The Retail Transformation Blog

Advice and insight to help retailers thrive in the new age of retail.

Return to blog index

The future of home delivery – 10 likely developments.

Home delivery has come a long way since the height of the dotcom boom, where ‘standard’ and ‘next day’ (if you were lucky) were the only options for retail customers.

Nowadays, customers are offered an amazing range of convenience, choice and service – such as collection at multiple locations, same day delivery, order up to midnight for next day, delivery subscription services, timed delivery slots and much more – and home delivery has become a strategic differentiator for retailers, with Amazon Prime and Prime Now a case in point.

Here are some of the likely developments in the future of home delivery:

  1. Amazon will become the largest home delivery operator, and will offer all its services to other retailers. Economies of scale and excellence of execution will give it an advantage as the lowest cost player. Although larger retailers will not be keen to give their biggest competitor visibility of every customer and parcel volumes, it will be a very attractive offer for smaller retailers.
  2. There will be continued consolidation in the market as home delivery businesses are acquired or go into administration, driven by the intense competition – not least from Amazon. Postal operators faced with continuing decline of letter volumes will invest in building their parcel operations and buying competitors.
  3. Same day services running from local stocked hubs and stores will continue to grow as a premium service in affluent urban areas. Although the economics of same day delivery are very difficult, the level of consumer demand and innovation is driving this sector forwards.
  4. Technology and service will continue to improve, with real time tracking of parcels and individuals via apps on their phone and real time scheduling of deliveries. This will enable customer deliveries to be made to where the customer is, and ‘customer not present’ will become something from the past. Doing this well will give a major cost advantage, as re-deliveries are very expensive for every parcel carrier. There will be continued separation between technology leaders and innovators who can charge higher prices for better services (such as DPD) and the budget home delivery carriers.
  5. Choice of collection points will continue to increase, with more and more store networks offered as collection points (Asda is latest to do this), increasing numbers of lockers and parcel banks, and more parcel shops such as Doddle. It will get easier to return purchases, with more choice of return routes and drop off points.
  6. There will be increasing attention on the environmental impact of home delivery, with a focus on reduction of vehicle miles and emissions, and the reduction of waste cardboard packaging.

Some of the disruptors that have long term potential include:

  1. Autonomous vehicles. Home delivery carried out by robots operating from a self-driving vehicle may seem like science fiction, but already we are seeing prototypes being tested by Starship Technologies.
  2. Crowd sourcing of deliveries. There are a number of platforms (e.g. Hitch, Deliv) that match people who are already travelling with deliveries that need to go to the same place. Could one of these have the potential to be the next Uber for home delivery, and will this dramatically reduce costs?
  3. The infamous Amazon drones. This is wonderful PR (and certainly gets a lot of media attention), but it can only ever be a niche service, due to flight regulations, weight of parcels, and customer safety.
  4. 3D printers. These will enable customers to make their own products instead of having them delivered. Again, this is likely to be a niche service, with the benefits of mass production outweighing home production for most products.

It is likely that in five years’ time, consumers (especially in urban areas) will be provided with even more choice and convenience, with supporting technology easily accessed from smartphones. There will be fewer and better home delivery operators, with continued innovation by the leaders. Longer term there will be significant industry disruption from new technology, more likely in the 10-15 year horizon.

FIND OUT MORE about Javelin Group’s Operations service line.