Parcel Delivery ESG Augmented Reality - Savills
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European Commercial – April 2021
S P OT L I G H T
European Reverse
Savills Research
Logistics
Parcel Delivery ESG Augmented Reality
European Reverse Logistics
Why are ecommerce returns rising?
The digital revolution, fuelled by returns is down to the ability for is reduced and the perceived “risk” of
national lockdowns in 2020 and 2021, consumers to inspect, examine and try buying a product that is not suitable
has boosted the need for shoppers to the product in store before purchasing. is removed. 17% of EU28 respondents
buy online given the restrictions to announced that they would not buy
physical retail. The level of ecommerce However, one of the challenges for online due to concerns about returning
jumped from 19% to 28% of total retail the sustainable growth of ecommerce goods, according to a Eurostat survey.
sales in the UK over the course of 2020 has been the perceived ease of returns
according to the ONS, although the and many customers buy with an PostNord’s survey of European
spike in the volume of goods bought intention to return some of their items, consumers indicates that German
online is creating new problems for for example ordering two sizes of the shoppers were the most likely to have
retailers. same shoe. Retailers are being forced returned a package in 2018, with 53%
to either factor returns into prices of respondents having returned items.
Forrester and eMarketer estimate as a result, or clamp down on serial This could partly be down to payment
the current level of ecommerce returns returners in order to maintain profit methods- in Germany for example, it is
to be 20%, whereas the proportion of margins. Smaller online retailers are usual to pay for ecommerce purchases
bricks and mortar returns is between also becoming forced to offer free by credit card and consumers are
8-10%, which is having a significant deliveries in order to compete with the charged at a later point for their online
impact on retailers’ profit margins. IHL most established online retailers. orders, whereas in the UK, consumers
Group estimate that the cost of return are generally charged at the point of
deliveries across EMEA has risen from Online retailers’ membership purchase. It’s also worth considering
$234 billion to $388 billion between schemes are also likely to have that the increasing ease of purchasing
2015 and 2019. contributed to the rise in returns. By a good online using website cookies at
paying a monthly subscription for free checkout etc could ultimately result in
Of course, one of the first reasons delivery and returns, the marginal cost a rise in impulse or “panic” purchases.
for online returns exceeding in-store of purchasing/returning goods online
Chart 1: Share of population returning online purchases 2018 (%)
Germany 53%
Netherlands 52%
France 45%
Italy 43%
Spain 43%
UK 40%
Belgium 38%
Poland 32%
0% 10% 20% 30% 40% 50% 60%
Source: PostNord
savills.com/research 2European Reverse Logistics
How are online retailers dealing
with ecommerce returns?
Europe’s retailers are now having returns centre for Amazon’s UK US
to adapt their logistics operations returns. Outside Europe, Amazon and
to deal with ecommerce returns as US retailer Kohl’s have formed a
consumers are faced with more ways to However, most online retailers partnership for consumers to return
return goods bought online across the continue to carry out returns Amazon goods in Kohl’s stores drop
continent. operations from their existing off goods without packaging or
distribution centres. Poland remains labels. Despite shopper footfall being
Netherlands a key distribution hotspot among significantly down, the partnership
Third party logistics operators ecommerce operators in Europe due has provided Kohl’s with a boost in
(3PLs) are introducing new measures to cheaper labour costs, proximity to in-store sales. Kohl’s CEO, Michelle
to improve the ease of returning goods the rest of Europe, access to power and Gass announced that in 2020, over
and faster process inbound returns. For ability to develop new stock. Zalando’s two million new visitors went to Kohl's
example, food delivery company, Picnic distribution centres are strategically stores to return an Amazon purchase-
has partnered with DHL to pick up located across Poland to cater for a service it's offered in all stores for
packages from consumers’ front doors distribution and returns within the nearly two years, and that a third were
in Picnic’s electric vehicles for returns Baltic and Scandinavian markets. millennials.
to drop off at distribution warehouses.
