RESEARCH REPORT

In brief

In brief

  • Postal organisations are at a pivotal moment. Retailers are transforming their supply chains to enable the fast and free shipping customers expect.
  • However, postal organisations have not responded accordingly, and are now putting their future survival at risk.
  • But by taking advantage of their enviable position to offer the solutions retailers need, they can reshape their networks and win the last mile.
  • Accenture’s research into eCommerce trends shows that fast and free delivery expectations are here to stay and postal organisations must respond now.


Competing to survive

Traditional postal organisations are at a moment so pivotal that it will determine who remains profitable for decades to come, and who finds themselves obsolete within years.

It’s clear that commerce—the way consumers buy things—has fundamentally changed, but what few grasp is how that change has reshaped retail competition and is remaking supply chains. So much so that Accenture analysis predicts that by 2023, more than 50 percent of all eCommerce purchases will be delivered from local inventory—and that number could easily be 70 percent.

Why? Because today, last mile delivery has transformed from a cost of business to a strategic differentiator. Customers have made it clear that, when given a choice between standard shipping of three-to-five business days and same-day delivery, they want the faster option—and there’s no going back for retailers or for delivery organisations.

What do UK consumers expect when buying online?

61%

Of consumers say same-day shipping is valuable.

83%

Of online shoppers say free shipping is important when deciding where to shop online.

35%

Of consumers are more likely to shop online if same-day delivery is an option.

The race to the top

Not only do customers say they want speed when it comes to their deliveries, but they behave differently as a result of it. Fast and free shipping impacts the most important metrics for retailers, including customer loyalty, market share, basket size and the most important: growth. Target, the eight-largest retailer in the United States, saw its digital sales surge 31 percent, with 80 percent of that growth driven by same-day fulfillment options.

But just as delivering on these expectations drives revenue upward, not fulfilling them puts entire businesses at risk. Forty-nine percent of UK consumers might not shop with a retailer again if they had a bad shipping experience. This is further complicated by the fact that 68 percent of UK consumers hold the retailer or marketplace accountable for delivery issues—and only 20 percent blame the delivery company.

That means that the right last mile offering—one that is fast and low-cost (if not free) for the consumer—is a decisive competitive advantage. The last mile has increasingly become the front line in the eCommerce battle.

Winning an uphill battle

Of course, while offering fast, free shipping is critically important, it is also difficult and costly to offer, making many question the sustainability of fast and free delivery. There are some who believe that senders will have to stop “subsidising” delivery at some point—that it is not a race to the top, but a race to the bottom. They evaluate delivery through old models that are focused on minimising cost by consolidating delivery into regional processing centres, limiting their ability to offer the kind of last mile delivery that retailers need.

What retailers have realised is that the traditional delivery model is too difficult and costly for fast and free delivery. Instead, the answer is for inventory to be close to the consumer. That’s why retailers are investing heavily to create an omnichannel supply chain that enables greater speed, efficiency, transparency and flexibility.

So how are retailers investing to meet consumer expectations sustainably and efficiently? These five trends toward an omnichannel future are reshaping supply chains—and demand a corresponding change from traditional postal organisations.

Marketplaces spur an arms race

By selling via marketplaces, inventory is stored in one place, meaning it’s quicker and easier to get purchases straight to customers.

Boosting inventory accuracy

Inventory management is crucial for retailers to enable fulfillment from stores—technology is facilitating a new level of accuracy.

The warehouse is where?!

Storefronts, back rooms or a floor in an office can be fulfillment centres, bringing inventory closer to consumers and cutting costs for retailers.

Automation for tight spaces

Automation and advanced robotics are transforming new warehousing spaces into low-cost, highly efficient sortation and fulfillment centres.

Outstanding progress in days outstanding

By using customer data to predict purchases, items are in warehouses for less time, get to customers faster and improve companies’ balance sheets.

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How will postal organisations catch up?

While retailers are transforming their networks, traditional postal organisations are not. Since many retailers have already invested in localising their inventories for speed and cost, they want to partner with delivery companies that capitalise on those investments and can quickly and efficiently make local deliveries. This puts postal organisations at risk of losing business from big retailers, who are instead turning to startups with new technologies, as well as to their own solutions, to solve the last mile challenge.

The good news is that traditional postal organisations are best positioned to offer the solutions that retailers are looking for—and take advantage of this incredible growth opportunity. Postal organisations not only already have local infrastructure of hubs and depots to facilitate last mile delivery, but they have a mandate to visit every address in a given country, most days (if not every day) of the week.

Traditional postal organisations already have the infrastructure in place for local last mile. Now, they just need to make it usable. But how?

3 key recommendations for postal organisations

1. Localise the delivery depot

Sortation centres are becoming obsolete as inventory is already closer to the consumer. In future, local delivery depots must handle parcels going out for delivery as well as those coming in.

2. Achieve continuous delivery

Adding collections from retailers while en route, and then re-optimising routes, increases route density, improves fleet utilisation, reduces delivery costs and increases speed to customers.

3. Redefine their role in the ecosystem

Postal organisations must make smart choices about where they invest, what capabilities they need to be successful and who they partner with in order to win the last mile.

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The transformation of the last mile has begun, and when it is complete, the world of delivery will be drastically different. Retailers will see even faster eCommerce growth. Consumers will take advantage of and expect more delivery capabilities. In short, the way people buy and get things will be fundamentally changed.

Traditional postal organisations are faced with immense opportunities and challenges, as well as a clear imperative to evolve. Done well, it will create remarkable growth and the foundation for sustained success. Done poorly, it will push them to irrelevancy, and potentially out of business. The choice is truly that stark, and there’s never been a more important time to get it right. It’s time to join the race to the top.

Brody Buhler

Managing Director – Post & Parcel In​dustry Group


Mark Smith

Managing Director – Accenture Health & Public Service, United Kingdom

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