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VALUING HOME DELIVERY

2008
e-Retail Industry Review
©

IMRG is working to give online shoppers home delivery fit for the internet
age by aligning the collective efforts of all stakeholders:
CONSUMERS, RETAILERS and CARRIERS.
This report provides a market update and sets out the cost-benefit of
home delivery to these three key stakeholder groups.

IMRG Delivery Charter Founder Sponsors

IMRG Delivery Charter Sponsors

© ®
Internet Shopping Is Safe (ISIS) where you see these signs
IDIS is the delivery mark of the ISIS e-retail industry trust scheme

IMRG, London WC2B 6AA


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

CONTENTS

1. Fast Facts .......................................................................................................................... 3

2. Introduction ........................................................................................................................ 5

3. Delivery: The Consumer View ........................................................................................... 8

4. CONSUMER Costs of e-Retail Delivery Failure.............................................................. 10

5. RETAILER Costs of e-Retail Delivery Failure ................................................................. 11

6. CARRIER Costs of e-Retail Delivery Failure................................................................... 12

7. How Can Home Shopping Fulfilment Be Improved?....................................................... 13

8. Innovation in Internet Shopping Delivery......................................................................... 15

9. The IDIS Programme (www.imrg.org/IDIS) ..................................................................... 17

10. IDIS Delivery Charter and Accreditation.......................................................................... 18

11. IDIS Delivery Manager .................................................................................................... 21

12. Research ......................................................................................................................... 25

13. Appendix A: Summary of IMRG Delivery Data............................................................... 26

14. Appendix B : Summary of Cost Values and Assumptions ............................................. 28

15. Appendix C: Supporting Research ................................................................................. 29

16. Appendix D: IMRG Delivery Survey 2008 - Highlights ................................................... 31

IMRG DELIVERY FORUM MEMBERS


(as of 07/2008)

RETAILERS: AMAZON, ARCADIA, ASOS, BOOTS, BT DIRECT / BT RETAIL, BUNALUN UK,


CARPHONE WAREHOUSE, CLASSICAL WEDDING, COMET, DABS.COM, EMPIRE DIRECT,
FIGLEAVES.COM, FIREBOX, HOUSE OF FRASER, IKEA, I WANT ONE OF THOSE, JOHN LEWIS,
LIGHTING DIRECT, REDCATS, REPUBLIC, SCREWFIX, TESCO, VENTE-PRIVEE.COM
FACILITATORS: AXIDA, BUSINESS DIRECT GROUP, FULFILMENT GUIDE, GIRAFFE MARKETING,
IFORCE, KELKOO, KILPATRICK, METAPACK, PARCELPAL, POSTCOMM, STERLING COMMERCE,
TOUCHPOINT COMMUNICATIONS, WIN , ZENDOR GSI COMMERCE
CARRIERS: AUSTRALASIAN MAIL SERVICES, BUSINESS POST, BYBOX, DHL, HOME DELIVERY
NETWORK, GEOPOST UK, JERSEY POST, KIALA, PARCEL 2 GO, PARCELFORCE, PARCELNET,
ROYAL MAIL, WINCANTON

www.fulfilmentguide.com/IMRG

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 2 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

1. Fast Facts

UK Online Shopping and the Delivery Challenge in 2008

ƒ British shoppers will spend £63 billion - £2,185 each


ƒ 820 million parcels will ship to 27 million shoppers
ƒ 11.5% of e-retail home deliveries will be
FIRST TIME DELIVERY FAILURES, i.e. 94 million
ƒ 1% of e-retail home deliveries will be UNDELIVERABLE,
i.e. 8 million
ƒ £420 million of direct costs will result from delivery
inefficiencies and failures
ƒ £0.50 of inefficiency cost on every parcel

UK Parcel Delivery Failure Costs


2008 2005
First time delivery failures 94 million 62 million
(i.e. "Carded" Deliveries)
11.5% 12%
(12.39% actual)
UK "undeliverables" 8 million 10 million
(i.e. did not arrive for whatever reason)
1% 2%
(1.03% actual) (2.19% actual)
TOTAL COST £420 million £423 million
This table shows that progress has been made in halving the number of
"undeliverables", though the "first time delivery failures" rate has only improved
marginally in three years. The total cost has remained unchanged even though the
value of sales will more than treble, from £19.2 billion to £63 billion per annum.

Who Pays?

ƒ CONSUMERS: 2,466 man-years of wasted time per


annum (section 4)
ƒ RETAILERS: £300 million due to FIRST TIME FAILURES
& UNDELIVERABLES (section 5)
ƒ CARRIERS: £120 million cost of delivery re-attempts
(section 6)

THE OPPORTUNITY
IMRG estimates that £4 billion per annum of
benefit is currently available by resolving delivery
inefficiencies and that industry adoption of
IDIS Delivery Manager by MetaPack could realise
at least 50% of this

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 3 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

IMRG Capgemini e-retail Sales Index for UK e-Retail Market

6000

5000

£4 billion sales per month


4000

70 million parcel deliveries per month


In d e x V a lu e

3000

2000

1000

0
A p r-0 0
J u l-0 0
O c t-0 0
J a n -0 1
A p r-0 1
J u l-0 1
O c t-0 1
J a n -0 2
A p r-0 2
J u l-0 2
O c t-0 2
J a n -0 3
A p r-0 3
J u l-0 3
O c t-0 3
J a n -0 4
A p r-0 4
J u l-0 4
O c t-0 4
J a n -0 5
A p r-0 5
J u l-0 5
O c t-0 5
J a n -0 6
A p r-0 6
J u l-0 6
O c t-0 6
J a n -0 7
A p r-0 7
J u l-0 7
O c t-0 7
J a n -0 8
A p r-0 8
Chart 1. UK e-retail sales, April 2000 - May 2008: This graph shows the 5213% growth of UK online
shopping between April 2000 and December 2007: the value of monthly sales rose from £87 million to £5.4
billion: the number of shipments per annum increased from 15 million to 820 million.
head / year £

People using

deliveries %
connections
Broadband
Av Spend/

deliveries
shoppers
Spend %

delivered

shopping
No. of e-
e-Retail

internet
change

change
parcels
spend

Home

Home

Home

Home
£

2008 63.0 bn + 35% 29 m 2,185 45 m 17.5 m 820 m 714 m + 15%


2007 46.6 bn + 54% 27 m 1,726 43 m 15.5 m 710 m 620 m + 15%
2006 30.2 bn + 57% 25 m 1,208 42 m 12.7 m 620 m 540 m + 20%
2005 19.2bn + 32% 24 m 816 40 m 9m 520 m 450 m + 20%
2004 14.5 bn + 32% 20 m 727 35 m 5.7 m 430 m 375 m + 15%
2003 11 bn + 72% 16 m 688 29 m 2.9 m 375 m 325 m + 15%
2002 6.4 bn + 255% 12 m 533 24 m 1.7 m 320 m 280 m + 10%
2001 1.8 bn + 125% 6m 302 19 m 0.1 m 290 255 m + 5%
2000 0.8 bn + 167% 3.5 m 228 15 m 0 280 m 243 m -
1999 0.3 bn +100% 1.8 m 167 9m 0 - - -
1998 0.15 bn +84% 1.1m 136 4.8m 0 - - -
1997 0.08 bn +166% 0.7 114 3.6m 0 - - -
1996 0.03 bn +200% 0.4m 75 2.4m 0 - - -
1995 0.01 bn - 0.2m 50 1m 0 - - -
Chart 2. UK e-retail key market and parcel delivery data, 1995 - 2008: This table reveals how e-retail
spend really took off when domestic broadband became available, from 2000. The difference between
parcel numbers and deliveries is because on average, 1.15 parcels are delivered per consignment.
The general trend of the data indicates that half the population will produce a billion internet shopping parcel
deliveries in 2009.

