Spring 2010

Inefficient and failed home deliveries cost Britain around £1 billion a year. That's the stark reality confirmed by a detailed new report from IMRG entitled Valuing Home Delivery.

The costs are divided almost evenly among the three main home delivery stakeholders – carriers (36 per cent), consumers (33 per cent) and retailers (30 per cent).

The report actually comes up with a figure of £792 million as the specific cost of delivery failure, but it points out that this figure is conservative.

In particular, it says some of the figures reported by participants were below industry norms. Adding benchmark call centre costs, for instance, would raise the figure to £846.6 million, it says, and including unreported delivery failures on untracked goods is thought to bring it up to the £1 billion mark.

 

The report says it omits some other costs that might have lifted the cost even higher, including the extra stockholding costs caused by high returns levels.

The report concludes that current levels of inefficiency add around 70p to the cost of every parcel despatched, and 75p for every delivery.

On the positive side, it says that for every 1 per cent improvement in first-time, on-time delivery performance, the UK e-retail industry can recover at least £65.2 million in costs.

One detail, address management, is considered to offer significant opportunities for improvement. The report says that merely raising the sample accuracy rate of 98.9 per cent to the lower end of its benchmark range (99.45 per cent) could save the industry £146 million a year.

IMRG has produced similar reports twice before. This one, like its predecessors, is based on a mass of sample data drawn from a wide variety of sources, which has been cross-referenced and regularised to arrive at a robust result.

It drew information from 95 retailers representing more than 3.5 million active online shoppers, and homed in on seven major retailers, five national carriers and several other interested organisations. It also drew on the IMRG's latest Consumer Delivery Survey, and on other published sources.

Whilst it is difficult to quote individual costs outside the context of the report as a whole, some figures jump out – for instance, the overall cost to retailers of £9.54 for each failed delivery, and the cost of business lost through delivery failure of £77.82.

For carriers, some interesting findings include the cost of a redelivery (£3.43), and tellingly, the cost of a consumer collection from a depot (£2.50). The cost of undeliverable consignments is put at £6.05.

Consumers are notable losers when they have to collect a consignment from a depot, bearing the brunt of the entire cost. They pay £20.18 of the calculated total of £22.68.

Looking at costs across all stakeholders, the report says the cost of a single redelivery is £6.74, and for a double redelivery it is £13.94. Expanding these figures across the industry, it says single redeliveries cost £305.4 million, and double redeliveries £83.5 million.