Shoppers spent £114bn online in the UK during 2015, with £24.4bn being spent over the Christmas period alone. In this feature from the latest eDelivery Magazine, Emma Herrod reports on the impact on retailers and carriers.
Online shopping grew by 11% in 2015 over 2014’s level, as shoppers increased the amount they spent online. IMRG estimates that online now accounts for 27% of total retail market (excluding travel).
This growth has understandably led to an increase in parcel volumes. Royal Mail reports that it handled 130 million parcels overall in December alone, 6% more than last year, while IMRG believes that 260 million were handled by carriers for retailers throughout the November / December peak trading period. This was around 10 million more than anticipated. Hermes too reported a record-breaking peak 2015, during which it processed 30.3m parcels, representing a 24% increase over 2014’s level.
For all that, 2015 got off to a slow start yet the year ended strongly with the UK’s e-logistics sector dispatching a record 1.065 billion parcels. 2015’s retail parcel numbers finished up 15.7% higher than 2014, and ahead of the 13% growth forecast at the beginning of the year, according to the IMRG MetaPack UK Delivery Index.
They also reported a notable shift in trend in the month-on-month growth rate between November and December as volume flattened slightly as shoppers bought much of their Christmas spending forward in response to retailers’ extending their promotions into the weeks before Black Friday.
Despite the huge volumes moving through fulfilment operations during peak, the level of ‘on-time’ delivery performance remained in excess of 92% throughout the peak period – a record high for this time of year.
“After the issues caused by the unprecedented scale of the Black Friday weekend last year, it’s very encouraging to see just how efficiently fulfilment operations ran on the whole this year – with 92% of deliveries made on-time during peak, a significant improvement on 89% in the same period last year. It’s a testament to all the hard work that industry has put in over the past year,” says Andrew Starkey, Head of E-logistics, IMRG.
“Looking ahead to 2016 we see a number of key focus areas for fulfilment operations including improving returns management, creating new capacity including the wider adoption of third party click and collect, better transparency for cross-border deliveries and wider provision of in-transit delivery information.”
Kees de Vos, Chief Product Officer at MetaPack comments, “The profile of the peak period was entirely different to any previous year and highlighted just how important it is for both retailers and the carrier community to plan ahead, communicate and work closely in tandem. Customers took full advantage of flexible offers over a longer period of time, which could be fulfilled efficiently leading to enhanced customer service. As a result the industry didn’t just reach the record billion parcel mark, it smashed right through it.”
Customers are collecting
Reserve / click and collect is on the increase too; on average 4% higher in terms of percentage of sales than in 2014, according to IMRG. In the three months of August – October, 25% of multichannel retailers’ online sales were collected in-store. The penetration of click and collect has more than doubled since 2010, averaging 23% in 2015 with the number of collection points extending beyond retailers’ own stores to locker boxes and third party locations such as those in the Hermes and CollectPlus networks.
Doddle, for instance, reports that during its busiest hours in the run up to Christmas 2015, a customer collected a parcel from a Doddle store every four seconds. Its parcel volumes peaked on Monday 21 December, 15 days later than the parcel market highlighting the trust that shoppers now place in collection services.
“As more convenient choices become available, customers are choosing the most convenient options available to them,” says Tim Robinson, CEO, Doddle. “If consumers believe click and collect to be a more reliable delivery option, they will continue to shop until the last minute with greater confidence their order will be delivered the first time and therefore, on time,” he says.
Convenience was the shopping and delivery methods of choice for John Lewis’s customers as half of its online orders were collected from a store; 35% were collected from a branch of Waitrose. Overall, online accounted for 40% of its sales over the six weeks ending 2 January 2016.
Highlighting how people are now shopping across channels, the company reported that the combination of its shops, website and fulfilment centres worked together effectively. “For example,” says its trading statement, “on the Black Friday weekend our distribution teams processed 18% more parcels than last year, which equated to five units per second during the peak hour. Sales in our shops for the total six week period were down 1.2%, reflecting lower footfall pre-Christmas, but were up 16.2% during the first week of Clearance (week ending 2 January).
“Online sales grew by 21.4% compared to last year and mobile continued to be our fastest-growing channel, with sales from smartphones and tablets up 31%. Sales through Click & Collect were up 16% and it was the delivery method of choice for half of all online orders”.
House of Fraser also saw growth in its click and collect offering as Buy & Collect increased by 22% over the level seen during 2014’s peak period. Its Black Friday trading was particularly strong online, with sales up 40% on the year making it the retailers biggest online day ever. It continued trading strongly right the way up to Christmas with like-for-like sales for the 6 weeks to 2 January 2016 up 5.3% against the comparative period last year.
At Marks & Spencer, its challenges of handling last year’s peak seem to have been overcome as its online operation “delivered a strong performance with continued improvement in traffic and customer experience”. Its Castle Donnington DC dispatched record volumes as ecommerce sales increased 20.9% over the 13 weeks to 26 December 2015.
The patterns of consumer spending in the week preceding Christmas suggests that people were spending more online closer to Christmas, “perhaps as a result of shorter delivery time and click and collect options,” suggests Kevin Jenkins, UK & Ireland Managing Director Visa Europe.
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