Delivery Lockers: Unlocking the Final Mile
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Our report, 'Delivery Lockers - Unlocking the Final Mile',published by Retail Economics in partnership with InPost delivers crucial insights into the evolving use of delivery lockers in the UK retail landscape, consumer delivery preferences, and the integration of sustainable urban logistics. Essential for retailers aiming to refine strategic operations and adapt to ongoing market transformations.
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What can you get from this report?
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Discover how delivery lockers are revolutionizing the final mile in UK's retail landscape in 2024.
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Gain insights into consumer preferences for delivery options, highlighting the rising popularity and efficiency of delivery lockers.
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Understand the economic implications of delivery choices in the current UK retail environment, including impacts of inflation and interest rates.
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Explore the strategic role of delivery lockers in reducing last-mile delivery emissions, supporting the shift towards sustainability in retail logistics.
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Learn about the "15-minute city" concept and its potential to integrate delivery lockers into urban planning for enhanced consumer convenience.
Contents:
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Introduction
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Section 1: The Delivery Landscaoe & Omnichannel Journey
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Section 2: Delivery Expectations and the Cost of Friction
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Section 3: Evolving Consumer Behaviour and '15-minute cities'
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Conclusion
Introduction
The retail landscape is rapidly evolving and delivery lockers are becoming integral to its evolution. This ongoing transition reflects developments in technology, operational capabilities and shifts in consumer behaviour.
Consequently, today’s customer journeys have become highly complex with online and in-store experiences requiring flexible and adaptable approaches to meet customer needs across various touchpoints and platforms. By integrating digital technologies and enhancing online experiences, retailers aim to provide a seamless and cohesive journey for consumers across all channels.
However, despite this digitalisation, physical touchpoints such as stores, delivery lockers, and pick-up-drop-off locations remain integral to the omnichannel journey. These physical touchpoints offer convenience, immediacy, and tactile experiences that complement the digital shopping experience, enriching the overall customer journey and enhancing engagement. When considering the current macroeconomic climate and retail trends, it becomes immediately apparent as to how and why out-of-home delivery is highly popular, necessary, and demand is rising.
This research looks at the rise of delivery lockers in a more complex environment (‘delivery’ lockers also referred to as parcel-, automated-, or self-service lockers). It explores various issues around online delivery, and consumer sentiments about the current state of play.
Our research indicates that over half of consumers have already embraced delivery lockers, particularly appealing to younger, affluent, and frequent online shoppers. This trend highlights the growing demand for hassle-free and efficient delivery solutions that cater to diverse consumer needs.
Over half of consumers have already embraced delivery lockers
From an economic perspective, the outlook for UK retail remains uncertain. Consumers are grappling with tough economic conditions amidst a cost-of-living crisis which is entering a second phase, where inflation rate hikes have transitioned to elevated interest rates (climbing to over 5% impacting 4.4 million households exiting fixed-rate mortgages) (Source: Bank of England, Retail Economics analysis).
This shift has impacted more income brackets, and consumers are still focussed on value and reducing costs. Despite inflation cooling entering 2024, the recovery is being slowed by geopolitical tension and energy price increases, with consumer confidence remaining subdued. Also, pandemic-induced impacts are still being felt.
During the pandemic, consumer behaviour and preferences were altered greatly. Online penetration tipped above 30% of total retail sales in 2021 (Fig. 1), and new cohorts of consumers experienced shopping online for the first time for many products. Interestingly, our research shows that today, at least half of consumers’ pre-purchase activity is now online; so, although there’s been a return to physical stores, consumers are well versed in online shopping processes and tactics.
Fig. 1: Internet sales as % of total retail sales
Source: ONS
The Delivery Landscape & Omnichannel Journey
Advances within the delivery landscape, combined with advances within omnichannel retailing are reshaping many parts of the industry. Consumers are demanding seamless experiences, and delivery expectations have soared to new heights. As such, the stakes are high. Retailers offering inadequate delivery options run the risk of consumers abandoning carts, underlining the importance of flexible delivery solutions for sales growth.
Today’s consumers demand delivery choices tailored to their preferences and busy lifestyles. From same-day delivery to click-and-collect, retailers must cater to varying needs to remain relevant. Consequently, brands are pivoting towards ‘unified commerce’ where online, off-line, supply chain insight and a single customer view, operate in concert to deliver seamless and cohesive shopping experiences.
By quantifying shoppers’ delivery preferences, valuable insight can be gained into consumer behaviour and driving motivations, enabling retailers to tailor their delivery strategies effectively to increase conversion and market share.
In the UK, the perception that Royal Mail leads the delivery service sector persists, even though other courier networks collectively handle the majority of online shopping deliveries. Yet, as online shopping and its resultant returns have surged over the past decade, delivery lockers have gained prominence. InPost manages a considerable share of these returns, signifying a critical phase within the customer journey where many consumers may first encounter the brand.
Fig. 3 - UK consumers are particularly familiar with Royal Mail and Inpost for sending or returning items
Source: InPost, Retail Economics
Lockers increasingly the choice for Gen Z and Millennials
The research revealed that more than half (52.8%) of all consumers have used a delivery locker at least once; this rises to 71% for Gen Z, and 68% for Millennials (Fig. 5). One in three consumers used a delivery locker within the last three months of being surveyed (January 2024), rising to two in five consumers who used them in the last six months.
Fig. 5 - Locker users tend to be younger more affluent consumers
Source: InPost, Retail Economics
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Delivery Expectations and the Cost of Friction
In this section, we look at consumer preferences and expectations regarding delivery options offered by retailers. The research found that consumers are seeking diversity of options and cost effectiveness. This stems not only from the fact that individual preferences vary widely in general, but also because preferences change depending on a shopper’s circumstances at time of purchase (e.g. the shopping mission, physical location). The section also looks at typical delivery problems experienced by consumers, online basket abandonment, boycotting due to delivery, and preferences towards parcel lockers versus parcel shops.
