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Leaders & Heroes THE DELIVERY CONFERENCE DR LUDWIG HAUSMANN Partner Dismantling myths in eCommerce logistics Leaders & Her...
London, January 30, 2018 Dismantling myths in e-commerce logistics – In 2025, how will we receive the goods we shop for on...
2 USD 130bn USD 110bn Domestic B2C deliveries USD 23bn Cross-border B2C deliveries E-commerce ware- housing and fulfillment
3 E-commerce relevant parcel penetration 24 17 1112 7 9 77 1 43 23 18 16 1111 98 6 55 22 39 <1<1<1 >1<10.1 <1 0.1 Low-pene...
4 Domestic B2C deliveries Percent USD 55 bn 32 5 52 11 2011 Rest of World Western Europe 2021 USD 213 bn 34 17 40 9 Asia-P...
5 How fast? Traditional employed couriers or Uber-like freelancers? What technology features? At which location? Delivered...
6 B2C customer demand for instant and same-day delivery 20252016 Market share, percent Same day Instant <1 3 22 +43% p.a
7 +4 % points willing to pay EUR 3 extra for same-day delivery Urban +3 % points willing to pay EUR 3 or 5 extra for same-...
8 USD billions, 2016E Estimated net sales of US urban delivery start-ups Immediacy of use/“urgency” Perishable in minutes/...
9 USD/order Consumer prices for instant delivery Consumer willing- ness to pay 6 Estimated delivery costs 7 10 3.99 13.00 ...
10 Example: payment flow Instacart USD 30.00USD 36.00 USD 2.00 USD 1.50 USD 8.50
11 Example: payment flow Instacart USD 30.00USD 36.00 USD 2.00 USD 1.50 USD 8.50 3.00+ Delivery fee + Discretionary tippin...
12 Example: urban delivery start-ups 8 90 4 75 12 50 Employment Share of utilized capacity Percent of total paid working t...
13 Catalogued inventory for previously offline merchants Live adjustment, e.g., to delivery address or ordered items End-t...
14 Preferred delivery locations Percent Similar delivery conditions 6 4 8 82 Differing delivery conditions 9 43 5 43
15 Overview of delivery technologies Unmanned aerial vehicle (UAV) for single parcels Small electric AV travelling ~4 mph ...
16 2025: delivery forms by geography and type Low-density cities >10,000-100,000 Rural <10,000 High-density cities >200,00...
17 2030 and beyond: a long-term view Low-density cities >10,000-100,000 Rural <10,000 High-density cities >200,000 Medium-...
18 Reasons for cross-border shopping Number of customers (out of 10) Product availability "The only way of getting this ru...
19 Share of e-tailers expecting growth of cross-border revenue share Percent 62 78 66 67 73 78 Ø 71 Fashion e-tailers Non-...
20 Where will the goods come from – stores, warehouses, perhaps even factories in China? Will same-day or even instant del...
21 Huge opportunity, but extremely hard to chart the strategic course until 2025
22 The sky is the limit in e-commerce logistics
23
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#TDC18 - McKinsey&Company - Dismantling myths in eCommerce logistics: How will we receive our online shopping in 2025

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Leveraging new McKinsey research, Ludwig will provide a look into the delivery future.
o How fast? Is next-day enough or will we see same-day or even instant delivery as the new normal?
o Through classical parcel delivery services or through UBER-like couriers? And what technology features and services that delight us will become reality?
o At which location? Doorstep, locker, shop, office, car trunk?
o By man or machine? Drones, druids, autonomous vehicles with built-in locker?
o From local stores, domestic fulfillment centers, or as direct parcel from China? Will cross­ border e-commerce really pick-up and be sustainable? What does this mean for the way the goods get shipped?
Learn more about MetaPack's The Delivery Conference 2018 (#TDC18) at the event website https://www.thedeliveryconference.com.

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#TDC18 - McKinsey&Company - Dismantling myths in eCommerce logistics: How will we receive our online shopping in 2025