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 4 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

2. Introduction

Enormous improvements are being made in UK home shopping delivery.


Shopper satisfaction with home delivery (81.1%) has improved significantly, and
now ranks second only to 'Product Choice' (84.3%).
While the UK market value trebled during the past three years, overall delivery
failure costs remained static, as efficiency improved.
Innovative new, large scale fulfilment solutions being introduced indicate that
IMRG's target of 100% industry-wide delivery success will be achievable.

IDIS STRATEGIC VISION


ENABLING ONLINE SHOPPERS TO MAKE INFORMED
DELIVERY CHOICES THROUGH TRANSPARENCY OF
OPTIONS, LIMITATIONS, BENEFITS AND THEIR
ASSOCIATED COSTS.

Online shopping has become the dynamo of the retail sector. It accounts for more than 15% of the total
retail market and, as the world's attention fixes on climate change, can answer many of the urgent
questions being asked about the need for and efficiency of moving people and goods.

IMRG forecasts that the internet will account for half of all retail sales by 2020 and influence most of the
other half. Many online sales will not result in parcels being shipped, such as those fulfilled in store or via
click and collect services, groceries that are delivered via the dedicated transport fleets necessary to
maintain the chill chain, ticketless travel products, and virtual goods that require no physical distribution.
Nevertheless, half of online shopping does call for packages to be shipped so demand for home delivery
and other consumer fulfilment services will inevitably mushroom, with huge implications for consumers,
retailers and brands, planners, the transport industry and Government.

IMRG: Online & Web Influenced Retail Sales ‐ 2000 to 2020
2008
100

90

80

70
% of Total Retail

60

50

40

30
Web Influenced Sales
Online Sales
20

10

0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
© IMRG 2008

Chart 3. 2020 Vision: This graph shows IMRG's estimate and forecast of online retail sales and internet
influenced sales during the first two decades of the third millennium. The red line to the left of 2008
represents actual sales recorded by the IMRG Capgemini e-Retail Sales Index

When the first IMRG Valuing Home Delivery report was published in May 2006, a depressing £423
million a year of direct UK e-retail costs were being wasted due to largely avoidable home delivery

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 5 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

inefficiencies and failures. This equated to an inefficiency cost of £0.80 being imposed on every one of
the 540 million internet shopping shipments made that year. Delivery problems, together with the
associated uncertainty and hassle they caused for everyone involved, blighted the industry, inhibiting
growth and putting many people off shopping online altogether.

“ ”
To a business, its percentage of failed deliveries may seem
low, but to each disappointed consumer, the failure is 100%
Carrier

The answer was obvious: give shoppers more suitable delivery options and make communication better
all round. Ironically, most of the solutions needed to avoid the failures were readily available - named-
day deliveries, timed deliveries, drop boxes and SMS alerts to name just a few - but they were seldom
offered to shoppers at the point of sale, so of course were not being used. Our 2005 market survey
revealed that half of e-retailers offered just one delivery option - i.e. no choice - and only 20% offered
three or more options.

The delivery experience is key to the success of online shopping, and the fact that UK consumers are
spending £4.5 billion per month on the internet shows that many people are generally satisfied with the
service. However, there is such considerable room for improvement that it is surprising that more
progress has not yet been made towards realising better e-retail delivery.

The IMRG Delivery Forum's research consistently shows that by using existing solutions, clearly
communicated to the consumer, and fulfilled by the retailer and carrier working closely together, all of the
key stakeholders can gain significant benefits:

ƒ CONSUMERS can have easier and more convenient home delivery, which will result in more
consumers spending more online, more often;
ƒ RETAILERS can differentiate themselves from competitors, and gain significant bottom line benefits
through increased efficiency, higher volumes and lower customer churn rates;
ƒ CARRIERS can expand their revenues and service ranges (with new added value services) and
increase profitability:

But until recently, each of these stakeholders had expected another to take the decisive steps necessary
to align home delivery with internet shoppers' needs, resulting in a strategic impasse.

“ ”
I can't shop online because I'm always out when they
deliver. The last time I had to traipse to a depot in the
middle of nowhere on Saturday to get my stuff.
Where's the convenience in that?
Shopper

“ ”
The reason websites rarely offer time or date options is
because few carriers are able to offer these services and if
they do the cost is far too high. As a result the number of
customers who would actually be prepared to pay for them
is too small.
Retailer

“ ”
We asked retailers what delivery services they wanted, then
piloted the results - but they never want to pay a realistic
price. New delivery services will only become cheaper
when volumes are high. It's chicken and egg.
Carrier

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 6 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

For years, the gridlock was impassable. Piecemeal improvements in delivery were being made by
individual companies while all other aspects of internet shopping were progressing in leaps and bounds,
resulting in consumers' rising expectations outstripping the speed of delivery developments.

Chart 4. The biggest improvement in Cumulative Customer Satisfaction is seen with the Delivery
Experience, which has risen 3.9% compared with the December 2006 survey, and now ranks
second only to Product Range: The quarterly UK e-Customer Service Index report provides businesses
with an ongoing review of customer satisfaction with online retailing services, information and support.
Data has been gathered quarterly using a standard survey since December 2006, providing direct
comparative information across a number of survey cycles. Comparisons with the initial December 2006
data show that significant progress has been made especially in the area of delivery, which has been the
focus of huge amounts of effort on the part of retailers and transporters in the past two years and the
positive results show that consumers have noticed and appreciate such efforts.

Today, far more strenuous efforts are being made to improve the situation, which is just as well as soon a
billion internet shopping parcels will be delivered each year. Retailers, recognising delivery as a key
market differentiator, are giving it more attention than they have previously, while carriers, keen to
capitalise on the sector's rapid growth, are investing in capacity and service improvements.

At an industry level, the key advance has been the introduction by IMRG of the gridlock-breaking
IDIS Delivery Manager by MetaPack, a major innovation in home delivery for internet shopping that
enables e-retailers of all sizes to offer their customers a variety of delivery options from multiple carriers
and services (page 21).

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 7 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

3. Delivery: The Consumer View

The internet age has brought convenience, speed and choice to shoppers, yet,
even now, consumers routinely have to settle for a 'take it or leave it' approach to
delivery services with vague delivery promises. Uncertain delivery times and
sketchy delivery information deter millions of people from shopping online.
But delivery is improving fast; customers recognise this and want more.

The IMRG Delivery Survey 2008 was conducted as always by eDigitalResearch and attracted 1,478
respondents. More highlights of the results are contained in Appendix D (page 31).

Chart 5. Is e-shopping planet friendly? Chart 6. Would you opt for green delivery?
This chart shows that the majority of respondents Almost 80% say they would, which is good news as
think it is - a real accolade for a channel that is little green delivery options are becoming available.
more than ten years old.

Two of this year's new questions were associated with green issues, above. Below, this chart shows that
while satisfaction with delivery has risen overall, some sectors lag behind, such as Furniture, and
Clothing which both lags and remains unimproved, and Books which is actually falling.

IMRG Home Delivery Satisfaction Index


Dec-06 Apr-07 Sep-07 Jan-08 May-08
RATE SATISFACTION AS %
Number of consumer responses 6945 13661 10564 10906 10906

Overall, rate your delivery experience (ALL SECTORS) 77.2 79.5 80.2 78.7 81.1
Furniture, DIY and gardening 74.5 74.5 74.7 75.3 75.6
Clothing, footwear and jewellery 78.4 78.2 78.4 77.2 78.6
Home and consumer electronics 74.2 78.3 78.3 78.3 80.0
Gifts N/A 79.13 80.8 78.7 80.5
Books, CDs, music, games, videos/DVDs 81.1 81.1 80.8 78.8 80.3
Health and beauty (e.g. cosmetics and pharmacy products) 79.4 80.2 78.3 79.4 80.0
Food, drink and household supplies 80.3 79.0 80.7 79.7 80.1
Travel (flights, holidays, car hire) and tickets (cinema, events) 71.9 82.4 84.4 82.1 83.3
Chart 7. This chart shows how consumers' rising expectations offset improvements in home delivery
services, resulting in delivery satisfaction ratings remaining largely flat. In some sectors - notably Books,
CDs, Music, Games, Videos/DVDs - satisfaction is falling.