The cost of delivery is cross-subsidised For smaller online retailers, we are We have also observed Amazon’s
between the outbound food delivery seeing a rising number of parcel drop Key In-Car service where delivery
and return package collection journeys off lockers emerge from companies companies can unlock the vehicle’s
and packages are then picked up by such as Polish company, Inpost. boot, leave the package and secure the
DHL at the sorting depot. These companies partner with online vehicle without the use of a key for
retailers and parcel delivery companies Volvo and General Motors vehicles.
Germany to provide a convenient drop off point
Amazon’s parcel delivery lockers are in urban areas, including shopping UK
becoming more established, although it centres and transport hubs. In order to compete with traditional
remains most common for consumers delivery companies, Uber has launched
to return goods to post offices, where Norway Uber Connect, an on-demand service
DHL, Hermes and DPD are the main Telecom operator Telenor has to send parcels (up to a weight of 13
parcel delivery operators. Amazon’s partnered with delivery service kilograms) within UK cities. Initially
130,000 sq m Monchengladbach Helthjem and Kolonial for in-home the focus is on the more highly
distribution centre caters for the deliveries. Customers choose an option dense conurbations of London and
German and Dutch markets and was for home delivery inside the front door Manchester, where consumers have the
acquired by Samsung Securities in and drivers receive a single use code ability to return packages quickly and
2019. for the digital lock to open the door, efficiently.
with a similar service available for
CEE collection of parcels. Assa Abloy and Logistics company, Clipper has
Some multinational ecommerce Scandinavian postal service, PostNord been appointed by a number of
operators are now developing also trialled an Inhome Delivery retailers including ASOS and John
dedicated centres across Central scheme using digital locks from Yale Lewis to process returns through their
Eastern Europe (CEE) to process Doorman. In other cases, consumers “Boomerang” service. The service
returns. Amazon’s returns warehouses have adopted digital boxes outside turns returns into new goods, including
in Dobroviz, Czech Republic and Sered, their front doors for delivery and quality checks, repairs and relabelling
Slovakia cater for returns across CEE collection of parcels. for same day customer refunds.
markets, similar to the Dunfermline
3European Reverse Logistics
How is technology being adopted
to reduce returns?
One rising problem for Europe’s rising demand for food delivery. goods. Amazon Wardrobe offers Prime
retailers is the falling level of members the opportunity to “try
warehouse availability and shortage of However, retailers are investing before you buy” and are not charged
land for new developments. European in new technology to find the most on the date of order, but are allowed
logistics vacancy rates now hover at suitable product for their customers a 7-day try-on period and if the goods
an average of 5.3% in 2020, and retail to ultimately reduce the probability are not returned by the end of the
distribution centres are having to of a package being returned. One deadline, the money will not leave
become more efficient to deal with example is the implementation of their account.
returns. augmented reality (AR) in online
purchases. UK retailers, Argos, for Retailers are now paying additional
Thus, we are now seeing more example has developed an augmented focus on consumers’ spending habits
corporate investment within supply reality shopping app for consumers to and sanctioning serial returners from
chains as a result of the rising configure sofas, televisions, cabinets their previous order history. ASOS, for
ecommerce and returns. Globally, etc in their own homes to visualise the example, has adapted its returns policy
€44bn was transacted in “supply chain product before purchasing. More focus so that returns remain sustainable for
technology” during 2020, marking a is now being applied to adapting AR to the company and for the environment.
109% increase from €21bn in 2019, the online fashion sector.
according to Pitchbook. A rising
focus of this capital is targeting the Retailers are also becoming willing
“foodtech” submarket stemming from to offer a trial period for consumer
savills.com/research 4European Reverse Logistics
What is the environmental impact
of ecommerce returns?
Despite the increased ease of environmental ministry is reportedly reduce carbon footprint, according to
purchasing for consumers, rising visiting various ecommerce merchants EV-Vehicles. Amazon’s fleet of electric
ecommerce returns are beginning to in order to gain a sense of the vehicles are now making deliveries
have a negative impact. US reverse proportion of goods which are thrown in Los Angeles and Amazon plan to
logistics operator, Optoro, estimate out, in anticipation of new regulation expand this to 100,000 vehicles by
that 25% of returns are destroyed being introduced, according to 2030 in order to meet the company’s
or end up on landfills as unsellable Bloomberg. climate pledge aiming to have net zero
inventory. As a result, Boston carbon emissions by 2040.
