Last Mile Delivery Leisure A benchmark series of the Swedish market Consulting Imagine that your competitors …

… offer customers real time insights, offer ordering and fulfilment wherever and whenever customers want, deliver within hours for free, and provide seamless returns.

What can you do to win the customer?

What can you do to be ready for your nightmare competitor?

2 | Last Mile Delivery Benchmark | Sweden Scope of benchmark Determine the last mile offering from your company in order to build a differentiated and profitable offering and value proposition

Customer preferences How can we win the customer? Scope of this benchmark What services does the customer want? What premium are they willing to pay?

Profitable operations Competitive landscape How can we assure that our What are our competitors offering? e-commerce last mile is profitable? What can we learn from peers? How can we leverage the How can we become Best-in-Class? omnichannel supply chain?

3 | Last Mile Delivery Benchmark | Sweden Contents

Executive Omnichannel Delivery terms Return terms Methodology summary visibility

4 | Last Mile Delivery Benchmark | Sweden Executive summary

5 | Last Mile Delivery Benchmark | Sweden Introduction

The last mile delivery benchmark series Methodology1

Leisure is the sixth publication of the “Last mile Industry segments are compared to Best-in-Class delivery benchmark series”, where >200 retailers are segments and cross- average, resulting in a compared in delivery & return services. scoring model per service category.

Best-in-Class Highest cross-retail score

Leading Higher than cross-retail average

Beauty & Care Electronics & Home Telecom On par Similar to cross-retail average

Lagging Lower than cross-retail average

Least performing Food & Apparel Leisure Lowest cross-retail score

1 Data gathered March 2019

6 | Last Mile Delivery Benchmark | Sweden Key findings

ichannel visib Omn ility

Long return window Industry strength Store stock One third of the Leisure retailers offer more than Industry scores Best-in-Class or visibility two months return window, which is twice as long Leading Lead times as the cross-industry average. Capability on par with average Industry scores similar to cross-retail average Beneficial in-store delivery terms Improvement opportunity Delivery Industry scores Lagging or costs Leisure retailers are Best-in-Class when it Least performing

D comes to in-store delivery terms. All Brick-and- e

l

i Click retailers within Leisure offer free in-store v e

r deliveries and have better lead time than Last Mile Free y

Return t industry average. time delivery e

Service r

window threshold m

Scoring s Lagging in home delivery terms Only 5% of the Leisure retailers offer free home Return deliveries. At the same time, the average fee for channel Express home delivery is higher than industry average. integration delivery

R e tu Return Delivery rn locations locations te Free rm returns s

7 | Last Mile Delivery Benchmark | Sweden Suggestions for improvement Three things Leisure could do to bring last mile delivery services to the next level

Play the premium game Next level store network Increase location portfolio

Assess options for express Leverage the store network More offerings in delivery delivery and increased choice for to open up opportunities and locations boosts the choice for customers optimize the last mile the customer The majority of Leisure retailers do not It is worth reviewing the future role of Several studies claim the preference of offer express delivery. Offering premium the store in the end-to-end supply chain a customer is largely influenced by the delivery service to an additional fee gives to enable e.g. shorter lead times without choices they have in delivery locations. In the customers an option to receive their adding more centers. Regular a fast changing environment where the products faster than the original terms. lead times can be further reduced, customers demand flexible deliveries can Generally customers are willing to pay overstocked locations can be relieved, and additional delivery options add customer premium for lead time reduction if they premium delivery services like same day value and competitive advantages. are in need of the product, which is a great delivery can be enabled. opportunity to win market share.

8 | Last Mile Delivery Benchmark | Sweden Omnichannel visibility

9 | Last Mile Delivery Benchmark | Sweden Only 40% of Swedish Leisure retailers offer in-store stock visibility. In-store stock visibility can drive traffic to store and prove a competitive advantage to increase spontaneous in-store purchases.