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

Chart 8. The consumer view. This chart is a summary of the IMRG 2008 delivery survey's key findings.

The survey found that 95% of online shoppers request delivery direct to their home and that 90% of the
survey considered that the first delivery attempts were successful.

It also found that only 74% of the respondents rated their Overall Delivery Satisfaction between 80 and
100%. Alarmingly, a meagre 40% gave Returns between 80 – 100% satisfaction ratings.

65% have experienced one of more inconvenient delivery while 55% said that failure of one or more of
their home deliveries was due to there being nobody home.

Delivery concerns were a reason not to complete one or more shopping attempts for 69% of respondents
while delivery pricing has prevented 65% from buying online at some time.

Chart 9. Areas of opportunity. This chart is a summary of the areas of opportunity for retailers and
transporters identified by the IMRG 2008 delivery survey.

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 9 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

The Delivery Survey 2008 indicated some key areas of opportunity for retailers and transporters, as
shown in chart 7, above.

Cost reduction was identified by 59% of respondents as a key area of concern. Delivery cost efficiencies
offer significant competitive advantage where these can be generated.

Convenience of delivery (45%), more defined delivery times (44%) and time definite delivery (32%) were
identified as key area of concern and hence opportunities for retailers and transporters.

25% of respondents also indicated that the ability to deliver to an address other than that of the
cardholder would be a major encouragement to shop more online.

4. CONSUMER Costs of e-Retail Delivery Failure


Convenience and cost savings are primary drivers for online shoppers. But if delivery failure negates
these benefits, the reason for shopping online is eliminated. It follows that consumers' time, costs and
frustration when things go wrong must be factored into the internet shopping delivery cost benefit model.

The chart below only sets out the costs to consumers of UNDELIVERABLES, i.e. total delivery failures
where the goods never arrive at all.

The chart excludes costs associated with ATTEMPTED DELIVERIES, i.e. deliveries that ultimately
succeed either through further delivery attempts or consumers collecting from depots. Further research
is being undertaken to assess these costs.

The figures are based on IMRG research and assume that the 1% 'undeliverable' rate recorded in
Q1 2008 remains constant during the year across the 820 million expected online shopping deliveries,
i.e. that 8 million deliveries will fail completely.

Consumer Costs of e-Retail Delivery Failure


Source: IMRG 2008

TIME CONSUMING TASK TIME EXPENDED


(minutes)
Follow up telephone calls 20
Waiting time 40
Rearranging delivery / collecting parcel
OR 60
Cancelling order, making / managing claim, find and set up with new supplier

Total cost of an individual failure to a consumer * 120 minutes per failure

Total cost of UNDELIVERABLES to all UK e-shoppers in 2008* 1,825 man years p.a.
Chart 10. Consumer costs of delivery failure. * assumes 8 million UNDELIVERABLES per annum (i.e.
1% of the total 820 million UK online shopping deliveries expected in 2008).

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

5. RETAILER Costs of e-Retail Delivery Failure


There is a clear minimum information set that is required in order to successfully initiate and manage the
delivery process. This includes the basic address information required for a delivery, the dimensions of
the package (not the contents), the mode of delivery, the delivery commitments including timing, and the
consumer information related to contact. When this information set is incomplete or corrupted in
transmission, the costs to the retailer can be high.

The following chart is based on IMRG Retailer Survey (2005), supplemented by generic industry data
and conservative assumptions, extrapolated across the UK market where indicated. Further details of
the costs can be found in Appendices A, B, C and D.

RETAILER COSTS PER TASK / ITEM


ƒ Physical delivery cost of a successful home delivery (£4.26 for delivery plus £3.74 for fulfilment and
packaging) = £8
ƒ Customer service costs for a failed delivery = £4
ƒ Cost of handling stock / replacements / damages of a failed delivery = £5
ƒ Additional charges / overheads that MAY occur per delivery (e.g. answering customer enquiries;
escalating complaints, handling claims, recalculating invoices, re-issuing invoices; customer attrition /
loss; customer recruitment costs to replace those lost due to delivery problems …) = £28

Retailer Costs of e-Retail Delivery Failure


Source: IMRG 2008

a) INDIVIDUAL TASK / ITEM £ COST


One REDELIVERY ATTEMPT (if not individually charged to the retailer, this £1.50
will be recouped in the future transport contract)

One UNDELIVERABLE (with one attempted redelivery, customer service and £18.50
stock handling costs) + value of lost sale
revenue
One UNDELIVERABLE (as above) with additional charges / overheads that £46.50
MAY occur + value of lost sale
revenue
b) TOTAL SECTOR COSTS FOR 2008
All FIRST TIME DELIVERY FAILURES* in 2008 (at £1.50 each, excluding £141,000,000*
any additional charges / overheads that MAY occur) + value of lost sale
revenue
All UNDELIVERABLES** in 2008 (excluding additional charges / overheads £148,000,000
that MAY occur) + value of lost sale
revenue
All FIRST TIME DELIVERY FAILURES* and UNDELIVERABLES** in 2008 £289,000,000 p.a.
(excluding additional charges / overheads that MAY occur) + value of lost sale
revenue
Chart 11. Retailer costs of delivery failure.

* assumes 94 million FIRST TIME DELIVERY FAILURES per annum (i.e. 11.5% of the total 820 million
UK online shopping deliveries in 2008)

** assumes 8 million UNDELIVERABLES per annum (i.e. 1% of the total 820 million UK online shopping
deliveries expected in 2008)

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 11 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

6. CARRIER Costs of e-Retail Delivery Failure


Carriers have the greatest responsibility and exposure in the delivery cycle. They are the physical
manifestation to a consumer of the success or failure of the delivery process. Often they have
inefficiencies imposed on them through poor data or process, either because the consumer has not been
asked / has not provided the necessary correct information, or the retailer has not processed and passed
it on as required.

Carrier Costs of e-Retail Re-delivery / Failure


Source: IMRG 2008

TASK / ITEM £ COST*


Return to facility operational costs (receipt, sorting, monitoring HOLD and 0.30
UNDELIVERED shipments, record and data entry)
Physical redelivery costs 1.50
Call centre / customer service costs 0.10

Additional charges that MAY occur (answering customer billing enquiries, handling 1.50
claims, recalculating invoices, re-issuing invoices…)

Total basic cost per shipment of single re-attempt delivery £1.90


Total single redelivery with additional charges that MAY occur £3.40

Total cost to all UK internet shopping carriers of single re-attempt £178,600,000 p.a.
delivery per annum at standard charge**
Chart 12. Carrier costs of delivery failure..

* average of costs reported by 5 carriers (2005)

** assumes 94 million FIRST TIME DELIVERY FAILURES per annum (i.e. 11.5% of the total 820 million
UK online shopping deliveries expected in 2008)

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

7. How Can Home Shopping Fulfilment Be Improved?

Delivery is critically reliant on the efficiency of processes prior to consignment of


the goods to a transporter. Then it is vulnerable to the presence of a recipient of
the goods at the time and place of delivery. The ultimate goal for efficient
distribution is consolidated deliveries that succeed first time.
With delivery experience satisfaction running at over 80% in the most recent IMRG delivery survey this
would indicate that a mix of process efficiency and error correction during sub processes is providing an
overall process efficiency level of around 95 to 95.5% overall, using the current prevailing delivery model.
Reaching the target of 100% delivery success will therefore require the adoption of new delivery models,
and proactive communications that are fully embedded in the online shopping process.

