The document discusses challenges and opportunities in reinventing last-mile retail delivery. It notes that e-commerce has grown much faster than physical stores. Consumer expectations for delivery speed and convenience are rising, especially among younger generations. Fulfilling online orders comes with higher costs that compress margins for retailers. Winners will raise the customer experience bar while improving economics through measures like common delivery platforms and optimized operations. The case of Sainsbury's Argos transitioning to a digital retailer focused on omnichannel delivery is also discussed.
The Global Challenge to Reinvent the Last Mile in Retail: Insights From Sainsbury’s Argos
1. The Global Challenge to Reinvent the
Last Mile in Retail: Insights From
Sainsbury’s Argos
ANITA BALCHANDANI, Partner, OC&C Strategy Consultants
BERTRAND BODSON, Chief Digital and Marketing Officer, Sainsbury's Argos
3. 3
ecommerce has outgrown stores >10x in most markets
Retail Market Growth by Channel, Top25 ecommerce Markets1, 2005-15
CAGR %
Source: Canadean, OC&C analysis
-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
0
5
10
75
70
30
25
20
15
Sweden
India
Austria
Netherlands
Canada
Spain
Russia
Store Growth
Italy
Australia
Turkey
South Korea
France
Japan
Germany
UK
China
US
Mexico
Argentina
ecommerce
Growth
Denmark
Belgium
Norway
Finland
Poland
Brazil
Bubble Size
Indicates Size of
2015 Online Retail
ecommerce
Growth =
Store Growth
2x
10x
20x
1. Based on 2015 ecommerce value
2_RET_v2.4
4. 4
Up to a third of purchases
made online by 2020
Majority of purchases
researched online
Majority of retail will be multichannel enabled
Source: Canadean; Google Barometer; OC&C analysis
Online Consumer Activity1
% Total
16%
20%
18%
17%
20%
26%
17%
20%
22%
15%
21%
20%
21%
Austria 75%
79%
Australia
USA
77%
79%
75%
Netherlands 72%
85%
Germany
South Korea
Norway
China
68%
France
70%
Finland
80%
92%Sweden
72%Denmark
UK 79%
1. Excluding ‘Food & Grocery’
Excluding Food & Grocery
Online Researched 2020e
Online Purchased 2020F
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5. 5
Averages mask substantial category differences
7% 11% 12%
21%
47%
7%
Health & Beauty
28%
62%
32%
Furniture &
Floor Coverings
Food & Grocery Home & Garden
Products
70%
79%
Apparel, Accessories,
Luggage & Leather
Goods
Electrical &
Electronics
65%
ecommerce Share by Category, 2015 vs 2020F
% Total
Source: Canadean; Google Barometer; OC&C analysis
2015 Bought Online
2015 Researched Online
1. Data not available for Books, News and Stationary, Sports & Leisure Equipment or Music, Video & Entertainment Software
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6. 6
Last mile deficiencies are holding back consumers
100%
10-15%
55% =
Store as
preferred
channel
c20%
10-15%
Current Online
Penetration
1%
Grocery continues to see barriers to online1,2
% of Market
Limited slots
Uncertainty on
attendance
Picking
Substitutions
Bad
experience
Trust
Too expensive
High threshold
on free delivery
Price Scheduling
45% = Delivery-related Reasons
1. Consumers were asked: “What are the main reason(s) that you have not purchased grocery items online in the last 6 months?”
2. Sample: Aggregated Sample (UK, US, FR, DE, CN, JP); N = 1415
Source: Euromonitor, OC&C Consumer Survey, OC&C analysis
25% in
Japan
>20% in UK / US; <10%
in China / France
6% in UK
45% in UK;
65% in France
7% in
UK
UK, US, FR, DE, CN, JP
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8. 8
Japan
78%
19%
2%
85%
12%
2%
USA
18%
29%
55%
32%
17%
68%
Markets are segmenting into three last mile end states
Germany UK FranceChina
Source: OC&C Consumer Survey, OC&C analysis
1. Consumers were asked: “Which of the following delivery methods have you used to receive online orders in the last 6 months?”