Consulting Group estimate that €7bn This has created opportunities for
of returned goods are destroyed every the emergence of “re-commerce” A rising environmental concern for
year in Germany alone. companies, such as blinq.com, which policymakers is the level of packaging
acts as a returns liquidator for resale to waste across European markets. Latest
Policy makers are now consumers in order to reduce waste. data from Eurostat indicates the level
implementing sanctions on offending of packaging waste generated across
retailers. In 2020, France committed Parcel delivery companies are also EU-27 states increased from 157kg to
to outlaw the destruction of unsold seeking more sustainable ways to 174kg per capita between 2013 to 2018,
products including clothing and deliver goods across Europe. Over the rising at an annualised rate of 2%. At a
electricals by 2023. Retailers will past three years, we have observed the national level, Germany, Luxembourg
be forced to repair, re-use, resell or annual number of electric vehicle sales and Italy marked the highest levels of
recycle goods instead. The German almost treble to 742,000 in order to packaging waste generated per head.
Chart 2: Packaging waste generated per capita
180
175
Packaging waste per capita (kg per
170
165
160
annum)
155
150
145
140
135
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Eurostat
savills.com/research 5European Reverse Logistics
Outlook- How will returns impact
demand for logistics space?
Rising levels of ecommerce activity, marking annualised growth of 9.1% an estimated 1.7 sq m of this space
for both delivery and returns, is over the past four years. This indicates will be required to accommodate and
creating new demand for logistics that for every one million packages process returns from parcel delivery
space. What is clear is that there is no delivered in the UK, this creates companies. Rather than a like-for-like
one-size-fits-all solution to returning demand for an additional 100 sq m relationship between parcel returns
goods as consumers prioritise (1,050 sq ft) of warehouse demand and logistics demand, this is more
convenience and retailers and parcel from parcel delivery companies. likely to be in the form of a ripple
delivery companies accommodate effect for new demand from associated
these changing preferences in their Parcel delivery data from Effigy trading partners.
warehouse layouts. Consulting indicates a total of 12.3
billion parcels were delivered in Retailers’ omnichannel strategies
Take up from parcel delivery Europe during 2019. Adopting the 9.1% will become increasingly important in
companies alone in the UK reached annualised growth rate in UK parcel reducing the overall number of returns.
275,000 sq m (three million sq ft) deliveries, Savills Research forecast We expect to see more retailers using
during 2020, rising from 3% to 6% that an additional 8.6m sq m of their store portfolios for distribution
of total logistics demand from the warehouse space will be required from of goods, taking some of the demand
previous year. European parcel delivery companies away from the logistics market as a
between 2021-25. result.
OFCOM’s parcel delivery data
indicates that in the UK, 2.8 billion Assuming that 20% of goods bought
packages were delivered in 2020, online are returned over this period,
Chart 3: European parcel deliveries and parcel delivery take up
European parcel deliveries European parcel delivery take up
25,000 2,500,000
Parcel delivery take up, Europe (sq m)
Parcel deliveries, Europe (million)
20,000 2,000,000
15,000 1,500,000
10,000 1,000,000
5,000 500,000
- -
2018 2019 2020 2021 2022 2023 2024 2025
Source: Savills Research, Ofcom, Effigy Consulting, forecasts from 2020 onwards
savills.com/research 6Savills Commercial Research
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Marcus De Minckwitz Will Percival
Regional Investment Regional Investment
Advisory Advisory
+44 (0) 207 409 8755 +44 (0) 207 330 8628
MdeMinckwitz@savills.com will.percival@savills.com
Research
Mike Barnes
European Commercial
+44 (0) 207 075 2864
mike.barnes@savills.com
Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
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