Automation, gig economy can help retailers improve delivery: Capgemini report

Consumer products companies and food and grocery retailers must invest in last-mile delivery services to unlock new revenue streams, cut costs and drive profitability, according to a study by Capgemini Research Institute.

The study, which surveyed 2,870 consumers and 500 supply chain executives, entrepreneurs and industry leaders, found that 97% of organisations believed existing last-mile delivery models weren’t sustainable for full-scale implementation across all locations. Shipping cannot be free unless delivery costs are reduced through automation, it said.

The study suggested that there is a significant opportunity in automation as more than one-third of supply chain costs come from warehouse and product sorting. Recognising this opportunity, 89% of organisations are investing in mechanization and automation of store back-rooms to expedite fulfillment and deliveries, it added.

The study said automated warehouse operations, backroom automation for delivery and click-and-collect orders, and autonomous delivery vehicles are some options that can help boost profitability. Retailers must also collaborate with consumers for crowdsourced delivery platforms, encourage employees to deliver parcels for more incentives and use the gig economy for delivery during peak seasons, it added.

The report found that 40% of customers surveyed currently order groceries online at least once a week and that this number is likely to touch 55% by 2021.

Another interesting finding was that 74% of satisfied customers intend to increase expenditure by as much as 12% with retailers they frequently buy from. A majority 82% of customers have shared positive experiences with friends and family, and just over half (53%) would be willing to purchase a paid membership for a good delivery service. Also, despite 55% of customers saying that offering two-hour deliveries would increase loyalty, only 19% companies provide this service.

The report concluded that increasing store-based deliveries by 50% could potentially lead profit margins to soar by as much as 9%. Dark stores - retail outposts with store-like layouts intended only to fulfill online orders - can also process high delivery volumes and are 23% cheaper than conventional stores for same-day deliveries.

The study also emphasised that back-room automation could increase profits by up to 14% by reducing the cost of click-and-collect orders and deliveries from store.