2. Sample: UK = 543, USA = 523, FR = 506, DE = 553, CN = 502, JP = 517
3. Most popular of Collection Points, Lockers, Click & Collect, Check & Reserve
Usage of Fulfilment Types1,2
% Respondents
5%
36%
80%
5%
40%
80%
Deliver or
Collect
Home delivery winning
Home
Delivery
Collection3
Drive Thru
Two ways to shop Willing to drive
2_RET_v2.4
9. 9
Consumer service expectations continue to rise…
Delivery Expectations1,2
% Respondents
1. Consumers were asked: “Which of the following delivery options would you expect to see offered ‘as standard’ across the majority of retailers (vs only offered by selected retailers)?”
2. Sample: UK = 543, USA = 523, FR = 506, DE = 553, CN = 502, JP = 517
Source: OC&C Consumer Survey, OC&C analysis
23
5
7
21
53
17
13
18
29
37
23
5
8
16
27
17
2
5
11
38
27
13
17
34
58
33
45
21
42
InstantWithin 2 HoursSame DayNext Day Specific Time Slot
Japan
China
Germany
France
US
UK
Outside of France, over a third
of consumers expect Next
Day to be offered as standard
Same Day likely
to be the next
market standard
in many markets
USA and China are most
demanding for speed
20-30% of consumers
expect to be able to select
specific time slots for
delivery
2_RET_v2.4
10. 10
2
5
4
6
-5
Next Day
Instant
Within 2 Hours
Same Day
3 – 5 Day
…and are particularly pronounced in younger generations
Delivery Expectations, by Age1
%pt Delta in Respondents (vs Market Average)
Expectation Higher Than Market
Expectation Lower Than Market
18-34 55+
1. Consumers were asked: “Which of the following delivery options would you expect to see offered ‘as standard’ across the majority of retailers (vs only offered by selected retailers)?”
2. Aggregated Sample; N = 931, 881 for 18-34, 55+ age brackets respectively
Source: OC&C Consumer Survey, OC&C analysis
Usage of Same Day Delivery Concepts, by Age
% Respondents
0
5
10
15
20
18-34 34-55 55+
9
Within 2 hours -6
-5
-4
-5
Instant
3 – 5 Day
Same Day
Next Day
2_RET_v2.4
11. 11
Aside from same day, consumers willingness to pay is low
Willingness to Pay Varies Slightly by Country, But Shows Same Overall Trends
% Respondents (Aggregated Sample - UK, US, FR, DE, CN, JP)
1. Consumers were asked: “Which of the following delivery options would you willing to pay for (vs expect to be free of charge)?”
2. Sample: UK = 543, USA = 523, FR = 506, DE = 553, CN = 502, JP = 517
Source: OC&C Consumer Survey, OC&C analysis
18%
16%
24%
24%
32%
25%
13%
5%
Specific Time Slot
Sunday
Instant
Within 2 Hours
Same Day
Next Day
3 – 5 Day
2 Week In the US, 20% of consumers are
willing to pay for 3-5 day delivery
UK consumers value same day more
highly (40%), and German consumers
over twice as likely to pay
Predictability over speed – German
consumers will pay for Sunday
delivery (25%), with time slots most
popular in Japan (25%)
Next day valuation varies, with US
most willing to pay (35%)
2_RET_v2.4
12. 12
Amazon Prime and Prime Now have taken off globally…
Source: OC&C Consumer Survey, OC&C analysis
1. Consumers were asked: “Which of the following delivery methods have you used to receive online orders in the last 6 months?”
2. Sample: London = 223, New York = 252, Paris = 255, Berlin = 251, Beijing = 280, Tokyo = 276
Usage of Amazon Prime & PrimeNow1,2
% Respondents
25%
31%
37%
43%
43%
61%
Paris
Shanghai
Berlin
Tokyo
London
New York
11%
12%
23%
50%
Paris
Berlin
London
New York
n/a
n/a
2_RET_v2.4
13. 13
…and new last mile concepts are gaining traction
Source: OC&C Consumer Survey, OC&C analysis
1. Consumers were asked: “Which of the following delivery methods have you used to receive online orders in the last 6 months?”
