Failed home deliveries are a headache for the consumer, but the amount it costs the retail industry each year is in the millions. Charlotte Hardie assesses what can be done to lessen the pain

Parcels left with the neighbour, notes signifying a missed delivery, trips to the post office to collect items, packages hidden behind the plant pot…sound familiar?

As convenient as online shopping is, the delivery aspect of it certainly is not. IMRG’s first report on home delivery, in 2006, revealed that £423 million was wasted by retailers each year, mainly as a direct result of avoidable errors and failures with home delivery. IMRG chief executive James Roper says this equated to an 80p inefficiency cost being imposed on each of the 540 million internet shopping shipments made that year.

There are signs that retailers are raising the standards of home delivery and improving customer satisfaction as a result. IMRG’s 2008 research, published in July, shows that shopper satisfaction has increased – 81.1 per cent claimed to be happy with the standard of home delivery this year, compared with 77.2 per cent in 2006. And, while the UK market value has trebled in the past three years, overall delivery failure costs have remained static (see box overleaf). However, there are still massive improvements that need to, and can, be made.

Roper says that within a year or so, 1 billion parcels will be shipped as a result of online shopping. “At £3 or £4 per parcel, that represents a £3 billion or £4 billion opportunity for retailers in terms of additional revenue. That’s a serious opportunity and retailers are trying to invest in order to get more out of that,” he says.

So, how are retailers improving the final and all-important fulfilment part of their lengthy supply chains? And how much more work remains to be done?

Roper believes that many of the problems consumers experience can be overcome by improving communication. Royal Mail head of multichannel fulfilment Val Walker agrees. She says that being upfront about delivery charges is critical. Around £2 billion worth of shopping carts are abandoned every year when online shoppers stumble upon delivery costs they had hitherto failed to spot. “That’s £2 billion of lost sales,” she says. “Delivery information needs to be clear and charges need to be reasonable. It sounds logical, but quite a lot of retailers don’t do this – even the large ones, you’d be surprised.”

Walker adds that it is vital to give customers a choice of times, so that they feel in control. Retailers also need to provide more than just an e-mail link, in case people have queries about their delivery. “People need to know that they have the option of speaking to someone at the end of the phone. That’s essential,” she says.

Tracking technology, whereby customers can monitor the delivery status of their product, is an additional investment that helps improve communication and thus customer satisfaction. Comet is due to launch online tracking technology this year. Comet managing director Hugh Harvey says: “Customers want to monitor their deliveries. It gives them the reassurance that if, say, they’ve chosen a time slot on a Tuesday that avoids the school run, they can check on Monday that it’s still coming the next day at that time.”

Roper says retailers are gradually realising that investment in home delivery pays off. In 2005, one of IMRG’s studies revealed that half of e-tailers offered only one delivery option, despite the fact that many options were available in the market – such as named-day deliveries or timed deliveries. “All those are revenue opportunities, too. Every problem with internet shopping is an opportunity,” he says. It may be more costly to offer next-day delivery or timed slots, but it’s absolutely worth the investment.

Comet launched next-day delivery earlier this year and customers can also choose weekend deliveries – including Sunday – and specific time slots. Harvey says: “We find our most loyal customers are those who touch our brand at multiple points – research online, experience product in store and then have a delivery and, more importantly, installation and set-up from us – that’s customer experience we put a lot of care and attention behind and, if they go through that route, we know they’ll be more loyal to us.”

Online delivery management

There have been a number of innovations in the field of home delivery that can help retailers improve the experience for their customers. One is ByBox, which operates a network of secure mailboxes that allow users to receive packages without being present at the time of delivery. BT and ByBox are working together to transform the country’s network of 80,000 payphones into internet shopping delivery points. Automatic SMS or e-mail alerts are sent to customers to tell them when a delivery has been made.

Another development has been Metapak’s IDIS Delivery Manager system. Whereas larger retail businesses – which can afford to sign up to multiple carriers that can be used to best effect depending on the type or size of product or delivery options that they provide – small- to medium-sized businesses don’t have this luxury. With the IDIS system, at virtually no cost to the retailer – aside from an initial minimal sign-up fee, which is often waivered – a variety of delivery and carrier options can be offered online .

The technology automatically identifies which carrier is most suitable for the online shopper, depending on postcode and product type. Stuart Hill, logistics manager at Asos, which uses the system, says it offers flexibility and efficiency as well as being cost-effective. The automatic, real-time alerts that inform the company of problems are particularly useful, he adds, allowing the retailer to contact the customer immediately. “When something goes wrong, we don’t want to find out about it from the customer calling at 6pm to tell us their delivery has failed,” he says.

A common failure among retailers in the past has been to blame the customer for failed deliveries. In IMRG’s 2006 report, one retailer commented that “three out of every four deliveries are a result of customer error – address entered incorrectly, just went out for 10 minutes, etc”. But this approach is hardly productive. Instead, retailers need to be proactive. A simple online message that flags the importance of accurate data or being in for specified time slots can help – as can an address-checking system to catch input errors.

The mindset of retailers is changing and online delivery has improved significantly. IMRG believes it will soon be possible – perhaps within five or six years – to achieve 100 per cent delivery success in the UK. But there is still a long way to go. Of the 1,500 people who took part in this year’s home delivery industry review, 91.5 per cent told IMRG that a bad delivery experience would, or might, prevent them from
re-ordering with that company. So it’s worth making every effort to try and reach perfection.

THE COST OF E-TAIL DELIVERY FAILURE

Individual items

  • One redelivery attempt – if not individually charged to the retailer, this will be recouped in the future transport contract. Cost: £1.50 
  • One undeliverable – with one attempted redelivery, customer service and stock-handling costs. Cost £18.50, plus the value of lost sale revenue 
  • One undeliverable – as above, but with additional charges or overheads that may occur. Cost: £46.50, plus the value of lost sale revenue 

Total sector costs for 2008

Assuming there are 94 million first-time delivery failures a year – 11.5 per cent of the total 820 million UK online shopping deliveries in 2008 – and 8 million undeliverables a year, 1 per cent of the total, this equates to:

  • All first-time delivery failures, at £1.50 each, excluding any additional charges or overheads that may occur. Cost: £141 million, plus the value of lost sale revenue
  • All undeliverables, excluding additional charges or overheads that may occur. Cost: £148 million, plus the value of lost sale revenue 
  • All first-time delivery failures and undeliverables, excluding any additional charges or overheads that may occur. Cost: £289 million, plus the value of lost sale revenue 

Source: IMRG