IMRG has gained extensive first-hand knowledge of just exactly what can go wrong with home shopping
deliveries through its operation of the ISIS trust scheme since 2000. The two primary causes of home
delivery problems are communication failure or the lack of suitable delivery options, with
innumerable variations of each and combinations of both.

“ ”
Looking at the research and our own experience, it appears
that 3/4 of failed deliveries are due to customer error:
'address entered incorrectly' .'just went out for 10 mins', etc.
Retailer
This quote from IMRG's 2005 market review indicates that the retailer
considers it to be a 'customer error' if they are not in and available at all
times to receive an unscheduled delivery. So the first thing this retailer
needs is a change of attitude.

Communication failures may start out as simple errors, such as shoppers accidentally miskeying their
address information; we all make mistakes, so this kind of problem is common. But if such a mistake is
not picked up and corrected (as credit card miskeyings are), it may be passed on to the retailer, who may
then fulfil the order and pass the bad address on to the carrier. The incorrect address may be that of a
real home, in which case the carrier may then make several failed attempts to deliver the goods or, worse
still, successfully deliver the goods into the wrong hands, creating further delay, hassle and opportunity
for loss. Meanwhile, the shopper may be getting very annoyed with the retailer that their goods have not
arrived, generating emails and phone calls that the retailer has to respond to using costly resources, and
demanding that replacement goods are sent out. Such problems are all too common, and can take
weeks to unravel.

IMRG routinely encounters such chaos, and the costs to all concerned can often run into hundreds of
pounds if valuable goods are involved.

Such problems may be easy to avoid: just flagging to shoppers the importance of correct data helps; a
simple address checking system, such as the payment industry uses to spot the entry of wrong number
of digits or impossible dates, would catch many simple input errors.

Was it possible to add special delivery instructions?


(source: IMRG research April/May 2005)
Add special delivery instructions? % retailers
No 80
Yes 20
TOTAL 100

“ ”
Specific delivery instructions are not very helpful as these
typically are: 'Call 10 minutes before delivery'...or ...'leave on
porch if not in'...or...'deliver between 9.00 and 9.30'....etc. And
of course these people have only paid for standard delivery.
Retailer

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 13 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

Given the potential complexities of home delivery, you might expect that retailers would encourage
shoppers to add specific delivery instructions, but most do not, as the following table shows. The fact is
that even if shoppers give helpful instructions, there is often no way of responding to them. So the holes
in the system keep filling up with annoying, expensive problems.

Did the website make clear that a signature was required?


(source: IMRG research April/May 2005)
Signature required made clear? % retailers
No mention 54
Yes 28
No signature is needed 7
Makes it clear that you need to be in 5
A signature may be required 4
Not usually 1
Certain products indicate that you need to sign 1
TOTAL 100

Communication failure is of course exacerbated by a lack of suitable delivery options. Retailers are
responsible for goods successfully reaching the customer in good condition, and so may force a
signature to be collected when that is quite unnecessary (for example with low-cost goods), thereby
causing avoidable delivery failures. The retailer may not be aware of any downstream problems that
their signature demand may trigger - they simply ship the goods and hear no more, so assume that
everything is okay. Even if the retailer is aware of such problems, as long as the cost is borne by the
carrier, and there is no comeback, they may see it as an easy way to mitigate risk.

Each Christmas we see a huge spike in online sales as millions of shoppers buy gifts and supplies
online. Having items gift wrapped and sent directly to the recipient is highly popular with time-pressured
people. However, as the chart below shows, the research revealed that 94% of retailers surveyed in
2005 did not allow shoppers to split their order across multiple delivery addresses, forcing shoppers to
place multiple orders.

Was it possible to split the order across multiple delivery addresses?


(source: IMRG research April/May 2005)
Split order across multiple addresses? % retailers
No 94
Yes 5
Not online – you have to call to arrange 1
TOTAL 100

IMRG partners with Fulfilment & e.logistics, the leading printed and online periodical on multi-channel
fulfilment, and together we have created an online Delivery Resource Centre that contains a
PARCEL CARRIER SERVICE GUIDE, a section on UNATTENDED AND DEFERRED DELIVERY
SOLUTIONS, a fulfilment and logistics GLOSSARY, and much more (www.fulfilmentguide.com/IMRG).

www.fulfilmentguide.com/IMRG
Whatever your discipline - sales, customer service, marketing - Fulfilment & e.logistics will bring you up to
speed with essential topics like unattended delivery solutions, text and email alerting systems, carrier
services and website integration.

To activate your personal registration, just go to www.fulfilonline.co.uk/register and fill in a simple form.
Normally you have to show you are an 'eligible reader' to get on to the magazine's free list, but if you
enter your offer code as IMRG1, your application should be waved through.

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 14 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

8. Innovation in Internet Shopping Delivery

Innovative new, large scale fulfilment solutions being introduced indicate that
IMRG's target of 100% industry-wide delivery success will be achievable.
A primary reason for the internet's phenomenal growth is that every emerging problem is pounced on by
people around the world who see them as opportunities, and internet shopping delivery is no different.
During recent years, a raft of innovative e-retail fulfilment solutions have emerged, and there are more in
the pipeline. Here are just some of them.

Pic 1. Payphones become fulfilment points. The network of 80,000 UK


payphones are set to become internet shopping delivery gateways.

Two IMRG members, BT and ByBox, are working together to transform the country's network of 80,000
payphones into internet shopping delivery points. The first units will be deployed in main commuter
locations in October 2008, ready for the Christmas rush. Not only will they guarantee 100% delivery
success, with efficient overnight distribution, and enable pickup at the consumer's convenience, they will
also take the hassle out of returning parcels. Is this the holy grail of efficient distribution: consolidated
deliveries that succeed first time?

Pic 2. Safe and sound. Secure delivery boxes, such as this Hippo Box
ensure successful delivery first time every time.

Delivery boxes that you bolt to the wall of your house or garage are not new, but large scale consumer
take-up of them is. With more and more workplaces prohibiting personal deliveries, and the provision of
a local delivery solution set to become a popular income stream for members of the public, these can be
a good fix for ensuring you get parcels instead of yet more failed delivery cards. This version will take
your mail so the burglars do not know you are away.
© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 15 of 36
Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

Pic 3. IKEA's 2-Man Plan. IKEA is leading an initiative whereby retailers


create a shared user network for 2-man home deliveries.

When IKEA started selling online, the service was an immediate success with the public. So much so
that the available fulfilment resources soon proved to be less than ideal, for example, often requiring
consumers to stay in for a whole day. As a result, IKEA has set about creating a retailer-led operation to
enable other retailers with similar challenges work together to provide the delivery solutions that they and
their customers need.

Pic 4. SMS messaging. SMS messaging is increasingly being integrated


into e-retail services.

With almost everyone carrying a mobile phone these days, innovative SMS messaging is increasingly
being integrated into e-retail services, especially for delivery reminders and advice, and to flag problems
early on to minimize inconvenience all round. Automated text message updates inform shoppers of the
estimated arrival time of their goods, streamlining the interaction between the retailer and its customers.

Pic 5. Royal Mail's Delivery Promise tool. This online consultancy tool
helps retailers to improve their customer service.

Royal Mail recently launched a new online consultancy tool to help e-retailers make sure they offer
consumers the best possible experience and reduce shopping basket abandonment. The tool can
analyse any e-retail website, monitoring the quality and availability of delivery information such as cost,
time, tracking, delivery options and contact details. It produces a detailed report which includes
recommendations on how each website can improve its service.