2. Sample: London = 223, New York = 252, Paris = 255, Berlin = 251, Beijing = 280, Tokyo = 276
Usage of New Delivery Concepts1,2
% Respondents
37%
63%
6%
24%
37%
12%
London New York BerlinParis Shanghai Tokyo
Food Delivery Convenient Parcel DeliveryGrocery Delivery
2_RET_v2.4
14. 14
Online barriers
have disappeared
Stores will need to fight back on immediacy & convenience
3%
3%
3%
6%
11%
11%
12%
21%
22%
Offer In Store
Product Unavailable Online
Cost of Delivery
Prefer Dealing with People / Wanted Advice
Enjoy Shopping In Store
Needed Item Urgently
Impulse Purchase
Wanted to Test, Try & Compare
Convenience / Proximity of Store
1. Consumers were asked: “You said you bought the item in store, what were the main reasons for this?”
2. Sample: UK, N = 341, excludes n<10
Source: OC&C Consumer Survey, OC&C analysis
Primary Reason for Choosing In-Store
% Respondents
Immediacy &
convenience are
key drivers for
physical channel
Stores not sufficiently
differentiating on experience
2_RET_v2.4
16. 16
Higher fulfilment costs are challenging retail economics…
Source: OC&C Experience, OC&C analysis
Traditional
Retailer
3-5%
Fulfilment Costs
% Sales
11%
6%
0%
High Service,
High Cost Market
High Service,
Low Cost Market
Marketplace
TodayYesterday
Switch to online fulfilment
expected to compress profit
margins for multi-channel
retailers by c.1.5 % points
2_RET_v2.4
17. 17
…accentuated by multiple points of profit leakage
Customer Order Economics and Points of Leakage
Example Fashion Order
Source: OC&C Experience, OC&C analysis
Net Order Value
2 Fashion
Items Gross Margin (GM)
~ 50%
Margin GM after Returns
~ 40%
Return Rate GM After Cost to Serve
Small
Basket
Low Margin
Items
High Return
Rate
Failed Deliveries,
Inefficient Operations
Managing all
points of leakage
is essential to get
order economics
right
2_RET_v2.4
19. 19
Winners will raise the bar on customer experience, while
improving the economics
• Order before 22.00 for free next day delivery
• 1 h delivery slot; on morning of delivery exact
arrival time +/- 10 min announced
Kakuyasu
2_RET_v2.4
20. 20
Over 600 pick up locations 15 min time slot for collectionOrders through website or app
Direct to the boot of your carDelivered in 5mins from arrivalPicked in advance in-store
Leclerc leverages a dedicated format for 2-hour collection
5 min
1
4
2
5
3
6
2_RET_v2.4
21. 21
Picnic employs focused range and fixed delivery time slots
Fresh goods ordered overnight Technology speeds packingOrder by 10pm deadline
…tracked in the Appat a time dictated by route plan…Delivery by electric van..
