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Prime Mover Magazine

Final mile same day delivery demand to bring radical change confirms new study

A new retail study in the US has confirmed the growing appetite for same day delivery among consumers is transforming the landscape for third party delivery.

The study by technology consultant, Capgemini, surveyed over 2,870 consumers and 500 supply chain executives, entrepreneurs and industry leaders and revealed that grocery delivery was a major growth area in which 55 per cent of customers said retail stores that could provide two hour delivery times after purchase would increase their brand loyalty.

Only 19 per cent of stores were able to currently meet the demand.

More than half the stores (59 per cent) offered a delivery time frame of more than three days.

Only one per cent of online customers are willing, according to the study, to absorb the total cost of final mile deliveries.

At current retail firms charge online customers 80 per cent of the overall delivery cost.

Another survey released this week by the National Retail Federation found that 75 per cent of consumers surveyed expect delivery to be free.

A sharp rise on 68 per cent of consumers surveyed the previous year.

This expectation included orders as low and under $50.

With the freight task expected to grow locally and overseas one key takeaway from the study for transport companies was that 74 per cent of satisfied consumers planned to increase purchase levels by as much as 12 per cent with a preferred retailer.

Investments were also on the rise in delivery innovations in grocery as companies looked to meet consumer demand.

In the UK, Ocado, an online retailer, was working with companies in the US, France, Canada and Sweden to build automated customer fulfilment centres for the processing and packing of online orders.

The Capgemini study cited the recent launch by Walmart of its pilot run of its crowd sourced final mile grocery delivery platform and Target’s $550 million buyout of Shipt, an online, same-day delivery startup – one of the largest acquisitions in the retail company’s history.

Since October 2018, venture capital firms have invested $US3.5 billion in food and grocery delivery services.

Ford, Walmart and delivery service Postmates are working in collaboration to tailor a service for delivering groceries and other goods to Walmart customers using autonomous vehicles by 2021.

“We’re always looking for the best ways to serve customers, so we’re exploring a number of different options for getting groceries from our stores to the customer’s front door – some in-house, some third-party,” said Tom Ward, Walmart Digital Operations Vice President in a statement last September.

As the costliest link in the supply chain final mile delivery under its current model was not sustainable for retail businesses as organisations were absorbing some of the costs enough to erode profits.

- The Capgemini study found that 64 per cent of consumers are indifferent to whether delivery is made by a retail store’s employees, private individuals and third-party couriers.

- For an incentive, 55 per cent are willing to deliver products to neighbours in their vicinity.

- Up to 79 per cent of these are willing to deliver groceries at a price that is less than the cost incurred by retailers to deliver it themselves

- Capgemini estimates that should 44 per cent of customers deliver for other customers profit margins, as retailer delivery costs are lowered, will rise by 29 per cent.

- As many as 89 per cent of retailers were considering joining forces with other retailers to create a shared delivery platform for last mile delivery through crowdsourcing.

Marshall Hughes, Founder and CEO of crowdsourcing startup Passel in Australia, believes consumers are willing to make final mile delivery a part of their daily lives.

“Shoppers should not be delivery agents,” he said. "Hughes believes that consumers are willing to make this part of their daily lives, rather than being seen as delivery agents."

“Shoppers should not be delivery agents,” he says. “Rather than getting shoppers to do a delivery job, we offer to pay them to go home anyway and drop a package in their street. We think that’s the key difference.”

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