Ecommerce boom set to deliver growth for logistics industry

A GROWTH in ecommerce has brought big business to the logistics industry and will continue to do so between now and 2018, according to a new report.

Research commissioned by Barclays’ Transport & Logistics and Retail banking sector teams shows 92% of logistics companies now feel online trading represents their biggest area for growth over the next four years.

However, even this growth has not been enough to sustain everyone – as seen by the collapse at Christmas of Coventry-based City Link and the subsequent loss of almost 2,400 jobs.

The research also shows the growth is has not been without challenges and physically delivering items to consumers is likely to present many difficulties, with consumers not being at home to receive their delivery now the number one issue for logistics companies, with 61% listing it as a cause for concern.

The issue of absent consumers even tops that of managing costs (57%) and managing peak times (55%).  In the same survey, one in five (20%) of consumers questioned stated that they needed to re-arrange delivery of a parcel in the past year.

To address these challenges, logistics companies are looking ahead to where they can improve and innovate to drive future growth.
 
With 45% of consumers stating they would order more products online if delivery services were improved, the opportunity for growth is clear. According to the report, 61% of logistics firms say that improved tracking (61%) along with improved notification alerts (44%) will be their top areas for future development.

For more than a third (36%), adding the option for Sunday delivery is of interest for future service improvement. This is a move likely to be welcomed by consumers, especially as just under 70% of them canvassed in the same survey, wanted deliveries on a Sunday.  

Despite the appeal for the idea, less than 12% of logistics companies feel the service would specifically drive the growth of their business in terms of sales or profits.

With the number of deliveries set to increase by 40% to 1.35 billion by 2018, logistics companies are looking to capitalise on the opportunities this presents.

One area that both logistics firms and retailers are working on, according to Barclays’ report, is the size of packaging for deliveries. With letterbox-sized packages set to see the largest increase of deliveries by 2018, increasing by 45%, being able to fulfill delivery in the first attempt will lead to a reduction in costs associated with repeat delivery services and so has obvious benefits for the both the retailer and the consumer.  
 
While the growth of online shopping will boost logistics companies’ business, half (52%) say that having to cope with this increased capacity could also pose a challenge. An increasingly demanding consumer (35%) and surge in the use of free delivery by retailers (32%) along with the rise of click and collect schemes (31%) are also deemed to be potential threats for logistics companies.

Mike Rigby, Head of Manufacturing, Transport & Logistics at Barclays, said: “A competitive and growing delivery market is an exciting place to be at present.  Where there is growth, there is opportunity and the real winners will be those who invest in technology and innovation.  
 
“The evolving dynamic between retailers offering a range of delivery options and consumers demanding more flexible delivery methods is an interesting one.  However, the predicted growth over the next few years clearly highlights that the opportunities are there for those operators who carefully reassess their delivery strategy and continue to innovate and invest in fulfilling the all-important ‘last mile’.”