1
4
2
5
3
6
“Every day we come to your
street but everyday there’s
only one delivery time”
– Co-founder, Picnic
2_RET_v2.4
22. 22
Actions to consider
Make the last
mile integral
to your offer
Reimagine
how you can
raise the bar
for
customers
Make more
of stores
Back speed
as the norm
Invest in
predictive
analytics to
reduce profit
leakage
2_RET_v2.4
24. 24
… and join forces to create common platforms
Retailer PartnershipsCommon Service for Retailer Use
2_RET_v2.4
25. Acknowledgements
OC&C worked with Toluna Research to run a
survey of 3000 respondents across 6 markets
For further information contact:
Anita Balchandani
Partner, OC&C Strategy Consultants
anita.balchandani@occstrategy.com
Hendrik Walter
Associate Partner, OC&C Strategy Consultants
hendrik.walter@occstrategy.de
Miranda Parry
Consultant, OC&C Strategy Consultants
miranda.parry@occstrategy.com
26. The Argos Digital Transformation
Bertrand Bodson
Chief Digital & Marketing Officer,
Sainsbury’s Argos
34. At Peak 2015 we launched Fast Track Delivery
• Same Day Delivery on 20,000
products for £3.95
• 4 slots a day (e.g. Order by 6pm, get it
by 7-10pm), 7 days a week
• Live on 95% of UK postcodes, not just
in big cities
• Delivered from our Hub stores, via
our own friendly drivers
• Even on Christmas Eve, customers
could order up to 1pm for 4pm
delivery
• NPS: 80+
39. Key for us to springboard our customers online
40. We have evolved Argos culture and the way we work
An army of 30,000
digital colleagues
(now c.200,000)
Brought in and
developed new
skills and talent
Feels like a
start-up inside
Customers first
(end to end,
NPS)
Notas del editor
2
Many Chinese consumers choose to have parcels delivered to local convenience stores or apartment building management offices to reduce the risk of parcels being stolen; however, lockers are less widely used
There is high usage of 7-Eleven stores for sending parcels in Japan, but these are less commonly used as collection points
London
Deliveroo: Food delivery from partner restaurants
Launch year: 2013
Revenue 2016: GBP 130 (expected)
>300 employees
Scale: Most big cities in UK + IE, 17 further EU cities, Sydney, Melbourne, Hong Kong, Singapore, Dubai
DoddleRunner: Pick-up of parcels and unpacked items by „Runners“ who will even come to your desk, booked via app, available in London
Launched in 2015 by Doddle Parcels (a parcel store network that allows customers to send and receive parcels in their dedicated stores at railway stations, commuter hubs and university campuses around the UK)
Shutl: delivery of online shopping orders in 90 minutes or less
Currently 13 retailers have Shutl as a delivery option
Local courier service of items up to 150kg
Launch year: 2009 (UK), 2013 (US)
New York
Instacart: Grocery delivery from local stores
Rated as “America’s most promising company” in 2015 and valued at $2bn
Launch year: 2012
Grocery delivery app that aggregates local retailers and delivers within 1-hr
Self-employed ‘shopper network’ picks products from local shops and deliver them to your door
Retailers have created dedicated ‘Instacart’ lanes to speed checkout
Postmates: Courier delivery of “lunch, dinner, groceries, office supplies or anything else”
Present in various cities across 27 US states, ~$100m revenue 2015, 1 million deliveries per month
Founded in 2011, app launched in 2013
$140m funding rount at $600m valuation in 2016
Google Express: Same-day (or later) delivery of everyday essentials from stores like Costco, Walgreens, Toys"R"Us, and Petsmart
Launch in 2013, city-wise expansion (now covering 20-30 cities, rough estimate)
Delivery is subcontracted
$95 annual membership or $4.99 per delivery
Paris
Allo Resto: Food delivery from partner restaurants
4000 partner restaurants in 2600 French cities
Founded in 1998, 2014 entirely acquired buy just eat
Colis Privé: Private Parcel service with flexible delivery options, entirely acquired by Amazon in 2016
Packages can be delivered to home, partner shops (~9,000 in France), or InPost parcel lockers
Available as delivery option in 500 ecommerce shops, 35m parcels per year, 2,000 delivery FTE, 450 employees
InPost: Next-day delivery service with own parcel lockers
