The research identifies a logistics niche where recent strong growth rates appear set to continue.
As internet shopping continues to grow, so the fulfilment of online orders continues to be a growth market – in contrast to the maturity of many areas of the logistics industry. In 2013 there were more than half a billion internet orders which required fulfilment, creating a market of over £3bn in value.
The fundamental drivers are the ongoing growth in internet penetration and consumer acceptance of / enthusiasm for shopping online. The UK is an advanced market with almost three quarters of households now regularly shopping in this way making it the largest internet shopping market in Europe by a considerable margin.
Furthermore, consumers are increasingly becoming open to buying from overseas websites. Given its lead in the area, this is a key benefit for UK e-retailers, and many have already established significant levels of international sales. Market estimates are that around 14% of UK e-retailer sales are to overseas customers and we expect this figure to increase in future.
To meet these challenges, delivery services have continued to innovate and improve the way they tackle last mile deliveries, offering quicker delivery, SMS notifications, more options including parcel shops and secure locker banks and streamlined returns. Free delivery and returns reduce the barriers which prevent customers from ordering. Click and Collect, which now represents over £2bn, has been embraced by the large retailers with both physical and online presence as it allows them to use their store network as a differentiator in online sales.
Major logistics groups like DHL, Kuehne + Nagel, CEVA, UPS, Dentressangle and Allport offer e-fulfilment as part of a broader offer, which often includes management and / or provision of transport services. Their international operations may be particularly attractive for large e-retailers looking to expand via international sales. At the smaller end, the market remains fragmented and there are a number of specialists, such as iForce, Clipper, Torque, Amethyst and Spark Response who serve both medium-sized and some large e-retailers.
While outsourcing e-fulfilment is increasingly common for smaller e-retailers and marketplace sellers, some large retailers have brought the service back in-house, recognising its strategic importance to their proposition. In doing so, they are following the lead of Amazon, which, having originally outsourced its logistics, has now become a pioneer and innovator in this area.
Our forecast for segment growth to 2018 is derived from our market model and based on analysis of trends and growth drivers as well as insights from our interviews and other market evidence. We expect growth to continue to be at a rate well above that seen in most other logistics segments with significant scope remaining for further increases from both domestic and international customers.
The full market report: "UK e-fulfilment: Market Insight Report 2014", which includes insights from interviews with customers, profiles of the leading players, as well as growth forecasts for the market and its key drivers, is available from apex-insight.com/research