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

9. The IDIS Programme (www.imrg.org/IDIS)


As integral parts of e-commerce, IMRG has been studying fulfilment in general and home delivery in
particular since its formation in 1990. Annual 'Deliverance' workshops were held every year since 1994,
and at the June 2004 workshop delegates decided that a Delivery Forum should be established, bringing
together interested parties and industry expertise to streamline progress. The forum created the IDIS
(Internet Delivery Is Safe) Delivery Charter (see next page)and its associated Trust Scheme to provide a
template for good e-retail delivery service against which retailers and carriers can be accredited.

©
*IDIS: the internet delivery trust scheme - allied to the ISIS trust scheme

The IDIS badge was designed to enable shoppers to easily identify retailers who are investing in
appropriate and reliable home delivery services. IDIS was publicly launched on BBC TV News on
Tuesday 6 December 2005.

SUMMARY OF IDIS DELIVERABLES PROGRAMME BY PHASE

IDIS PHASE 1: 27 April 2005 - 20 July 2005


IDIS PHASE 2: 1 August 2005 - 31 March 2006
IDIS PHASE 3: 1 April 2006 - 31 March 2007
IDIS PHASE 4: 1 April 2007 - 31 March 2008

PHASE
I D I S D E L I V E R A B L E S
1 2 3 4
The IDIS BRAND and strategy 3
New research on current perceived good practice and bad practice and their effects 3 3 3 3
A template for good e-retail delivery service (What does 'good' look like?) 3 3 3 3
IDIS ONLINE SHOPPER DELIVERY CHARTER and associated IDIS Retailer Accreditation 3 3 3 3
Scheme (allied to the ISIS Trust Scheme)
Research definitions for a set of cost benefit models that convey the value opportunity of good 3 3 3 3
practice
VALUING HOME DELIVERY REPORT: A COST-BENEFIT ANALYSIS (33 pages) 3 3 3
A SOLUTIONS MATRIX detailing all of the transporters and co-suppliers together with their options 3 3 3
Guidelines for retailers 3 3 3
DELIVERY RESOURCE CENTRE FOR RETAILERS: Parcel Carrier Service Guide / Retailers - 3 3
Rate your Delivery Options (D-I-Y rating system) / Glossary of Fulfilment & Logistics Terms*
Guidelines for transporters and facilitators 3 3
Model terms for retailers 3 3
GENERIC KEY PERFORMANCE INDICATORS FOR B2C TRANSPORTER PERFORMANCE 3 3
AN ONLINE INTERACTIVE COST-BENEFIT MODEL FOR RETAILERS 3 3 3
A GLOSSARY of e-retail delivery terms, definitions and meanings that will apply across the three 3 3 3
primary stakeholder groups to ensure consistent interpretation of the IDIS Charter and its
commitments*
IDIS RETAILER AND TRANSPORTER CHARTER 3
IDIS PROMOTION: An ongoing publicity programme promoting the IDIS scheme to consumers, 3 3 3
industry and government, featuring accredited retailers and transporters, peaking pre-Christmas.
The IDIS Phase 4 PR campaign will set out to achieve high profile media coverage with an
estimated PR value of £25,000+ as a minimum but with a potential of achieving a value of up to
£500,000 if we repeat recent IMRG successes with national broadcasters.

Phases 1, 2 and 3 attracted broad media coverage, including in BBC TV, SKY TV, Radio 4, Retail Week,
Financial Times, Computing, Business Europe, Digital Marketing, Fulfilment & e-logistics, Out-Law.com,
Internet Week, New Media Age, Property Week, IT Week, Netimperitive, VNUNet.com, The Register and
Automotive World.
Chart 13. IDIS deliverables by phase. This chart summarises IDIS deliverables and the phase(s) in which
they were produced.

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

10. IDIS Delivery Charter and Accreditation


IDIS is an extension of ISIS that focuses on delivery. Voluntary IDIS accreditation is exclusive to
ISIS-accredited retailers, transporters and facilitators at no additional cost.
IDIS-accredited organisations are expected to provide their customers with positive delivery experiences,
and to have effective recovery procedures in place to deal with any problems that may arise.
At the heart of the IDIS programme is a DELIVERY CHARTER that looks to identify, negotiate and
document key success factors, responsibilities and consequent activities in the delivery cycle. For the
CONSUMER, the charter provides a clear understanding of their rights and responsibilities in ensuring
that the RETAILER and TRANSPORTER effectively manage the processes of order and delivery.

(a) How IDIS-Accreditation Helps Retailers


The delivery experience is key to the success of online shopping, however, some internet retailers'
services are far better than others. The best give shoppers detailed information and greater choice about
how and when they receive their orders. The IDIS logo enables shoppers to easily identify retailers who
are investing in appropriate and reliable home delivery services and provide clear delivery information.
IDIS helps retailers to differentiate themselves from competitors, and gain significant bottom line benefits
through increased efficiency, higher volumes and lower customer churn rates.

(b) How IDIS-Accreditation Works


IDIS operates under the ISIS Scheme Rules. Use / misuse is managed by the ISIS Management Team,
using the standard ISIS procedures ( see www.imrg.org/ISIS ).

http://www.imrg.org/IDIS

Internet shopping delivery is safe where you see this sign:

As an online shopper with an IDIS-accredited retailer, you have the right to:

1. Clear delivery information before you place your order


2. Convenient and reliable delivery service
3. Notification of any delivery limitations / conditions
4. Charges that are complete and simple to understand
5. Access to information on your order progress / history
6. Delivery within the agreed time frame
7. Helpful support with failed / late / attempted deliveries
8. Your goods arriving in good condition
9. A clear returns process, with any limitations /
conditions notified prior to purchase
http://www.imrg.org/ISIS

IDIS is a sub set and extension of the ISIS Code of Practice for e-Commerce:

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

The following bilateral IDIS Charter sets out mutually dependent principles that RETAILERS and
TRANSPORTER should both aspire to.
The IDIS Charter aims to establish a common understanding within and between the stakeholders of the
interconnected nature of the delivery cycle. This will normalise the trading environment and provide a
known baseline against which all players can be assessed. It does not in itself impose new processes or
commitments on any of the stakeholders.

IDIS RETAILER IDIS TRANSPORTER EXAMPLE


CHARTER CHARTER GOOD PRACTICE
COMMON TO BOTH RETAILERS & TRANSPORTERS INDICATORS

1. Common objectives should


Recognise that delivery is a key include:
PARTNERSHIP
CULTURE
component of e-retail success and ƒ Joint working on service
enhancements
work in a spirit of partnership ƒ Agreed service ‘statements’
towards common and agreed on retailer's website

objectives with those on whom ƒ Retailer access to


transporter information
success is reliant systems
ƒ Report IDIS-accredited KPIs
2. Employ suitable Transporters should Retailers should:

USE SUITABLE transporter(s) and co- clearly state what ƒ Use suitable transporters
TRANSPORTER(S) supplier(s) to fulfil the type of traffic is ƒ Use appropriate
management systems
TO FULFIL THE delivery promise, relevant to their core
DELIVERY PROMISE ƒ Not overstate the delivery
consistent with the competencies, and promise
needs of the product acknowledge any less Transporters should:
and the customer, and appropriate traffic for ƒ Provide a positive doorstep
accurately reflect the them experience
service(s) offered ƒ Be proactive in monitoring
the retailer's delivery
promise and advising where
this is incorrect or
inconsistent
ƒ Report performance
information to partners in
line with IDIS-accredited
KPIs
3. Data capture should include:
Data collection should ensure the ƒ Delivery details
DATA COLLECTION
ability to capture relevant, real time, ƒ Contact details
‘service necessary’ information from ƒ Service performance
a number of entry points and to hold ƒ Contingency action

this data confidentially


4. Communications should:
Communications should be timely,
COMMUNICATIONS ƒ Be proactive
accurate and easily accessible by ƒ Deliver relevant timely
the recipient and should incorporate information
ƒ Be accessible by multiple
available retailer, transporter and channels
consumer generated data necessary ƒ Have agreed ownership

to facilitate successful delivery

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 19 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