10 | Last Mile Delivery Benchmark | Sweden In-Store stock visibility 40% of Leisure retailers provide in-store stock visibility to customers

Lagging In-store stock visibility for customers1

Compared to other industries, Leisure has lagging results in terms of providing customers with in-store stock visibility. While 80% of Leisure retailers sampled are Brick-and- Click, only 40% of this sample offer in-store visibility. This is a lagging result compared to Electronics who are Best-in-Class. 40% 47% 79% In-store stock visibility can drive traffic to store and prove a competitive advantage to increase spontaneous in-store purchases. 41% of the customers state that they have searched for the availability of a product before visiting the store during the past three months2. Leisure Average Best-in-Class Leisure retailers have a wide range of products with different characteristic and the customers need to “look-and-feel” vary. The customer might want to visit a store and get product advice when buying a new pair of expensive skies or a bike, meanwhile customers do not have the same need to “look-and-feel” before buying products like a portable stove or a sleeping bag.

1 Brick-and-Click retailers only 2 ”E-handeln i Norden”, Postnord

11 | Last Mile Delivery Benchmark | Sweden Delivery terms

12 | Last Mile Delivery Benchmark | Sweden Larger leisure products (e.g. bikes) often have a higher margin, creating more opportunities to offer shipments for lower costs compared to more commoditized and lower margin large products.

13 | Last Mile Delivery Benchmark | Sweden Delivery options Leisure is strong in offering pick-up points, but lacks in home and in-store delivery options

On par Average number of delivery Share of companies offering location types offered delivery location types

Leisure retailers offer the same number +6% of delivery locations as the cross-industry 100% Average 2.5 average. 2.8 +40% 95% number of +64% locations 89% In the pick-up point delivery segment, 84% Leisure retailers are close to Best-in-Class +48% industry (Beauty & Care) with 95% of 39% 72% 63% 29% retailers offering this service. 27% 27% 27% 27% 25% 24% 25% 19% 51% For home delivery, Leisure score 18% 49% significantly lower compared to Best-in- 13% Class (Home). Only 51% of the sampled Brick-and-Click Leisure retailers offer home delivery. 1 2 3 4

In-store delivery provides a competitive The customer of tomorrow will demand more advantage for Brick-and-Click retailers to delivery options as they get accustomed to 1 add value to customers by utilising their the convenience of having products delivered Home Other In-store Pick-up address point store network compared to pure digital to where they want. Increasing the number players. of options might boost and cater to the different customer needs.

1 Brick-and-Click retailers only

14 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Lead times Leisure retailers have a lead time of 3.2 days, on par with cross-industry average

On par Average lead times1

In general, retailers offer more favourable delivery lead times in the larger cities in 2.7 3.2 3.3 Average Sweden compared to rural areas. They also lead time have a broader variety of delivery providers, (Days) for example Budbee, Instabox, Best, etc. 46% 44% The average lead time for Leisure retailers is 3.2 days which is better than cross-industry 35% average. However, only 5% of Leisure retailers 28% 27% have lead times within 1 to 2 days which is 9 21% percentage less than cross-industry average. 17% 14% 13% 13% At the same time, 46% of the retailers offer a 11% 11% 8% 8% lead time within 2 to 3 days. 5% This might be a result of Leisure retailers not offering home delivery to the same extent as 1 to 2 days 2 to 3 days 3 to 4 days 4 to 5 days >5 days other industries. The home delivery providers in the larger cities often offer delivery at the same day or the day after.

1 Excluding express delivery

15 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Delivery cost1 Leisure scores on par with cross-retail average for free delivery

On par Unrestricted free delivery Average delivery cost in case offering of paid delivery 24% of Leisure retailers offer free delivery and have an average delivery cost close to the 35 59 65 cross-industry average. Average cost (SEK) On the one hand a lower fee is attractive for 58% customers to incentivise purchase. On the other hand, the limited margins increase the 47% 46% need for elevated fees.