Importance of delivery options for frequent online shoppers -
Our research highlights the critical role that a diverse array of delivery options plays in the online shopping experience. As consumers complete varied shopping missions, they require a wide range of delivery options to fulfil a multitude of needs. This section looks at why having a broad range of delivery options available at online checkout is important.
The work reveals that 90% of Gen Zs and Millennial consumers feel that having a range of delivery options is important to them (Fig. 10). A third of shoppers (35.5%) from these consumer groups said having options to meet their need for delivery speed was most important – and that they were happy to pay more for it.
The second most important reason, as stated by another third of shoppers from these cohorts, was cost (33.3%); indicating that they need options to alter the delivery mode and speed to save money.
Lastly, flexibility to deliver to different locations was considered most important by one in four (24.2%). For comparison, almost half (48.5%) of consumers aged over 65 years old feel that being offered a broad range of delivery options is unimportant.
Fig. 10: Why diverse delivery options are important for Gen Z and Millennials
Source: InPost, Retail Economics
Convenience and the shoppper mission
Convenience is hugely important for all types of shopper missions. Be it a considered purchase, an impulse buy, a gift, a distress purchase, or a top up buy, offering convenience within delivery helps to ensure customer satisfaction. However, there are different aspects or attributes of ‘convenience’, including:
The following graphic (Fig. 11) represents the importance of several crucial factors that come into play during the shopper mission.
The relative area of the rectangles which make up the mosaics in Figure 11 (and percentage values), indicate the proportion of consumers stating their most important aspect of convenience.
Fig. 11: The relative importance of convenience aspects for different shopper missions
Question: Which delivery factor is most important to you for the different shopping scenarios?
Source: InPost, Retail Economics
Considered purchases: Occur when consumers are searching for a specific item and want to compare options to ensure they make the right choice. They are typically associated with higher-value items and often involve longer pre-purchase research.
Here, consumers most value reliability, which increases in importance with age and within lower-income households. This likely reflects the significant investment in time taken during the research phase of the customer journey before committing to a purchase. Ensuring that orders are received when expected is particularly crucial for higher-value items. Free delivery also ranks as a close second since considered purchases are not often needed immediately.
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Evolving Consumer Behaviour and ‘15-minute cities’
The world of online retail is constantly evolving. The remarkable surge of e-commerce over the last twenty-five years stands as a clear indicator of the value to which consumers place on convenience. Among other benefits, this has accelerated online shopping experiences through innovative functionality, competitive pricing strategies, and diversified delivery options.
As the online ecosystem develops, shifts in online consumer behaviour are likely to be impacted by: (1) the influence of the cost-of-living crisis; (2) the emergence of discount non-food retailers (e.g. Shein and Temu); and (3) increasing concerns over sustainability.
While these factors could alter consumer behaviour, we now compare them with an emerging counter-trend – the ‘15-minute city’. This city planning concept strives to give people access to key services within a 15-minute walking distance from their homes. If implemented, the 15-minute city idea could have a significant impact on how e-commerce and delivery systems evolve, and give rise to new customer journeys in the future.
The cost-of-living impact
The cost-of-living crisis continues to be a key influencer of shopper behaviour. Our research reveals that 40% of online shoppers have made an extra effort to shop with retailers who offer free (or cheap) delivery since the crisis began, with higher-income individuals surprisingly leading this trend (Fig. 19).
However, the current shift away from online shopping isn’t solely about delivery costs. In-store promotions and exclusive membership deals are tempting shoppers back to physical stores, where they also prefer the ease of immediate returns and the instant processing of refunds.
An increase in cash payments suggests consumers are wanting to use tangible currency to keep better track of spending. These behaviours point to a broader trend where consumers are rediscovering the benefits of in-store shopping, attempting to avoid additional costs linked to online shopping like delayed refunds.
Fig. 19: Higher income consumers now more sensitive to delivery costs
Chart shows the proportion of consumers who said that they ‘made an extra effort since the start of the cost-of-living crisis to shop with retailers who offer free or at least cheap delivery’.
Source: InPost, Retail Economics
Conclusion
In the dynamic world of retail, the integration of parcel lockers within the omnichannel journey represents a significant evolution in delivery preferences. Although home delivery remains the predominant delivery option, over half of consumers have now experienced the convenience of delivery lockers. And significant adoption has been observed by wealthier Gen Z and Millennial shoppers who shop more frequently online.
This shift marks a growing contrast between locker use and home delivery, with motivations for locker use hinging on factors such as convenience, speed, cost, and the appeal of their centralised network to address sustainability concerns.
With today’s elevated customer expectations, retailers can enhance their propositions by offering a comprehensive range of delivery options that address the changing nature of individual preferences and shopper missions. Unnecessary friction caused by insufficient delivery options can lead to online basket abandonment and, in severe cases, consumer boycotts—highlighting the need for a robust and flexible delivery system.
Consumer behaviour and delivery are impacted by broader societal shifts, such as the cost-of-living crisis, the sustainability movement, and the emerging concept of ‘15-minute cities’. In this regard, delivery lockers have emerged not only as a cost-effective solution but offer the potential to reduce carbon emissions associated with final mile delivery.
As we navigate the changing tides of consumer delivery expectations and environmental demands, the role of parcel lockers is set to become increasingly prominent. Their ability to offer a practical solution position them as a keystone in the architecture of the future delivery landscape. Retailers have the opportunity to capitalise on these trends, continue to innovate, and adapt to changing preferences, ensuring that the convenience of the ecommerce experience is matched by the efficiency and sustainability of delivery.