IDIS RETAILER IDIS TRANSPORTER EXAMPLE


CHARTER CHARTER GOOD PRACTICE
COMMON TO BOTH RETAILERS & TRANSPORTERS INDICATORS

5. Commitments between
Agree, understand and regularly partners should cover:
MEET
COMMITMENTS
review stated commitments between ƒ Agreed reporting format

the retailer and the transporter and ƒ Agreed reporting frequency


ƒ Agreed reporting content
share information to demonstrate ƒ Publication of consumers'
their achievement responsibilities
ƒ Report IDIS-accredited KPIs
6. Recovery should include:
Demonstrate clarity in explaining the ƒ Consumer specified
RECOVERY
contingency and recovery actions alternate delivery /
(from failed delivery collection points
or collection) and in communicating performance ƒ Multi channel information
of these when circumstances ƒ Return receipt confirmation
require. Measure and report clearly
and accurately
7. Customer satisfaction should
Monitor customer satisfaction and require:
CUSTOMER
SATISFACTION
publicise proposed actions and ƒ Clear and appropriate
delivery options
actual performance achievements ƒ Publicised performance
tables
ƒ Consumer feedback
mechanism and action
ƒ Performance improvement
planning based on IDIS-
accredited KPIs
8. Ensure that addresses Ensure that delivery Addresses should:

ADDRESSING AND are viable, accurate, instructions are ƒ Be clearly and consistently
positioned
LABELLING well displayed and can followed within the
ƒ Be PAF accurate
carry consumer agreed service
ƒ Be 6 line / faced left format
information where specification
ƒ Allow for additional delivery
appropriate information
9. PRESENTATION Ensure that ‘delivery’ Ensure where a Sales channels should:
is incorporated as part Transporter / ƒ Promote delivery
of the overall service Consumer interface is ƒ Explain delivery and returns
offering and is both provided, that ƒ Explain the consumer's
responsibility
clear, understandable appropriate, timely
ƒ Provide relevant information
and clearly accessible and relevant
information is
provided

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 20 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

11. IDIS Delivery Manager

At an industry level, the key advance has been the introduction of the gridlock-
breaking IDIS Delivery Manager by MetaPack (IDIS DM), a major innovation in
home delivery for internet shopping that enables e-retailers of all sizes to offer
their customers a variety of delivery options from multiple carriers and services.

IDIS Delivery Manager was announced by


IMRG on 12th November 2007

IDIS DM, the culmination of the IMRG Delivery forum's work, was announced on 12th November 2007.
It came about as a result of IMRG commissioning MetaPack to help retailers meet the IDIS Charter
standard by providing them with a practical, low-cost, on-demand multi-carrier delivery management
solution. MetaPack, one of the Delivery Charter Founder Sponsors, already provided delivery
management solutions for large clients including John Lewis, Dixons, B&Q and Comet, and so created
for IMRG a scalable solution that made the same functionality available to all retailers at an easily
affordable transactional price. In this way, all of the carrier industry's resources are brought to bear on
the challenge of providing home delivery fit for the internet age.

Now, with IDIS Delivery Manager available, the entire panoply of consumer fulfilment solutions becomes
available for any retailer to offer to their customers, bringing these important changes and benefits for the
e-retail industry:

ƒ CONSUMERS can have access to all appropriate delivery choices and complete, relevant, timely
information. By spotting the IDIS logo, they can see which retailers are IDIS chartered and so have
confidence that their delivery promises will be clear and met;
ƒ RETAILERS can concentrate on being retailers rather than having to become logistics experts. They
can easily source and manage any and all fulfilment solutions their customers may need. They can
display their IDIS accreditation as a key differentiator;
ƒ CARRIERS can compete on a level playing field. Their new or niche services can gain profile and
thereby test real market demand;
ƒ E-RETAIL INDUSTRY gains credibility, innovating itself towards excellent customer delivery service.
It also gains visibility of the market's overall delivery performance and therefore can identify, monitor,
measure and react to evolving conditions.

IDIS DM easy set-up for Retailers

IDIS Delivery Manager can be set up in a day, is all web


based, requires no integration and can provide access to
all of the UK's B2C carriers. It provides delivery options for
the consumer at point of order, automatic carrier
allocation, an end to manual data entry, label printing and
manifesting, and a full suite of customer service screens.
Retailers pay £100+VAT as a one-time set-up fee, and a
pay-as-you-go charge that is directly related to the number
of parcels despatched. A demo the system can be viewed
here:
http://www.metapack.com/asp/home/aspindex.html

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 21 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

IDIS Delivery Manager Services


Carriers Available Consumer Service Options Available
Amtrak Free delivery
ANC/Fed Ex Specific day delivery
BDPX Specific delivery time slot
Business Post Evening delivery
ByBox Saturday morning delivery
Citylink Sunday delivery
DHL/Securicor Delivery to a place I specify, e.g. shed/neighbour
DPD Dropbox on my daily route
HDNL Online order tracking
Interlink E-mail message notification about delivery
Nightfreight 1man E-mail advance warning of delivery problems
Nightfreight 2 man SMS message notification about delivery
Parcelforce SMS advance warning of delivery problems
Royal Mail (all services) * others are in development
XDP
Chart 14. This chart shows the carriers and service options that are currently supported by IDIS DM.
IMRG is committed to bringing onto IDIS DM all other significant carriers, fulfilment solutions and consumer
service options as they emerge to ensure that its solution set remains as comprehensive as possible.

IDIS DM enables all retailers to provide the best available delivery services at all times. If disruption
occurs with the availability of one carrier's service, the retailer can easily switch to alternatives. This is
important because the home shopping environment has developed to the point where:
ƒ Online shopping, with its greater need for choice and convenience, has gained a significant foothold,
changing the rules governing the retail market;
ƒ Consumers' expectations are changing: they are increasingly demanding more and better information
to inform their online shopping decision-making;
ƒ Carriers, through commercial pressures, have already developed most of the solutions necessary to
provide an improved home shopping fulfilment experience;
ƒ The increasingly competitive environment in the online space requires maximum efficiencies from all
aspects of an e-retail business.

IMRG estimates that £2 billion of benefit could be realised by industry-wide adoption of IDIS DM,
therefore its strategy is to encourage all retailers to adopt the IDIS Deliver Charter standards, and
Delivery Manager if appropriate, and to support and promote those who do.

“ ”
TSI welcomes this 'IDIS Delivery Manager by MetaPack'
initiative that aims to bring industry-wide improvements to
home delivery for online shoppers. With so many people
now using the internet to shop, it's high time that such
developments were introduced, in order to make home
delivery as efficient and reliable as possible for all. IMRG's
practical approach acknowledges that there are no easy
answers, and sets out to bring all of the delivery industry's
resources to bear on the problem.
Ron Gainsford, CEO, Trading Standards Institute (TSI)

© IMRG 2008 www.imrg.org/IDIS - delivery@imrg.org - 07000 46 46 74 page 22 of 36


Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

IDIS DM Case Study: ASOS

IDIS DELIVERY MANAGER CASE STUDY:

"Even the best shopping experience can be totally negated


by a bad delivery experience. With the IDIS Delivery
Manager, our delivery options will be significantly better."
Nick Robertson, CEO and founder of ASOS

Asos.com is the UK's largest online fashion and beauty store, attracting over one million visitors a
week. With over 53,000 product lines available and 500 new lines added each week, asos.com is the
online shopping destination for many young women. Asos.com went live on IDIS Delivery Manager
by MetaPack in June 2008. Logistics Manager, Stuart Hill, explains why:

"There is real excitement right across the business about how IDIS DM gives us something new and
different for our customers. Every department - customer care, operations, marketing and so on -
wins as a result of the flexibility, choice and control we now have over our fulfilment services.

