Same day delivery is being adopted by more UK retailers – why do most continue not to?

Retailers increasingly feel the need to match the same day delivery standards set by Amazon.

Amazon offers same day delivery of over one million items to several urban centres around the UK including Greater London, Birmingham and Greater Manchester. It does this through subscription services including Prime Now and Prime Same-Day. They deliver faster-moving items from Amazon’s traditional stock of books, homewares, electronics, etc. Meanwhile Amazon Fresh is a grocery delivery partnership with Morrisons supermarket which may be rolled out nationwide in the coming year or so.

In a recent survey we found that 26 of the top 500 retailers now offer a same day option. Some, like Argos, have their own delivery fleets but many other use third party delivery companies.

Argos rolled out its Fast Track delivery offering in October 2015 where customers can pay a flat fee of £3.95 to have their goods delivered within four delivery slots between 07:00 and 22:00 every day. Offering 20,000 items for same-day delivery it has some way to catch up with Amazon Prime Same-Day in terms of SKUs offered, though the retailer has the advantage of covering a claimed 90% of the UK – far and away better than the urban-centric coverage of Amazon Prime and Prime Same-Day.

CitySprint offers retailers a third party same-day B2C delivery service called On the dot. Its clients include the electronics retailer Currys PC World, MatchesFashion and Wickes. These three have their own tailored offerings to their customers. For example, Currys PC World offers small-item delivery within 10 miles of a store, seven days a week for a £10 delivery fee.

Other third party carriers offering same day services include Brisqq, Paack, Royal Mail / eCourier, Gophr, Stuart and Quiqup.

Retailers offer same day for different reasons, which feeds through to their pricing strategies:
– Some retailers simply look to price same day so that they recover their costs from providing it.
– Others see it as an opportunity to make additional margin by charging a premium price for a premium service, over and above the additional costs of providing same day delivery
– A third group sees it as a way to differentiate themselves and drive customer loyalty and increase spend, and make the decision to subsidise it to encourage its use.

However, many retailers do not (yet) offer same day delivery. Why not? Our research has identified three common barriers:
– Shortage of store space for pick and pack operations. This requires some space to be re-purposed from selling, which may be likely to have a negative impact on store sales levels. It can be a difficult trade-off for retailers to make.
– Inadequate visibility of stock at the store level. Same day delivery requires retailers to know exactly what they have in each store in real time, to enable the immediate dispatch of a courier to the right store to pick up the item. Many retailers do not yet have this level of stock visibility
– Ownership issues: traditionally, retailers had separate online and store divisions with their own financial performance targets. This means that same day orders can be a challenge as the costs of same day are shared between the online operation and store network. Only when retailers have moved to a genuinely multi-channel organisation are they able to get round this.

This, and other issues relating to the UK same day delivery market are discussed in our latest report:  UK Same Day Delivery: Market Insight Report 2019.