Based in Poland, revenue of ~$140 m (2015), present in 21 countries with 16,000 parcel lockers in Europe (2,500 in France)
Launch year: 2006
Berlin
Deliveroo: Food delivery from partner restaurants
Launch year: 2013
Revenue 2016: GBP 130 (expected)
>300 employees
Scale: Most big cities in UK + IE, 17 further EU cities, Sydney, Melbourne, Hong Kong, Singapore, Dubai
Tiramizoo: Same-day delivery and pick-up of parcels within cities
Partnerships with large e-commerce & multichannel players and automotive companies for instant local delivery
Present in 80 German agglomerations
Launch year: 2011
PaketButler: Foldable parcel locker that can be attached to the front door, where delivery services can drop parcels in (pick-up from locker also possible)
Provider independent, so can be considered platform
Nation-wide launch in 2016
Box can either be rented for €7.99 per month or purchased for €249
Developed in cooperation with Telekom
Beijing
SHBJ: Delivery of food, groceries, flowers and medicine
Covers 10 Chinese cities, ~1m deliveries per month, 2,000 delivery scooter riders
~GBP35m funding by Alibaba in 2015
Ele.me: China‘s largest food delivery provider
200 delivery stations in 25 1st and 2nd cities in China, 5000 employees
Received $1.25b funding from Alibaba in 2015/16 at valuation of $b3-5 (depending on source)
Daojia: Food delivery from restaurants
Available in 10 Chinese cities, covering 6000 restaurants, 3000 delivery FTE
Received $50m funding from JD in 2015
Tokyo
Seino Express: Offers national next-day parcel delivery, and global parcel shipping
Track&trace, customs services, uses infrastructure of Seino Group, an established logistics player
Seems to focus especially on e-commerce delivery between China an Japan, leveraging
Launch year: 2014
London
Ocado Smart Pass: Amazon Prime-like flat delivery concept for groceries from Ocado
Deliveroo: Food delivery from partner restaurants
Launch year: 2013
Revenue 2016: GBP 130 (expected)
>300 employees
Scale: Most big cities in UK + IE, 17 further EU cities, Sydney, Melbourne, Hong Kong, Singapore, Dubai
DoddleRunner: Pick-up of parcels and unpacked items by „Runners“ who will even come to your desk, booked via app, available in London
Launched in 2015 by Doddle Parcels (a parcel store network that allows customers to send and receive parcels in their dedicated stores at railway stations, commuter hubs and university campuses around the UK)
Shutl: delivery of online shopping orders in 90 minutes or less
Currently 13 retailers have Shutl as a delivery option
Local courier service of items up to 150kg
Launch year: 2009 (UK), 2013 (US)
New York
Google Express: Same-day (or later) delivery of everyday essentials from stores like Costco, Walgreens, Toys"R"Us, and Petsmart
Launch in 2013, city-wise expansion (now covering 20-30 cities, rough estimate)
Delivery is subcontracted
$95 annual membership or $4.99 per delivery
Instacart: Grocery delivery from local stores
Rated as “America’s most promising company” in 2015 and valued at $2bn
Launch year: 2012
Grocery delivery app that aggregates local retailers and delivers within 1-hr
Self-employed ‘shopper network’ picks products from local shops and deliver them to your door
Retailers have created dedicated ‘Instacart’ lanes to speed checkout
Postmates: Courier delivery of “lunch, dinner, groceries, office supplies or anything else”
Present in various cities across 27 US states, ~$100m revenue 2015, 1 million deliveries per month
Founded in 2011, app launched in 2013
$140m funding rount at $600m valuation in 2016
Paris
Allo Resto: Food delivery from partner restaurants
4000 partner restaurants in 2600 French cities
Founded in 1998, 2014 entirely acquired buy just eat
Colis Privé: Private Parcel service with flexible delivery options, entirely acquired by Amazon in 2016
Packages can be delivered to home, partner shops (~9,000 in France), or InPost parcel lockers
Available as delivery option in 500 ecommerce shops, 35m parcels per year, 2,000 delivery FTE, 450 employees
InPost: Next-day delivery service with own parcel lockers
Based in Poland, revenue of ~$140 m (2015), present in 21 countries with 16,000 parcel lockers in Europe (2,500 in France)