Free delivery is also mentioned as one of 24% 34% the most important attributes for customers 27% 27% 25% when deciding on to shop from.2 31% 20% 16%

10% 9% 6% 3%

<20 SEK 20-50 SEK 50-80 SEK >80 SEK

1 Excluding express delivery and pick up at store 2 ”E-handeln i Norden”, Postnord

16 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Delivery cost – threshold 81% of Leisure retailers have a free delivery threshold of 760 SEK on average

On par Free delivery offered Average threshold for free delivery (including above a threshold) 24% of Leisure retailers offer free delivery without a threshold. The number offering free delivery above a threshold is 57%, which 513 760 772 Average threshold results in a total score close to average. 95% (SEK) When a threshold is in place, it is relatively 81% 48% close to cross-industry. A low threshold for 79% 43% free delivery, when adapted to the target customer, can increase basket size and boost 33% 31% revenues. On the flip side, if the threshold 29% is set too high, customers might decide to 24%24% 20% 19% shop elsewhere. Knowing your customers is important, to set an appropriate threshold. 10% 5% 6% 5% 5% 0%

<250 250-500 500-750 750-1000 >1000 SEK SEK SEK SEK SEK

17 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Express delivery Express deliveries are not common within the Leisure retailers

Leading Average express delivery cost

16% of Leisure retailers offer express delivery (e.g. same-day delivery). With an Average express Average 30 85 105 average express cost of 85 SEK, Leisure delivery lead time cost retailers are better than average in terms for Leisure is 2.00 (SEK) of express delivery cost. days and can be 50% Beauty & Care is Best-in-Class in the compared to Best-in- category with an average express delivery 43% cost of 30 SEK. Class (Home) of 1 day 32% and the cross-retail 29% 29% 29% Share of companies offering 28% industry average of 23% express delivery 21% 1.44 days. 17%

0% 0% 33% <20 SEK 20-50 SEK 50-80 SEK >80 SEK 22% 16% 18 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Delivery options

19 | Last Mile Delivery Benchmark | Sweden Leisure is strong in in-store delivery, but could improve on other delivery points. Customers expect that the delivery services adapt to them, not the contrary.

20 | Last Mile Delivery Benchmark | Sweden Home delivery – lead times and cost Leisure retailers offer shorter lead time than average for home delivery

On par

Leisure retailers have short lead times for As seen before, Leisure retailers are lagging in Home delivery is offered by a range of players home delivery compared to cross-industry delivery within 1-2 days with only 11% offering in such as PostNord, Schenker, DHL, Budbee, average. Average delivery cost in case of the lead time. However, 47% of the Leisure Best and Airmee etc. paid delivery is 128 SEK, which is more than retailers offer delivery within 2 to 3 days. industry average. Average lead times Average delivery cost in case of paid delivery

Average 2.3 2.7 3.1 51 112 128 Average lead time cost (Days) (SEK) 47% 62% 44%

39% 36% 33% 31% 28% 26% 24% 21% 22% 21% 22% 19% 17% 16% 17% 15% 14% 11% 11% 11% 8% 5%

0% 0% 1 to 2 2 to 3 3 to 4 4 to 5 >5 <50 50-100 100-150 >150 days days days days days SEK SEK SEK SEK

21 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Free home delivery and threshold 79% of the Leisure retailers do not offer free home delivery (including above a threshold)

Least performing

Only 5% of the sampled Leisure retailers offer All Leisure retailers offering free delivery above a However, a few retailers offer free home deliveries free home delivery, and an additional 16% of the threshold require a shopping basket over 1000 only for larger products such as bikes and skies. Leisure retailers offer free home delivery above a SEK. The home free delivery terms are lagging These retailers are excluded from the results threshold. compared to the rest of the industries. since unrestricted free delivery is not applicable to all the company’s products.

