In 2020, e-commerce began to grow in leaps and bounds due to the pandemic and the online purchasing habits developed during that time will continue to drive the growth of online sales into the future. Between 2019 and 2021, the United Kingdom saw retail e-commerce sales increase by 73% to reach sales of £129B in 2021. By 2025, it is estimated that 38.6% of total retail sales in the U.K. will come from e-commerce. This growth is great news for retailers, but how will it impact their last-mile delivery strategies?

What is the current status of last-mile delivery for UK retailers?

In the U.K., the largest online retailers include Tesco, Argos and Amazon. These retailers have established their own resource-intensive delivery networks for their last-mile deliveries. Other retailers without the capital, time or resources to create their own last-mile delivery networks must rely on more traditional outsourced carriers such as DHL, Royal Mail and DPD. These carriers help retailers deliver what consumers want most; fast, free and easy deliveries. However, outsourced carriers often do not provide full visibility into each step of the delivery journey, leading customers to reach out to ask ‘Where Is My Order’ (WISMO). WISMO is an expensive question retailers must answer in order to please customers and retain brand loyalty.

Brands in the U.K. are increasingly re-assessing their last-mile strategy and may begin to turn to new non-traditional outsourced carriers being developed in the United States. 

New Last-Mile Delivery Tactics in the U.S.

Retailers in the United States such as Gap and American Eagle Outfitters, Inc. (AEO) have launched their own last-mile delivery arms and now offer their last-mile delivery services to other retailers. AEO created a subsidiary named Quiet Platforms after it acquired Quiet Logistics and AirTerra last year to create its own delivery network. Gap launched GPS Platform Services, a logistics and fulfilment network that is also open to other brands.

Walmart entered the market in 2021 with GoLocal that offers same day delivery to other businesses. By offering their delivery services to other retailers, Walmart, Gap and AEO have created additional revenue streams by using their own investment in fast delivery. Retailers without their own dedicated delivery networks can join Walmart, Gap and AEO to create their own branded last-mile deliveries. Both Gap and AEO say their supply chain operations provide full visibility to both retailers and their customers.

Will U.K. brands reassess their last-mile strategy?

Brands in the U.K. realise they need to be customer-centric and provide superior delivery experiences to their customers. Fast delivery, low/no shipping costs and delivery transparency are key demands among U.K. shoppers. Will U.K. retailers follow the recent American model for outsourced delivery through other retailers?

Retailers in the U.K. have used gig economy workers to help with fast deliveries, though there are challenges to working with gig economy carriers. A survey by UPS Capital found 60% of U.S. businesses have experienced more damages and losses with last mile or same-day carriers compared to traditional carriers. Could the last-mile strategy adopted by some U.S. retailers work for U.K. brands?

Concerns for Retailers Sharing Delivery Networks

Data privacy concerns might be daunting for some retailers who could utilise competitors’ last-mile delivery networks. AEO’s Quiet Platforms is an independent subsidiary with its own systems and operations and client data is not shared. Overcoming the fear that data wouldn’t remain secure could be a hurdle for some retailers.

Prospective clients of retailer-owned logistics networks may also be concerned about giving up their competitive edge when they control their own logistics network. Last-mile deliveries are customer-centric and the customer experience can make or break a brand. Turning over the customer experience to competitor networks can carry risk and may be a difficult challenge for brands in similar spaces to overcome.

Competitor delivery networks are relatively new in the U.S.. It remains to be seen if U.K. retailers will move into creating and sharing delivery networks with other retailers in the near future.

By Danny Hudson, Director of UK and Europe at FarEye