Launch year: 2006
Berlin
Deliveroo: Food delivery from partner restaurants
Launch year: 2013
Revenue 2016: GBP 130 (expected)
>300 employees
Scale: Most big cities in UK + IE, 17 further EU cities, Sydney, Melbourne, Hong Kong, Singapore, Dubai
Tiramizoo: Same-day delivery and pick-up of parcels within cities
Partnerships with large e-commerce & multichannel players and automotive companies for instant local delivery
Present in 80 German agglomerations
Launch year: 2011
PaketButler: Foldable parcel locker that can be attached to the front door, where delivery services can drop parcels in (pick-up from locker also possible)
Provider independent, so can be considered platform
Nation-wide launch in 2016
Box can either be rented for €7.99 per month or purchased for €249
Developed in cooperation with Telekom
Beijing
Ele.me: China‘s largest food delivery provider
200 delivery stations in 25 1st and 2nd cities in China, 5000 employees
Received $1.25b funding from Alibaba in 2015/16 at valuation of $b3-5 (depending on source)
Daojia: Food delivery from restaurants
Available in 10 Chinese cities, covering 6000 restaurants, 3000 delivery FTE
Received $50m funding from JD in 2015
SHBJ: Delivery of food, groceries, flowers and medicine
Covers 10 Chinese cities, ~1m deliveries per month, 2,000 delivery scooter riders
~GBP35m funding by Alibaba in 2015
Tokyo
Seino Express: Offers national next-day parcel delivery, and global parcel shipping
Track&trace, customs services, uses infrastructure of Seino Group, an established logistics player
Seems to focus especially on e-commerce delivery between China an Japan, leveraging
Launch year: 2014
Return Benchmarks -
UK Department Store, Womenswear 48%
UK Premium Fashion Brand 40.0%
Germany Online Pureplay, Shoes 30.0%
UK Department Store, Menswear 26.0%
Asian Fashion Retailer 13.0%
Germany Online Pureplay, Menswear 12.0%
Turkey Value Fashion Retailer 10.0%
UK Failed First Deliveries cost c.£1bn per year
National Postal Services 12%
Other Carriers 5.50%
STUART
€22m capital raise (at €45m valuation) in Nov 2015
Official launch in April 2016
Partnership with Just Eat, despite its primary pitch as Prime Now for local merchants
Stuart is rapidly adding food delivery, such as from Sushi Shop and Pizza Hut in France
Kakuyasu
Delivery of alcoholic and other beverages within 30 minutes
Rapid from-store delivery available in Tokyo, Osaka and Kanagawa (c. 24% of Japanese population)
Delivery from small beverage shops (seems like this is the core business) via scooter
Free delivery from “1 beer on”, 2500 yen minimum for lorries
Delivery time can be chosen from quickest possible delivery to a specific time within 10 days
Besides from-store delivery, Kakuyasu also offers nation-wide delivery from stock
1000 vehicles, 14 centre stores, 173 locations, 365 days 24/7
Big Basket
India’s largest online food and grocery store, >1m orders per month
Rev 2016 ~$100m
Launch year: 2011
Funding since started up: $243m (150 in 2016)
Picnic
Free grocery delivery (min order value: €25)
Currently 5 Dutch cities, claim of quick expansion
1 h delivery slot, on morning of delivery day exact arrival time +/- 10 min is announced, can follow delivery truck on app
Claim of lowest price
Launch year: 2015
Deliv
Same-day delivery service for currently ~100 retailers in 17 US cities through Uber-style crowd-sourced couriers
Now 4000 retailers ion 100 cities including Macy’s and Best Buy.
Total funding £40m, with £28 m from UPS in 2016
Several major US shopping mall chains have invested in Deliv, which offer Same Day services to mall tenants with intention of acting as local delivery hubs
Acquired Zipments and WeDeliver in 2015 to expand delivery network
Launch year: 2012
Leclerc have >600 sites, aiming for at least 700. Between all chain, there are c.3,000 Drive locations across France.
Overall Drive is 5.6% of grocery market in France. Leclerc lead with c.40% market share vs 20% overall share.
Leclerc Drive grew 19.7% YoY 2014-15 (whole company grew 3% in France) – Drive still relatively small proportion of sales c.7%
Leclerc have expanded Drive concept into other countries including Italy, Spain, Poland and Slovenia