Published: July 2021
Pages: 64
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UK e-fulfilment: Market Insight Report 2021

This market covers the provision of fulfilment services to internet retailers in the UK.
– It includes both pure play on-line retailers and multi-channel – traditional store-based retailers which also have an online presence; increasingly this is all major retailers.
– It also includes both outsourced fulfilment and fulfilment activities carried out by the retailer in house

Overview of e-fulfilment services
e-fulfilment - key activities

It does not include fulfilment of purely digital products such as software, travel tickets or music and video via electronic downloads. It also excludes grocery, for which there are distinct supply chains operated in-house by the major chains and on-line specialist, Ocado.

As internet shopping continues to grow, so the fulfilment of its orders continues to be a growth market – in contrast to the maturity of many segments of the logistics industry.

We quantify the e-fulfilment market size and historical growth rates, while reviewing key factors behind these figures.

We also carry out an in-depth analysis of the relevant drivers of industry growth – including the macroeconomic environment, internet retail sales, basket sizes, returns rates, the level of cross-border shopping and logistics supplier innovation.

The report covers development and growth of the market since 2015 and provides forecasts up to 2024. It includes:
– Description of trends in the market such as warehouse price increases, development of systems and robotics
– Analysis of market drivers, which form the basis for our forecasts
– Profiles of a wide range of e-fulfilment providers


Who is it useful for?

The report is intended for:
– Operators of e-fulfilment and other logistics businesses
– Retailers who sell via the internet
– Investors in these businesses
– Potential new entrants to the e-fulfilment market
– Market regulators and policymakers
– Banks, analysts, consultants and other parties with interests in the sector

What are the sources and methodology?

This report is based on:
– Publicly available data including company annual reports, websites, press releases and government statistics
– Interviews with senior-level contacts in the market
– In-depth analysis of the macroeconomic environment and relevant market drivers such as trends in retail sales, internet shopping, mail order and price trends.
– Our own experience of carrying out commercial and operational due diligence on behalf of many investors considering backing logistics businesses including those with e-fulfilment activities.

Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions.


The e-fulfilment market

e-fulfilment refers to the logistics processes which support an on-line retailing operation.

The service usually comprises the core elements of warehousing, IT system provision, provision and / or management of delivery services and returns logistics.

In addition, value added services, such as contact centres, packaging, repairs, assembly & configuration or website development may be provided as part of a solution.

We believe that the market is now over £11bn in size, having grown rapidly as internet retail has increased

The typcial operating model is that of a site in the midlands which is able to support next day or later delivery to most of the UK population via a traditional parcels carrier.
– Other models such as those including mobile warehouses and smaller storage sites in big cities, which could support same day delivery, are being considered.
– So far these models have been more widely adopted by in-house operations (such as Amazon and Argos) than by outsourced providers.

Arrangements may be on a pay-per-use, closed book or open book basis.

Given the large amount of information which must be processed and managed accurately, IT systems are very important. Some providers have developed their own systems (eg iForce) while others use systems from leading vendors such as Manhattan and Metapack

High returns rates, in particular in the clothing segment, create additional challenges both in handling of transaction information and physical goods

While transport cost increases have been modest, warehouse prices have increased at above the rate of inflation in recent years. This has led to increases in prices but also some pressure on margins, and greater usage of techniques such as mezzanine floors to maximise building usage. Higher warehouse costs may speed the adoption of robotics, which can also lead to significantly better usage of space.

While outsourcing e-fulfilment is increasingly common for smaller e-retailers and marketplace sellers, some large retailers – such as Amazon – keep the service in-house, recognising its strategic importance to their proposition. Some multi-channel retailers are exploring the potential to use their store networks as fulfilment hubs to support same-day delivery.

The main driver of the market is the level of internet retail. However, other factors are important, including:
– Consumer buying behaviour: average basket size and return rates
– Level of value added services provided
– % of sales by UK internet retailers which are to overseas customers

Competitive landscape

The e-fulfilment market can be segmented according to size / capability of provider. It is served by three different categories of providers, defined by their size, their service focus and their customers:
– Some companies, including Amazon, target start-ups and smaller / marketplace sellers,
– Major logistics groups such as DHL, K+N, Wincanton and XPO, who mainly focus on serving the largest retailers
– A range of providers serve medium sized customers, some with a general focus and some of whom specialise in niches such as garments. Providers include independents and also transport companies such as DPD and Whistl.

Entry barriers are low in serving smaller customers but scale is necessary to serve the largest retailers

Switching barriers exist but do not prevent some switching occurring if, for example, there has been a serious service failure or the current provider is not able to offer a required service

At the low end, unit prices and gross margins are typically higher, but offset by much greater customer management costs

Most companies in the market provide other logistics services as well as e-fulfilment. Frequently, other services are included within a single contract which might cover both e-fulfilment and physical store fulfilment for a multichannel retailer.


We expect to see continued growth in the market, driven by further increases in internet retail.

Growth is likely to be less rapid than in the past as internet retail inevitably matures as it accounts for an ever-larger share of overall UK retail

Key emerging trends include:
– adoption of warehouse robotics to increase picking efficiency, reduce labour costs and also reduce property costs
– use of satellite storage locations – such as retail stores, mobile warehouses, or Amazon Prime Now hub-type locations in or close to large urban areas to support same day delivery
– integration of transport and fulfilment services to support better end-to-end process visibility and enable later cut-off times.