"Stage one consolidates our fulfilment capability, enabling us to react to carrier issues, manage time
of day cut-off points, and to be proactive when problems occur. For example, when something goes
wrong we don't want to find out about it from the customer calling at 6pm to tell us their delivery has
failed. Instead, IDIS DM gives us real time alerts, flagging that there is a hitch and, so that we can be
doing everything we can to retrieve the situation and get the parcel there, or if necessary, be
contacting the customer first, ideally before 10am, so they don't need to wait in all day.

"In the past, asos.com had a very limited delivery offer; just 'standard' or 'next day'. But the whole
ethos of our business is about giving customers great choice, and in terms of delivery, that means
having multi-carrier options available in order to be able to match our customers' wide ranging
requirements. So we were looking for a solution that would give us carrier flexibility and efficiency
while also being cost effective and easy to use. IDIS DM is the only solution available that gives us
exactly what we need, providing a level of sophistication that would be impossible for us to achieve in-
house. And you don't need to use all of IDIS DM's numerous capabilities - you can just pick what you
need, when you need it.

"The steps are to use the system to dramatically improve our delivery offer. For example, the smart
system will take a view of what is being ordered, the customer's profile and location, the day of week
and time of day, and then offer an optimised suite of available delivery options that best match her
needs. Nobody will provide more convenient delivery options than asos.com."

END

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

IDIS DM Case Study: LIGHTING-DIRECT

IDIS DELIVERY MANAGER CASE STUDY:

"IDIS DM enables Lighting-Direct.co.uk to give our customers a


better service and avoid problems happening in the first place."
Gary Berg, MD, Lighting-Direct.co.uk

Lighting-Direct.co.uk offers a massive range of over 6,000 lighting and associated products from their
Watford headquarters. They went live on IDIS Delivery Manager by MetaPack on 29 April 2008.
Managing Director, Gary Berg, explains why:

"We ship significant volumes of parcels through a centralised despatch hub, and where previously the
team would have had to decide manually which carrier service to use, by weighing and sizing parcels
and then working out the optimum route by referring to tables, IDIS DM automates the process. This
saves both time and money, which is particularly useful at busy times when it is all too easy for staff to
simply opt for the easy but more expensive route.

"IDIS DM also makes searching for consignments much easier, so when a customer has a query
about their delivery we can respond much more quickly. No matter how we send a parcel out,
everything is searchable, across all of the different carriers, from just one source. But most
importantly, it helps us avoid problems and queries happening in the first place, saving us time,
distraction and expensive call centre costs.

"Looking forward, IDIS DM will allow us to bring other carriers on board by making it much easier to
compare services from, and then work with, multiple carriers. This will enable us to give our
customers more delivery options, and thereby more convenience."

END

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

12. Research
Delivery inefficiencies are costly, so the IMRG Delivery Forum's first task back in June 2004 was to find
out just how costly, in order to present a business case for fixing the problems. The research remains
ongoing.

In April / May 2005, IMRG researched how 100 UK online retailers were approaching the delivery
challenge. Then, during June / July 2005, IMRG conducted a confidential Retailer Survey in which
retailers collectively generating 100 million online shopping shipments per annum contributed relevant
data about their own fulfilment operations and experiences. The data sample represented approximately
one quarter of the UK online shopping market.

In addition, generic data was captured from a range of industry sources in order to enable IMRG to
control against large contributors' data skewing results, and to allow industry-representative estimates
and assumptions to be made.

Regular input is also received from the IMRG Customer Satisfaction Index, a joint venture with
eDigitalResearch and ipoints, that has tracked the online shopping market since December 2006.

eDigitalResearch also conduct an annual IMRG Delivery Survey: the 2008 survey was conducted in May,
attracting 1,478 respondents. Highlights of the survey results are contained in Appendix D (page 31).

Royal Mail also regularly contributes its Delivery Experience Research, and other data.

Fulfilment & e.logistics, the leading printed and online periodical on multi-channel fulfilment, also
generously provides data, input and support.

Definitions
FIRST TIME DELIVERY FAILURE In this report, FIRST TIME DELIVERY FAILURE is
defined as a delivery for which a signature cannot be
obtained, either from the customer or a designated
customer representative, and this results in the
customer's address being carded and the item
returned to the delivery depot for either redelivery or
customer collection.

UNDELIVERABLE This term refers to a package that cannot be


delivered at all or is refused, and is therefore
returned to sender or disposed of by the carrier. This
would include lost deliveries which were resent and
the original then turned up, so the consumer rejected
the second delivery.

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

13. Appendix A: Summary of IMRG Delivery Data


The total and average data values used in calculating the cost of failed home deliveries are shown in the
table below (extrapolated across the UK market where indicated). The supporting research used to
arrive at these figures is in Appendix B

Data Average where Total where applicable


applicable
29 million shoppers £63 billion in 2008
1. Value of UK internet shopping spending £2,185 each
2. Number of parcels shipped to UK 1.15 parcels per 820 million in 2008
homes consignment
3. Number of UK home deliveries in 1.15 parcels per 714 million in 2008
market consignment 620 million in 2007
540 million in 2006
420 million in 2005
4. Percentage of UK "FIRST TIME 11% in 2008 90 million FIRST TIME
DELIVERY FAILURES" i.e. "Carded" (11.5% actual) DELIVERY FAILURES
Deliveries per annum (of the total
12% in 2005 714 million UK online
(12.39% actual) shopping deliveries)
5. Number of UK "UNDELIVERABLES" 1% (1.03% actual) 8.2 million
(of the total 820 million UK online 2% (2.19% actual) UNDELIVERABLES per
shopping deliveries) annum
6. Number of parcels delivered on time
(excluding carded deliveries) 88%
7. Proportion of parcels that have an
address query (misroutes) 1.1%
8. Proportion of parcels that are damaged
/ lost resulting in a 'Return To Sender'? 0.2%
9. For lost/damaged/returned parcels, the
average cost of stock
replacement/value loss or cost of
repairs? £50
10. Average additional charges that may
occur per failed/late delivery e.g.
escalating complaints, handling claims,
recalculating/re-issuing invoices? £10
11. Average outbound cost to the retailer
per parcel? (overall) £4.26
12. Average cost to the retailer per
returned parcel (overall) £15.00
13. Average delivery cost to the consumer £7.84
14. Average cost of return to sender for
failed delivery (if not individually charged
to the retailer, will be recouped in the future
transport contract) £1.62
15. Cost of repeat delivery (if not individually
charged to the retailer, will be recouped in
the future transport contract) £1.70
16. Average value of basket £88.19 per basket
17. Cost Per Claim for "no signature"
delivery failure £94.00 per claim
18. Difference between Average Basket
Value and Cost Per Claim for "no
signature" delivery failure £5.81 per claim
19. Number of inbound complaint calls in
UK per annum 10,000,000
20. % of inbound complaint calls that are
delivery related 50%
21. Cost of customer service call £1.42 (50p per minute) (average is 3 minutes)

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

22. % level of customer defection per 4%


annum (3.81% actual)
23. How many calls to resolve a complaint 3
24. Delivery related defection 3%
25. Cost of customer acquisition £17.73 per customer

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14. Appendix B : Summary of Cost Values and Assumptions


