UK online home deliveries to grow by £19.6bn by 2025

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A report from the e-commerce delivery solutions provider Metapack and research consultancy firm Retail Economics has predicted an additional £19.6bn (US$26.5bn) of online home deliveries in the UK by 2025, as a result of the pandemic.

The E-commerce Delivery Benchmark report shows that 27.3% of UK consumers now expect to permanently shift more of their shopping online on the back of behaviors formed during the pandemic. This new wave of ‘digital shifters’ (the consumer cohort permanently switching to shopping more online) is expected to support an additional £22.4bn (US$30.3bn) in online sales compared to a scenario where the pandemic had no impact on shopping behaviors.

Across the markets analyzed, 37.5% of ‘digital shifters’ value speed ahead of convenience, cost and carbon footprint of deliveries. The report also expects online shopping to account for 49.7% of total non-food sales by 2025, amid persistent home working.

Figure 1: Online expected to account for half of UK non-food sales by 2025 Source: Retail Economics

The work from home initiative is disrupting retail as it is driving both an uplift in online spend and putting pressure on footfall to stores. A quarter (24.8%) of UK consumers work from home more since the pandemic, of which half (50.6%) expect to shop more online permanently (denoted in green dots in figure 2), compared with around a quarter (27.1%) of those whose place of work has not been affected by the pandemic (shown in red dots in figure 2).

Figure 2: Shoppers working from home are accelerating structural shifts in retail Source: Retail Economics

Consumers working from home have boosted the success rate of first-time deliveries. This, in turn, has enabled a much larger number of possible delivery slots. By 2025, UK home workers expect their proportion of online orders delivered to their home to rise by 11.5%, compared to an average of 7.5% among those that haven’t faced a change to their style of work.

However, the lasting impact of Covid-19 will not be felt equally across all retail categories. The research predicts that apparel, homewares and health and beauty will experience a greater permanent shift online, brought about by online discovery since the pandemic. A consequence of the shift online means that 35.8% of UK consumers expect to visit physical stores less in the future, ahead of those expecting to cut back in the USA (28.7%), Germany (20.8%) and France (17.2%).

Richard Lim, chief executive of Retail Economics, said, “A permanent shift in consumer behavior and vast investment across the e-commerce ecosystem has accelerated the shift to online. Structural changes in the labor market, with persistently higher levels of home working across households, has unlocked greater demand for home deliveries.

“Although the demand for speed will put pressure on supply chains, home workers have both greater ability and greater willingness to pay for delivery and returns compared to average online shoppers, which is critical for profitability amid rising costs and elevated customer expectations.”

Duncan Licence, vice president of global product, Metapack, said, “Driven by the pandemic, online consumer shopping expectations have changed significantly over the last few years and a lot of these changes are here to stay. Our new report takes a closer look at these developments and their lasting impact on both consumers and retailers.

“It is expected that, as home working becomes the norm for more and more people, their appetite for fast, convenient and easy deliveries that fit their lifestyle, will continue to increase. Retailers have reached a crossroads, they need to diversify their delivery options and invest in the right infrastructure and technology to meet the new needs of their consumers or they will struggle to compete – especially as the shopping experience becomes synonymous with the delivery experience. The retail industry has evolved beyond bricks and mortar, it’s time to step into the age of e-commerce.”

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