About this report 2
What does the report contain? 2
Who is it useful for? 2
What are the sources and methodology? 2
Summary 3
Market context and trends 3
Competitive landscape 3
Outlook 4
About Apex Insight: 2017 Parcels & Logistics Research Programme 5
About Apex Insight: recent parcels, transport and logistics consulting experience 6
About Apex Insight: example parcels / delivery research and consulting clients 7
Contents 8
List of charts and tables 11
UK e-fulfilment Market Overview 12
Description 12
Characteristics of the market 13
Segments 13
Specific requirements for clothing 14
Low entry barriers for serving small customers 14
Scale necessary to serve large e-retailers 14
At the low end, gross margins are higher, but offset by customer management costs 14
Arrangements may be on a pay-per-use, closed or open book basis 15
Desire of start-ups to outsource 15
Switching barriers exist but do not prevent switching 15
High importance of IT systems 16
Cost pressures from the consumer down the supply chain 16
High returns rates 16
Transport management 16
Market trends 18
Increasing internationalisation of e-commerce 18
Technological and process innovations 18
Marketplace / shopping cart integrations 18
E-fulfilment systems 18
Parcel shops / lockers 19
Click and collect & multichannel retailing 19
E-fulfilment developed in-house when e-retailers have the capacity 20
Market size and growth 21
Key inputs and assumptions 21
1. Internet retail 21
2. % of sales by UK internet retailers which are to overseas customers 22
3. Average basket size and volume of transactions 22
4. Return rates 23
5. Cost of handling returned items. 24
Market size and segmentation 24
Warehousing vs. transport 25
Core services vs. returns 25
Domestic vs. international 26
Competitive landscape 27
Overview 27
Major logistics groups 27
Medium-sized logistics service providers 27
Providers targeting smaller customers 27
Competitor benchmarking 28
Revenue 28
Growth 29
Margins 29
Profiles – Major logistics groups 31
DHL 31
Kuehne & Nagel 31
Wincanton 31
XPO Logistics 31
Profiles – Medium-sized logistics service providers 32
Allport Cargo Services 32
Amethyst Group 32
Clipper Logistics 33
CML 34
Dalepak 34
Delamode 35
iForce 35
International Logistics Group 36
James & James 37
Prolog (Promotional Logistics Limited) 37
SEKO Logistics Group 37
Spark Response 38
Torque 38
Unipart Logistics (UTL) 38
Profiles – Providers targeting smaller customers 39
Amazon (Fulfilled by Amazon - FBA) 39
Cloud Fulfilment 40
Royal Mail 40
Example e-fulfilment contracts 41
Market, driver and segment forecasts 44
e-fulfilment market growth 44
Driver forecasts 44
1. Internet retail 44
2. % of sales by UK internet retailers which are to overseas customers 45
3. Average basket size and volume of transactions 45
4. Return rates 45
Forecasts by segment 45
Risks to the forecast 48
List of abbreviations 49

List of charts and tables

Overview of e-fulfilment services 3
e-fulfilment market segments 13
Amazon warehouse robots 20
UK e-retail spending: value as % of all retailing / £bn, 2012-17 % 22
Average basket value, 2012-2017 (£) 23
Average basket value by product type (£), 2017 24
UK e-fulfilment market value, 2012-2017 26
UK e-fulfilment market by segment (transport / warehousing), 2012-2017 26
UK e-fulfilment market by segment (core services / returns), 2012-2017 27
UK e-fulfilment market by segment (domestic / international), 2012-2017 27
2017 revenue of leading e-fulfilment providers 29
Revenues of leading e-fulfilment providers, 2013-2018 29
Growth rates of leading e-fulfilment providers – CAGR 2013-17 30
Growth rates of leading e-fulfilment providers – CAGR 2013-17 30
Operating profit of leading e-fulfilment providers, 2016-17 31
Operating margin of leading e-fulfilment providers, 2016-17 31
Allport Cargo Services Limited financial performance, 2011-2017 34
Amethyst Group Limited financial performance, 2011-2017 34
Clipper Logistics financial performance, 2013-2018 34
Clipper Logistics revenue and growth by activity, 2013-2018 35
Clipper Logistics e-fulfilment & returns division financial performance, 2013-2018 35
CML Limited financial performance, 2011-2017 36
Cygnia Logistics Limited financial performance, 2011-2017 36
Delamode PLC financial performance, 2011-2017 37
iForce Limited Financial Performance, 2011-2017 37
International Logistics Group Limited financial performance, 2011-2017 38
Promotional Logistics Limited financial performance, 2011-2017 39
Seko Logistics Group financial performance, 2014-2017 40
Spark Response Limited financial performance, 2011-2017 40
Torque Retail Services Limited financial performance, 2014-2017 41
Fulfilment by Amazon pricing examples, 2018 42
Example e-fulfilment contract awards in the UK, 2012-2018 44
UK e-fulfilment market forecast, 2012-2022 47
UK retail sales and internet retail sales forecasts, 2012-2022 47
UK e-fulfilment market forecast by segment (warehousing / transport), 2012-2022 48
UK e-fulfilment market forecast by segment (core services / returns), 2012-2022 49
UK e-fulfilment market forecast by segment (domestic / international), 2012-2022 49
UK e-fulfilment market forecast by segment (transport / warehousing), 2012-2022 50
UK e-fulfilment market forecast by segment (core services / returns), 2012-2022 50
UK e-fulfilment market forecast by segment (domestic / international), 2012-2022 50

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