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There has been a lot of activity concerning retailers and their last mile delivery partners recently. Several retailers have cut ties with existing partners or cut schemes altogether, while others have decided now is the time to commit. So, what’s going on? Why are some retailers pulling back, while others are investing?

Let’s start by looking at what’s expected of a delivery scheme. Each is different, with most currently operating at a local scale, with a specific offer designed to meet local conditions. Sometimes the offer is complex, often with minimum order sizes, fixed product ranges, additional costs based on when the order is needed, and a specific catchment area to which the offer applies. These are not simple for customers to navigate.

Added to that, many, including some I’ll explore in this piece, are trials. They have been developed to test consumer appetite as well as the ability of the businesses involved to deliver the required level of service at the right price. This gives us a clue as to why some partnerships reach their natural conclusion – the right balance could not be found.

All change for Tesco and Walmart

In the UK, Tesco recently announced it is ending its Tesco Now service, which offered customers in London a one-hour delivery option. Shoppers were able to order up to 20 items from a range of 1,000 products, which were delivered by its courier partner Quiqup. However, Tesco ended the service in November saying it will now focus on scheduled same-day delivery instead.

How well the businesses involved work together is all important. Can the two business’ operations dovetail? This is more difficult to achieve under trial conditions, where investment in systems integration and processes is light. There’s a Goldilocks aspect to this. There needs to be enough orders to make the service viable, but not so many that the quality of service is negatively impacted.

Take Walmart, it’s recently re-shuffled it pack, cutting ties with Deliv, one of earliest delivery partners. Initially, Deliv was key to supporting efforts to offer the same day service in 100 US cities.

The Deliv platform uses “gig” drivers to deliver orders to Walmart customers. This made minimising the time taken to hand-off deliveries to drivers and getting those deliveries to customers homes all important. The process doesn’t appear to have been optimised, with delivery drivers and store customers competing for a share of store associate time. Delivery drivers often waited for long periods, eroding the profitability of the model.

Despite this, Walmart continues to partner with other businesses offering a similar service, agreeing contracts with four new businesses in January – Point Pickup, Skipcart, AxleHire and Roadie.

While these two retail giants have recently ended relationships with third-party delivery providers, plenty of others have announced new ones. Some of these emphasise different aspects of the offer, aside from cost and delivery times. The way in which the goods are being moved is a good example and reflects retailers’ attempts to cater to evolving customer priorities – namely the desire for “greener” transport.

Investment from Ocado and Co-op

Ocado’s new “Zoom” service is being tested in West London. It allows customers to place orders with Ocado for delivery within an hour. Its partner company, Stuart, uses a variety of methods to deliver goods, including bikes and cars. Stuart has a specific proposition, focusing on moving goods around urban locations in environmentally friendly ways. What’s unique about this partnership is the integration of the partner into the retailer’s process. This allows Ocado to match orders to delivery methods, making the process as smooth as possible.

Co-op has several trials in place, demonstrating how diverse an online, rapid delivery offer needs to be at a national level. It has partnered with e-cargobikes.com to deliver orders using zero-emission electric cargo bikes. This is the same service provider that Sainsbury’s partnered with last year for its own grocery delivery service. It has also been trialling Starship Technologies’ robots. The autonomous robots are used to make delivery from a local Co-op store. It also announced a free grocery delivery service by taxi at eight stores across the UK, as well as its home delivery scheme with Deliveroo.

Conclusions

Getting orders to customers quicker and in ways that meet shifting priorities is a key battleground. We’re seeing a huge amount of experimentation with retailers of all sizes trying to find the right formula. Across the mix, it’s inevitable that some schemes will prove to be viable, while others ultimately fail.

It’s also clear that those waiting for a cookie-cutter model to emulate will be waiting a long time! There is no one-size-fits-all model because too many variables influence success. While time from order to delivery is a clear unique selling point, and the way goods are transported an increasingly important differentiator, retailers and their service provider partners must be capable of consistently meeting the service guarantee. This means attracting just the right number of customers – the Goldilocks zone – enough to make it viable, but not so many that the customer experience suffers.

Chris Irish

Chris Irish

Supply Chain Insight Manager

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Online retailer Ocado has announced a partnership with Coles to develop its online grocery business in Australia. This is the fifth international partnership for the Ocado Smart Platform in less than 18 months.

Developing Coles’ online business

Coles is one of Australia’s largest grocery retailers, operating 818 supermarkets across the country. The retailer is already a market leader in online grocery retailing in Australia with its Coles Online business and over AU$1bn of annual sales. Ocado will allow Coles to use its ecommerce platform for grocery and other food distribution related activities in Australia on an exclusive basis. The new deal will see Ocado’s technology and software develop Coles’ online grocery business in Australia.

The two companies will build two automated customer fulfilment centres (CFCs) as part of the deal, one in Sydney and one in Melbourne. Coles will invest up to AU$150m building these CFCs and on upfront costs to Ocado. Coles expects the partnership to approximately double its home delivery capacity.

Through Coles’ new partnership with Ocado, it hopes to better serve its customers in Australia’s larger urban areas through fulfilment from Ocado’s CFCs, while customers in less populated areas will benefit from Ocado’s store-pick software.

The agreement comes as retailers continue to scale up in the online channel to meet the challenge of ecommerce competition.

Ocado’s international expansion

Ocado's role as a provider of retail technology is continuing to gain momentum. The Coles partnership is Ocado’s fifth international deal in less than 18 months, following its partnership with Bon Preu Group in July 2018, Swedish retailer ICA and US retailer Kroger in May 2018, and Canadian retailer Sobeys in January 2018.

The Coles deal follows Ocado’s announcement of a £1.5bn retail joint venture with Marks and Spencer in the UK.

To understand more about how the two retailers operate, check out the Ocado and Coles retailer hubs.

The Co-op has launched its first online home delivery service that offers customers delivery via a dedicated online store in as little as two hours.

Two hour delivery

Co-op’s new dedicated online store offers a range of around 1,500 products including food, drink, household goods and health and beauty products. A £5 delivery charge applies to all orders, with a minimum spend of £15. A free click and collect service is also available. The new service offers customers delivery of these products in two hours, and is initially available to shoppers within a 2.5 mile radius of a Co-op store on the Kings Road in Chelsea, with plans to roll out the service to a further eight stores in London. If successful, the trial could be rolled out to further towns and cities across the UK.

For this service, Co-op has partnered with e-cargobikes.com to deliver orders using zero emission electric cargo bikes, the same service provider that Sainsbury’s partnered with last year for its own grocery delivery service.

Chris Conway, head of food digital at Co-op, commented: “This is an exciting time for the Co-op, with trials underway on a number of new, online initiatives. As the leaders in convenience shopping we want to look at different ways of bringing our award-winning products closer to shoppers, and this new service does exactly that”.

Home delivery schemes

The retailer has been exploring a number of different home delivery schemes. It has recently been trialling the use of robots in Milton Keynes with Starship Technologies, where autonomous robots are used to make delivery from a local Co-op store. The society has also announced a free grocery delivery service by taxi at eight stores across the UK, as well as its home delivery scheme with Deliveroo.

Due to shopper demand and rising expectations, we are increasingly seeing retailers investing to improve their delivery standards, not only offering same day delivery, but also more immediate solutions for shoppers. The Co-op joins a number of retailers offering fast delivery options, tapping into the trend of creating more convenient solutions for customers.

Most recently, Ocado has launched a one-hour delivery service, Ocado Zoom. For more information on this service, click here.

If you're interested in a round-up of last mile developments take a look at our Delivering the goods: winning in the last mile blog.

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