With the IMRG calculating that shoppers now spend £1in every £4 online, demand for delivery services continues to grow. Can the industry cope with promotional peaks?
As the dust settles on “Black Friday” and the Boxing Day sales, it has been interesting to hear the various comments on the Christmas trading season in recent weeks as retailers have reported their sales figures. Views ranged from the enthusiastic and bullish at Dixons Carphone, to the more cautious from Andy Street, managing director at John Lewis, while media headlines continued to highlight delivery problems at peak trading times, not helped by the demise of City Link.
According to a survey by KPMG for the British Retail Consortium, online sales represented 17 per cent of all UK non-food sales during December 2014. “The numbers also show that all of the growth in non-food sales in December came from digital channels,” said BRC director general, Helen Dickinson. Adverse publicity about the delivery “backlog” following the “Black Friday” peak in late November proved little deterrent: “The backlogs forced some retailers to renege on their delivery guarantees and this impacted shoppers’ confidence to buy gifts online in December,” said David McCorquodale, head of retail at KPMG. “However, even against this challenging backdrop nearly one in five gifts were still bought online. The main factor constraining online is the retailers themselves: their systems still show signs of strain at peak times and they need to be able to cope from order to delivery.”
Certainly the volumes involved will have put many retailers and carriers under strain. According to parcel management platform, NetDespatch, “Black Friday” saw a 50 per cent year-on-year increase in the number of parcels needing to be shipped, with a 25 per cent y-on-y increase on so-called “Manic Monday”, 8 December. Post Christmas, as the sales got underway, the increase in parcel shipments was, y-on-y, 31 per cent.
“If retailers are going to successfully manage the peak volumes of their online sales, and keep the cost of despatch and delivery down,” says NetDespatch CEO Becky Clark. “They need to ensure they are communicating to consumers the range of delivery options available.”
At John Lewis, click -and-collect won the day accounting for 56 per cent of online orders during the festive season with almost two-thirds of these collected from Waitrose stores. The partnership’s end-of-year performance was buoyant with sales up by almost five per cent in the run-up to Christmas – although it was only online business that accounted for this increase. Andy Street was less confident about “Black Friday”: “My personal hope is that this is the high water mark for Black Friday,” he said, “I don’t think we can put the genie back in the bottle but do we need to stoke that fire any more? I personally hope not.”
His concern about focusing so much trade into a single day – or at best a long weekend – may have been shared by those carriers who had been so heavily criticised at the time, but not by Dixons Carphone CEO Sebastian James. He waxed lyrical on the Today programme late last month about the “huge scale and success” of both Black Friday and the Boxing Day sale. He predicted even more bargain offers for these promotional dates in 2015 declaring that the company was already working with its suppliers to create cut price ranges.
His will not be the only retail company already planning its promotional strategy for this year’s Christmas season; no doubt quite a few logistics companies will also be pondering what the future will hold. Many will no doubt agree with Becky Clark and David McCorquodale that there has to be some major revaluation of the service offer if delivery promises are to be kept when faced with such dramatic peaks in trade.
Having more than half your online orders collected in-store may work for John Lewis, which has always had spacious customer collection points in its department stores (although the collection point in my local Waitrose certainly contributes to congestion at times), but could be challenging for smaller outlets. Encouraging greater use of alternative collection services, such as the Post Office or Collect+, as well as secure locker options may reduce pressure on both stores and delivery drivers – but although DHL is already delivering urgent consignments to inhabitants on the island of Juist by drone, it seems unlikely that this particular delivery mechanism will provide much help when it comes to Black Friday 2015 deliveries.
Should the industry, as Andy Street suggests, try to limit the “Black Friday” boom? After all it’s not as if the day after Thanksgiving is a public holiday in the UK as it is in the US, so why focus all that shopping onto a single day, when the same offers could be staggered over several days or weeks greatly simplifying delivery issues?
Or perhaps customer expectations have just been set too high with the promise of massive bargains and free next-day deliveries? “Free” often translates into self-employed delivery drivers struggling to reach the minimum wage, as logistics companies cut rates to win retail contracts. Perhaps it is time for a reality check on both delivery pricing and capacity before next December’s spate of “failed delivery” media headlines or a repeat of the City Link débâcle.