Share of companies offering Share of companies offering free Average threshold for free delivery free home delivery delivery (including above a threshold) Average 449 715 1400 threshold (SEK) 100% 50% 48%

% 33% 29 21%

19% 69% 0% 17%17% % 10% 16 6% 0% 0% 0% 0% 0% 45% % <250 250-500 500-750 750-1000 >1000 5 SEK SEK SEK SEK SEK

22 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Pick-up point – lead time and cost Leisure scores below cross-industry average for lead time

Lagging

Leisure retailers score below the cross- The average delivery cost for pick-up point However, products within the Beauty & industry average with an average lead time of delivery is the same as cross-industry average, Care industry are consumption products 3.7 days. None of the sampled retailers offer 39 SEK. Beauty & Care is Best-in-Class in both that are bought in a higher frequency. an average pick-up point lead time within 1 to pick-up point time and cost. Leisure products might not have the same 2 days. expectation to be delivered fast to a low cost.

Average lead times Average delivery cost in case of paid delivery

39 Average 2.8 3.3 3.7 25 Average lead time cost

(Days) 52% (SEK) 50% 47% 46%

35%

31% 30% 29% 28% 26% 27% 24% 23% 22% 19% 19% 16% 17% 14% 11% 10% 11%

5% 3% 4% 3% 0% 1 to 2 2 to 3 3 to 4 4 to 5 >5 <20 20-40 40-60 >60 days days days days days SEK SEK SEK SEK

23 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Free pick-up point delivery and threshold 26% of Leisure retailers offer free pick-up point delivery

On par

Leisure scores on par with cross-industry Fashion & Apparel retailers are Best-in-Class 70% of Leisure retailers only offer free average in offering free pick-up point delivery. with 31% of retailers offering free pick-up deliveries on order values above 500 SEK. point deliveries and with another 64% offering The average threshold for free delivery is free deliveries above a threshold. 612 SEK.

Share of companies offering free Share of companies offering free Average threshold for free delivery pick-up point delivery delivery

(including above a threshold) 471 612 633 Average threshold 55% (SEK)

95% 83% 43% 31% 40% 33% % 77% 30% 26 25%

15% 14% 13% % 11% 7% 24 5% 5% 5% 0%

<250 250-500 500-750 750-1000 >1000 SEK SEK SEK SEK SEK

24 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class In-store lead times All of the Leisure retailers offer free in-store delivery

Leading

63% of the sampled Brick-and-Click retailers The average in-store lead time for Leisure In-store delivery is the fastest delivery option offer in-store delivery. All of those retailers retailers is 2.3 days, which is close to for the Leisure retailers compared to home offer free in-store delivery, which makes the Electronics & Telecom who is the Best-in-Class and pick-up point delivery. Leisure industry Best-in-Class. industry.

Percentage offering free in-store Average lead times delivery 1.8 2.3 2.8 Average lead time 65% (Days) 100 %100 % 40% 34% 87% 27% 20% 19% 20% 13% 13% 13% 13% 9% 9% 4% 0%

1 to 2 days 2 to 3 days 3 to 4 days 4 to 5 days >5 days

25 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Return terms

26 | Last Mile Delivery Benchmark | Sweden Free returns Leisure retailers score on average, with 32% of retailers offering free returns

On par Share of companies offering free returns

32% of Leisure retailers offer free returns which is close to the cross-industry average. Compared to Best-in-Class (Fashion & Apparel), there is still a 33 percentage gap and improvement opportunity. 32% 31% 65%

Think outside the return box Leisure Average Best-in-Class The store network is a great way to improve customer satisfaction and drive additional revenue. Customers at your store are more likely to purchase additional products and you will reduce your last mile and return costs.