Area In the absence of any data from the retailer Source
1. Delivery charge £4.26 per parcel - This is the average delivery charge to the IMRG
(to shopper) consumer as found in a survey of 100 web sites (Q1 2008).
2. Delivery charge ƒ Two to three day economy £3.50 Metapack
(to shopper) ƒ Next day £4.50
ƒ Saturday £9.50
ƒ Evening £12.00
3. Delivery cost (to £7.84 per parcel, including packaging - This is average cost IMRG
retailer) reported in the IMRG Retailer Survey, conducted June / July
2005.
4. Call centre costs If outsourced - 58p per minute inbound (bureau service) - UMS
higher outbound. If a dedicated call handler is used allow
£18.95 per hour inbound and £20 per hour outbound on 70%
productivity = a 3 minute call would cost £1.74 bureau and
£1.35 - £1.45 dedicated. This takes no account of overhead or
technology costs = £1.75
5. Call centre costs Average cost per customer interaction: Global Contact
ƒ Inbound = $10.72 Centre
ƒ Outbound = $8.03 Benchmarking
Report Jan
2005
6. Call centre costs It is assumed that it takes 3 calls to resolve a delivery query.
1. Customer to Retailer. 2. Retailer to Carrier to locate or
advise new instructions. 3. Retailer to Customer. 3 Calls
7. Call centre costs It is assumed that each call is of 3 minute duration. Industry CCA
sources report the current average call through a call centre to (Call Centre
be of 4 minutes duration. The figure of 3 minutes has been Association)
taken to ensure a conservative estimate. = 3 minutes
8. Acquisition costs £18 per customer. DMA
9. Number of failed In some cases first time failed deliveries will be refused by the Panel of 6 large
deliveries customer and returned to the sender. It is assumed that 5% of retailers 2008
returned to those deliveries that do fail first time are treated in this way.
sender = 1% of all deliveries
10. Number of 50% of failed first time deliveries result in a call to the call Panel of 6 large
general centre. retailers 2008
complaint calls = 50%
11. Number of 50% of all call centre calls are delivery related Panel of 6 large
delivery query retailers 2008
calls
12. Defection / In the absence of accurate data, estimations are made from Assumption
Attrition due to data provided by retailers (e.g. 20% defection - it is assumed
delivery that 25% are delivery related = 5% delivery defection). In the
problems absence of any data, a conservative figure of 3% is assumed.
= 3%
13. Delivery related Average cost of claim is the basket value as no retailers or Assumption
claims carriers cover consequential loss.
Delivery related claims are those where failure to complete
delivery results in a claim for loss or damage. In the absence
of any data (and no retailer has been able to provide this so
far) it is assumed that 10% of delivery failures result in a claim.
= 10%
14. Cost of claim The average cost of a claim is the same as the average Panel of large
basket value. retailers

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15. Appendix C: Supporting Research

Data Source
1. More people would use home delivery if returns were Free of Charge. Transport Studies
2% - 3% more would use it if they could specify that deliveries could be Group 2001
made to another location.
2. 50% of households are empty between 09:00 and 16:00. Transport Studies
Group 2001
3. "Unattended delivery" is increasing due to flexible working patterns, Transport Studies
increases in whole family working and increases in single person Group 2001
households, and this will accelerate as home shopping online
increases.
4. Leaving goods unattended is increasingly unlikely to be deemed Transport Studies
acceptable behaviour in consumer circles, leaving sender / carrier Group 2001
liable.
5. According to one delivery company using CDP / Box solutions, they Transport Studies
have been able to increase the number of deliveries their drivers can Group 2001
make by up to 50%.
6. DTI "Your Home" report / PA Consulting report 2001 says that people DfT Research Oct 2003
would do more home shopping if they were given more delivery
options and would spend more if they could collect their goods from a
railway or petrol station.
7. 2/3 of customers do not use specific e-retailers because of the difficulty Royal Mail Delivery
in returning goods. Experience Research
2007
8. Of customers who register a complaint, 54-70% will buy again if their Tarp study 1998
complaint is resolved. The figure goes up to 95% if the customer feels
the complaint was resolved quickly.
9. On average, firms have a 60 to 70% chance of selling to its current Marketing Metrics
customers again; a 20 to 40% chance of successfully selling to
previous customers; only a 5 to 20% chance of turning prospects into
customers.
10. Number of home deliveries in UK 2000: Small Package 400m (93%) Transport Studies
(DTI study 2001 estimated 420 million), Grocery 6.6m (2%), Large Group 2001
20.5m (5%).
11. 420 million home deliveries excluding postal deliveries = 16 per DfT Research Oct.
household per annum, but estimates range up to 22 per household 2003
according to carriers.
12. In home delivery, 38% of the costs are taken up by the need to Transport Studies
maintain delivery time windows. Group 2001
13. Preferred delivery locations - Verdict Research 2001 - Next door 64%, DfT Research Oct 2003
Post Office 9%, Workplace 7%, Doorstep 7%, Garage (home) 6%,
Local depot 5%, Secure box at home 4%, Local forecourt 1%,
Convenience store 1%, none of the above 5%, don't know 2%.
14. Delivery problems rate third in consumers' frustrations, with delivery Zendor (Direct
costs, difficult returns and packing costs all being mentioned. Response Magazine)
15. The main factors encouraging home shoppers to home shop are: Royal Mail Delivery
- No hidden delivery charges 64% Experience Research
- Fast delivery 62% 2007
- Easy returns 58%
16. Top three barriers to home shopping are: Royal Mail Delivery
- Security concerns 36% Experience Research
- Like to see and feel what buying 16% 2007
- Easier to go to the shops 10%
17. In terms of delivery the most important feature was being able to know Royal Mail Delivery
the exact date so that they could be at home. Over 55s were OK with Experience Research
just the day, whereas 16 -24 years olds want fast delivery and the 2007
ability to pay for urgent deliveries.

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18. The majority of those surveyed would pay more for urgent delivery, if Royal Mail Home
needed. Shopping Tracker 2004
19. Lapsed home shoppers cited the following reasons: 3rd - rarely at Royal Mail Home
home 39%; 4th - delivery times inconvenient 38%; 5th - delivery Shopping Tracker 2004
charges too high 32%; 6th - hard to return 32%
20. Non home shoppers cited the following reasons: 4th - rarely at home Royal Mail Home
36%; 6th - delivery times inconvenient 28%; 5th - delivery charges Shopping Tracker 2004
too high 33%; 3rd - hard to return 44%
21. In all cases online shoppers were more concerned about delivery than Royal Mail Home
catalogue shoppers. Shopping Tracker 2004
22. 'Convenience' is the main reason given for customers shopping online, Nielsen Net Ratings
but there is still dissatisfaction with service, particularly delivery. Dec 2004
23. Customer frustration with delivery information leads to shopping cart Royal Mail Delivery
abandonment for 60% of online shoppers. Experience Research
2007
24. 25% of customers reported that they had actually increased the Royal Mail Home
frequency of home shopping as a result of the service. A further 41% Shopping Tracker 2004
thought that they would shop from home more in the future due to the
availability of the service.
25. 83% of people surveyed as part of the Winchester City Council Cherrett and McLeod,
MIRACLES project said that they would use an alternative delivery Home shopping
point to save them missing home deliveries. deliveries, University of
Southampton Jan. 2005
26. 56% of people surveyed as part of the Winchester City Council Cherrett and McLeod,
MIRACLES project said that they missed more than 25% of their home Home shopping
deliveries through no one being at home when the delivery was first deliveries, University of
attempted: Southampton, Jan.
ƒ Families missed 29% 2005
ƒ Professionals missed 28%
ƒ Elderly missed 18%
27. 52% of people surveyed as part of the Winchester City Council Cherrett and McLeod,
MIRACLES project said that a failed delivery usually resulted in a Home shopping
special trip to the delivery depot. deliveries, University of
Southampton Jan. 2005
28. Shopping is the most frequent reason for travel in Great Britain, National Travel Survey
accounting for 20% of all trips in 2004 and for 12% of mileage. 2004

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Valuing Home Delivery 2008: e-Retail Industry Review - JULY 2008

16. Appendix D: IMRG Delivery Survey 2008 - Highlights


The IMRG Delivery Survey 2008 was conducted as always by eDigitalResearch and attracted 1,478
respondents in May. Highlights of the results are below.

…...

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END OF REPORT

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