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UK retailers to up logistics spend to 12% of revenue

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UK retailers are set to boost investment in logistics by a third over the next five years, according to research.

A survey by law firm TLT of 100 leading UK retailers found that logistics investment amongst leading retailers is set to grow from 9% to 12% of annual revenue.

This came as 46% of UK retailers said the future of their business depended on improving fulfilment and logistics, with 73% said more companies will need to offer free delivery to compete. One of the areas of pressure was returns, with 56% saying effective management of returns is key to the profitability of online sales.

The investment would lead to, amongst other things, faster delivery. The proportion of retailers offering next-day delivery or faster is set to grow from 62% to 83% in the future, while the proportion offering same-day would rise from 19% to 29%.

The survey found the number of retailers investing in warehouse management systems or robotics would double from 22% to 44%. However, 66% cited economic uncertainty as barriers to technology adoption, while 58% named legacy issues and 53% not knowing where to invest.

Fifty-seven percent planned to invest in proprietary technology, while 30% wanted to partner with technology companies and 20% planned to buy off the shelf.

Interestingly, 8% planned to partner with other retailers, while the proportion investing in shared warehouse space is expected to grow from 14% to 20%.

Meanwhile, 66% believed urban warehousing and 67% urban lockers would become trends.

Perran Jervis, partner and head of retail and consumer goods at UK law firm TLT, said: “We’ve been surveying the UK’s top 100 retailers for several years now, and while adapting to an increase in online sales is not new, this year’s data suggests that retailers have reached a tipping point and business models need to change to become more agile.

“Consumers increasingly want fast, free and flexible delivery. That’s going to require fundamental changes to warehouse locations and technology, product visibility and commercial offerings, including offering customers a more personalised service.”