27 | Last Mile Delivery Benchmark | Sweden Return location options Leisure scores on par with average in return flexibility

On par Average number of return Share of companies offering location types offered return location types Leisure retailers have on average 1.5 return (% of companies) 0% location types. In both Store Return¹ and 100% 100% +44% Courier at home returns, Leisure retailers 91% show below average results where they 1.5 1.8 can learn from Best-in-Class (Electronics & Average number Telecom and Home respectively). of locations

56%

51% 49% 49%

41% 63% 35%

27% 16%

3% 8% 0% 0% 0%

1 2 3 Postal Store Courier Bring return return return to DC 1 Brick-and-Click retailers only

28 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Return channel integration¹ 70% let the customer fully decide where to return products

Leading Share of companies offering return channel integration

Return channel integration measure the possibilities to return a product bought online in-store and vice versa. 70% of the Leisure retailers1 offer certain return channel integration, which is close to Fashion & Apparel who is Best-in-Class with 74% offering return channel integration. 70% 58% 74% Most of the Leisure retailers offer free in-store return, which gives the customer a possibility to “look-and-feel” without risking return fees if they are unhappy with the product. Customers can easily change to another size Leisure Average Best-in-Class or colour in the store. In this way, the retailers can avoid both postal return costs and delivery costs for the new product.

1 Brick-and-Click retailers only

29 | Last Mile Delivery Benchmark | Sweden Return window 68% of Leisure retailers offer more than 28 days return time window, a leading score

Best-in-class Average lead times 43 87 Average The average return time window for Leisure lead time retailers is 87 days, which makes the (Days) industry Best-in-Class. 68% 68% One third of the Leisure retailers offer more than two months return window, which is twice as long as the cross-industry average. 55% Some retailers within the Leisure industry offer a full year return window. 43% There is a visible split between retailers that have a very long return time windows (68% 27% 27% have > 28 days) and those with standard return time windows (27% have the legal requirement of 14 days). 5% 5% 2%

14 days 14 to 28 days >28 days

30 | Last Mile Delivery Benchmark | Sweden Leisure Average Best-in-Class Methodology

31 | Last Mile Delivery Benchmark | Sweden Benchmarked services

Omnichannel visibility Delivery terms Return terms

Store Stock Visibility Lead times Free returns The percentage of retailers showing the The average standard lead time from order Share of companies offering free returns availability of stock in their stores to delivery according to the retailer’s website Fashion & Electronics & 31% 65% 47% 79% Beauty Apparel Telecom 3.3 days 2.7 days offers offers & Care free return free return Delivery costs The costs of a standard delivery for the Return locations customer The return locations offered by retailers Beauty 65 SEK 35 SEK – postal, store, courier and bring to DC at & Care home are assessed

Free delivery threshold 1.5 1.8 Home The order size above which retailers offer return return free delivery locations locations Fashion & 772 SEK 513 SEK Apparel Return channel integration in order size The freedom the customer has to return at 28% the place he/she desires – independent of offers free delivery the purchasing channel Fashion & Express delivery 58% 74% Any form of express delivery offered by the Apparel retailer that reduces the lead time of the delivery option Return time window The time a customer has from the moment Beauty 22% 33% of delivery to return a product – excluding & Care warranty returns

Delivery locations 43 days 87 days Leisure The delivery locations offered by retailers – Average home, other addresses, store, and pick-up Best-in-Class point are assessed

2.5 2.8 Home delivery delivery options options 32 | Last Mile Delivery Benchmark | Sweden Available benchmarks

Beauty & Care Electronics & Home Food Fashion & Apparel Leisure Telecom

40 companies 50 companies 38 companies 32 companies 40 companies 37 companies benchmarked benchmarked benchmarked benchmarked benchmarked benchmarked

33 | Last Mile Delivery Benchmark | Sweden Contact our Consumer team for more information

Joakim Torbjörn Conny Ternstrand Erik Selldin Partner Partner Director [email protected] [email protected] [email protected]

Research Team

Alexander Engblom Rebecca Rehn Karin Larsson Analyst Analyst Analyst [email protected] [email protected] [email protected]

Carin Ivarsson Josefine Finsbäck Sofia Samuelsson Analyst Consultant Analyst [email protected] [email protected] [email protected]

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