Annual Cost of Failed UK Online Deliveries is £851 million says IMRG

IMRG (Interactive Media in Retail Group) has conducted research that reveals the estimated overall cost to the UK e-retail sector of failed ‘1st time, on-time’ delivery is £851m per annum.

The huge sum comes from the IMRG UK Valuing Home Delivery Review 2012, the fourth edition in a series following on from those published in 2006, 2008 and 2010. The 2012 Review is supported by Blackbay.

The purpose of the Review is to help the UK e-retail industry understand the costs incurred when online delivery fails to meet the shopper’s expectation, of 1st time, on-time, every time. This data allows the industry to consider what can be done to eradicate delivery failure and maintains the momentum of service innovation and development on the supply side and deployment of new solutions by e-retailers.

The 2012 Review acts as a progress report and focuses on the costs associated with 6 delivery failure scenarios:

1.    Failed 1st delivery – re-delivery required
2.    Failed 1st delivery – collection by customer
3.    Late delivery
4.    Order lost – replacement sent
5.    Order lost – loss of customer goodwill
6.    Order undelivered and returned to sender

The foundation datasets, upon which this review is constructed, come from the IMRG MetaPack UK Delivery Index with additional aggregated data provided especially for this research. The sector cost of £851m represents a 7.5% increase on the 2010 figure, some of which results from an increase in online deliveries.  IMRG estimates the growth in the number of orders over that period to be:

•    2009 – 10     +11.5%;
•    2010 – 11    +19.2%;
•    2011 – 12      +12.7% (forecast).

Not all of this growth will have transferred through to the carrier delivery sector covered in this review due in part to the development of Click and Collect solutions.

Andrew Starkey, Head of e-Logistics at IMRG, commented: “The actual fulfillment of an online order represents the final hurdle for retailers and a negative experience at that point provides the impression that lasts. As these figures demonstrate, for retailers it is not just brand reputation that is impacted when a delivery is missed but the associated costs of that failure can also be significant. The Review reveals that all stakeholders involved in the process of online fulfillment (retailers, carriers and consumers) have a role to play to enable the attainment of the shopper’s expectation of 1st time, on-time, every time delivery.”

“To meet the increasing demand for online deliveries, at the same time as keeping existing customers and importantly winning new ones, retailers must make sure that they deliver the best possible home delivery experience,” said Nigel Doust, Blackbay’s CEO.  “Retailers and their carriers should be making full use of today’s technology to improve communication as to the whereabouts of individual parcels throughout the entire delivery process. The data captured means it is perfectly possible to let consumers know where and when their parcels will be delivered. It’s all about improved communication between the retailer, the carrier and the consumer to ensure delivery occurs right first time.”

This year’s review found that the overall volume of orders generated by UK retailers can be estimated at 656 million packets and parcels deliveries per annum, (excluding grocery and 2 man deliveries). In addition, Market Place providers2 (supporting SMEs and individual online sellers), contribute at least another 375-400 million orders per annum.

The overall volume of packet and parcel orders dispatched from the UK creates 1.05 billion deliveries made up of 1.1 billion packets and parcels. Of these it is estimated that at least 10%3; or 100 million of these orders are destined for shoppers in other countries, and that UK consumers return approximately 22% of received orders.

Set against this background, the overall cost to the UK e-retail sector, of failed 1st time, on-time delivery is £851m per annum broken down over the 6 most likely scenarios as shown in the chart above.

The full report can be accessed on the IMRG site for free by IMRG members, and is available for purchase by non-members.

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