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More than half of customers in the UK will order their groceries from online retailers by 2021, according to research by Capgemini.
The study found that currently, 43% of customers shop for food online at least once, or in some case multiple times, a week – a number which is expected to increase to 56% over the next three years.
But only 1% of retailers are willing to cover full delivery costs for shopping, despite 59% of customers saying they are not satisfied with current high delivery prices.
Tim Bridges, global sector leader, consumer products, retail and distribution at Capgemini, said: “Today, customers are neither satisfied with the quality of delivery services, nor willing to bear the total cost of last-mile delivery. Therefore, the dilemma facing retailers is to provide last-mile delivery services that customers value, without damaging their own profitability.”
As technology adoption and convenience shopping has increased, consumers have higher expectations around almost all aspects of their purchasing lives. Nearly half of the consumers surveyed said they would stop spending with a retailer if they had a bad delivery experience.
But delivery can be one of the most expensive parts of the supply chain for retailers, with the last step of getting products to the customer’s door – often called “last-mile delivery” – accounting for 41% of the overall delivery cost.
A majority of retailers believe current models for delivery are not sustainable or scalable, but 55% of customers said the option of two-hour delivery would increase their loyalty to a brand, while 47% of customers are unhappy with supermarket that do not offer same-day delivery.
Capgemini suggested retailers need to work on developing a supply chain that both meets customer expectations and reduces costs for retailers.
Consumers themselves are willing to try new things if it means a better delivery experience. In the survey, 53% of customers who had had a good delivery experience with a brand said they would pay for a membership if it meant continued good delivery in the future.
More than 65% of customers are already using services such as Ocado, Google Express or Instacart for grocery delivery rather than traditional supermarket retailers because the delivery service is more satisfactory.
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Half of customers are also willing to try services such as smart locks if it means more convenient deliveries, and many customers increase spend by 12% with a retailer that they purchase from and have a good delivery experience with.
Consumers are also willing to deliver products to their nearby neighbours in return for an incentive from the retailer, with 64% saying they don’t care whether their products are delivered by a brand or by a third party.
But there is a disconnect between what customers think is important and what retailers are working on. Low delivery costs are high on the agenda for most customers, but only for 30% of retailers, and 73% of customers want to choose a convenient delivery time slot for goods, despite only 19% of retailers thinking this is a priority.
Not catering to these customer demands can have an impact on customer loyalty, because a greater choice of services available to consumers allows them to be fickle.
Retailers are investing in machine learning and automation technology to reduce costs behind the scenes as consumer expectations grow, forcing an efficient supply chain to become a priority.
Warehouse and product sorting costs account for one-third of supply chain costs, and 89% of retailers are working on automating some of these processes to cut costs.
Using Amazon-style delivery lockers for 30% of deliveries and returns would also save money, as would a focus on store-based deliveries or delivery-specific outposts in strategic locations.
Some retailers have already begun implementing these technologies, with Waitrose trialling same-day delivery for its food and wine goods, and Morrisons expanding its online deal with Ocado to reach more customers.