Author(s):

Citation:
(1999) "Home shopping and logistics", Facilities, Vol. 17 Iss: 5/6
DOI
http://dx.doi.org.ezproxy.psz.utm.my/10.1108/f.1999.06917eab.004
Downloads:
The fulltext of this document has been downloaded 199 times since 2006
Keywords:
Distribution systems, Home shopping
Type:
Secondary article
Publisher:
Emerald Group Publishing Limited

Article
Home shopping and logistics
Section:
Choose

Home shopping and logistics

Keywords Distribution systems, Home shopping
As the first in a series of reports on the future direction of the transport and logistics industry, FPDSavills recently
undertook a major study into home delivery in the UK. They took one aspect of this topic electronic shopping
and summarised some of the findings in the report.
Forecasts for electronic shopping
According to the latest available Government figures, home shopping currently accounts for just 4 per cent of
retail sales, with electronic commerce accounting for less than 1 per cent of this total. However, there is a wide
spectrum of forecasts on the future of electronic shopping, ranging from the great enthusiasts (usually IT-related
companies) to the sceptical (usually City analysts).
Examples of forecasts

IBM by 2005, 40 per cent of the US population will be making 20 per cent of all their
purchases online.
Forrester Research Inc. worldwide online sales will grow by 260 per cent to $17,387
million between 1998-2001.
Microsoft global online sales will grow from $6bn in 2000 to $16bn by 2002.
Verdict Research electronic shopping will reach 7 per cent of all consumer spending
by 2010.
Forecasts from the retailers themselves fall somewhere belween the two. From FPDSavills' survey of the top 250
retailers, 100 per cent of the sample were agreed that there will be a future increase in home shopping, with the
majority of respondents claiming it will grow between 10-40 per cent in the foreseeable future.
It was clear from the research that some retailers were at a more advanced stage of offering an online service
than others. While only 35 per cent of the sample had a Website with an existing point of sale, 93 per cent said
they will be developing one in the future. The reasons for this stated commitment is either for defensive purposes

(for fear of being left behind if online shopping does take off), or from a positive belief that retail sales can be
increased in the future.
Evidence to date
The earlier attempts at online sales were notoriously unsuccessful, such as Argos's service. However, two
companies in particular in recent months appear to have revolutionised online shopping in the UK Asda and
Amazon.com (see later).
Property implications
The most striking result was that 85 per cent of respondents agreed that those retailers offering an online service
would need to acquire more warehousing space in the future.
However, in a virtually untested market, there was a high degree of uncertainty on what type of warehousing
would be required: 29 per cent of respondents stated they did not know, 36 per cent of respondents stated that a
mix of NDC/RDC/LDCs would be required, while 14 per cent stated that retailers would require a series of LDCs
or RDCs.
What type of warehousing will be required to facilitate online shopping?:

Local Distribution Centres (LDC) (14 per cent).

Regional Distribution Centres (RDC) (14 per cent).
National Distribution Centre (NDC) (7 per cent).
Mix (36 per cent).
Do not know (29 per cent).
There are few UK examples that retailers can imitate, with the exception of Asda and Amazon.com:

Asda: has traditionally had a 7 per cent market share within the M25 and, on launching
its online service, announced its acquisition of a 55,000 sq.ft warehouse and call centre
facility in Croydon. This is a significant departure from the other grocery retailers that
currently deliver to their online customers from their stores, and has prompted
Somerfield to announce its plans to launch its service with a dedicated network of 20
urban warehouses to process orders.
Amazon.com: due to its success in the USA, the company has launched a UK Website
offering up to a 40 per cent discount on its goods. The company acquired 40,000 sq.ft
in Slough for its service.
Conclusions
As a significant proportion of non-grocery retailers currently operate from a central distribution facility (57 per cent
of the sample), it would appear that there is a fundamental mismatch between retailers' existing warehouse
networks and the type of network required for home delivery. That is, retailers will need additional smaller
regional or localised depots in order to facilitate an efficient response within one to two days of ordering. In the
short term, this is likely to benefit the south-east, where PC ownership, Internet access and affluence are highest.
For further information contact: Fiona O'Callaghan, FPDSavills Research,. Tel: 0171 409 8738, or Henry AngellJames, FPDSavills. Tel: 0171 409 8846