  1. 1. Leaders & Heroes THE DELIVERY CONFERENCE DR LUDWIG HAUSMANN Partner Dismantling myths in eCommerce logistics Leaders & Heroes
  2. 2. London, January 30, 2018 Dismantling myths in e-commerce logistics – In 2025, how will we receive the goods we shop for online? THE DELIVERY CONFERENCE CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission is strictly prohibited
  3. 3. 2 USD 130bn USD 110bn Domestic B2C deliveries USD 23bn Cross-border B2C deliveries E-commerce ware- housing and fulfillment
  4. 4. 3 E-commerce relevant parcel penetration 24 17 1112 7 9 77 1 43 23 18 16 1111 98 6 55 22 39 <1<1<1 >1<10.1 <1 0.1 Low-penetrated markets ~1-2 parcels/capita ~20 parcels/capita Medium-sized, mature markets Large-sized, mature markets Parcels per capita p.a. (2013 vs. 2016) ~8 parcels/capita China (tier 1) Nor- way Nether- lands Switzer- land Ger- many UKAustria USSwe- den BelgiumIndia Singa- pore ItalyIndo- nesia Thai- land Malay- sia 2016 2013
  5. 5. 4 Domestic B2C deliveries Percent USD 55 bn 32 5 52 11 2011 Rest of World Western Europe 2021 USD 213 bn 34 17 40 9 Asia-Pacific North America
  6. 6. 5 How fast? Traditional employed couriers or Uber-like freelancers? What technology features? At which location? Delivered by people or machines? From local stores, domestic warehouses, or direct from China?questions
  7. 7. 6 B2C customer demand for instant and same-day delivery 20252016 Market share, percent Same day Instant <1 3 22 +43% p.a
  8. 8. 7 +4 % points willing to pay EUR 3 extra for same-day delivery Urban +3 % points willing to pay EUR 3 or 5 extra for same-day delivery High income +13 % points base delivery choice mainly on speed and reliability Younger (aged 18-34) +5 % points willing to pay EUR 3 or 5 extra for same-day delivery More time constrained Adopters of fast-delivery options
  9. 9. 8 USD billions, 2016E Estimated net sales of US urban delivery start-ups Immediacy of use/“urgency” Perishable in minutes/hours Non- perishable Average gross margin USD/transaction Perishable within days Postmates ~ 20% instacart ~ 10-20% 40 20 0 ≤0.3 ~1.0 Prepared food Nonfood retail Groceries +0.5
  10. 10. 9 USD/order Consumer prices for instant delivery Consumer willing- ness to pay 6 Estimated delivery costs 7 10 3.99 13.00 6.70 2.95 Virtually none
  11. 11. 10 Example: payment flow Instacart USD 30.00USD 36.00 USD 2.00 USD 1.50 USD 8.50
  12. 12. 11 Example: payment flow Instacart USD 30.00USD 36.00 USD 2.00 USD 1.50 USD 8.50 3.00+ Delivery fee + Discretionary tipping ~10% 3.00 Customer pays 36.00 30.00Groceries 9.50 3.00Delivery fee 2.00+ Merchant commission 8.50./. Crowdsourced courier 1.00Urban delivery startup earns Urban delivery start-up collects + Discretionary tipping 3.00 1.50+ 3rd party promotion
  13. 13. 12 Example: urban delivery start-ups 8 90 4 75 12 50 Employment Share of utilized capacity Percent of total paid working time Crowdsourcing Total pay per delivery USD
  14. 14. 13 Catalogued inventory for previously offline merchants Live adjustment, e.g., to delivery address or ordered items End-to-end live GPS tracking and dynamic ETA updates Driver ratings Push notifications and in-app driver communication In-app customer service Narrow time windows to choose from and precise ETA at checkout In-app payment and tipping 1 common user- friendly interface across retailers Substitution recommender for out-of-stock items 10 magical moments
  15. 15. 14 Preferred delivery locations Percent Similar delivery conditions 6 4 8 82 Differing delivery conditions 9 43 5 43
  16. 16. 15 Overview of delivery technologies Unmanned aerial vehicle (UAV) for single parcels Small electric AV travelling ~4 mph on curbside AV with parcel locker on top Advanced robot fulfilling current delivery driver job incl. parcel handover
  17. 17. 16 2025: delivery forms by geography and type Low-density cities >10,000-100,000 Rural <10,000 High-density cities >200,000 Medium-density cities >100,000-200,000 Same day Time definite Deferred Instant
  18. 18. 17 2030 and beyond: a long-term view Low-density cities >10,000-100,000 Rural <10,000 High-density cities >200,000 Medium-density cities >100,000-200,000 Same day Time definite Deferred Instant
  19. 19. 18 Reasons for cross-border shopping Number of customers (out of 10) Product availability "The only way of getting this rugby gear to Australia is to ship it in from the UK" Lower prices "Buying this camera gear straight from Japan saved me EUR 250" Greater selection "The only way to get the full lineup of my favorite cosmetics brand is to buy it directly from the US" Product quality "By buying this handbag straight from Italy, I could be sure I get the best product quality"
  20. 20. 19 Share of e-tailers expecting growth of cross-border revenue share Percent 62 78 66 67 73 78 Ø 71 Fashion e-tailers Non-fashion e-tailers E-commerce giants Brick and mortars High-value manufacturers Low-value manufacturers
  21. 21. 20 Where will the goods come from – stores, warehouses, perhaps even factories in China? Will same-day or even instant deliveries ever seem normal? Will couriers be contractors or employees? Where will consumers pick up parcels? Are they going to be delivered autonomously and, if so, by drones, by droids, or by self- driving trucks? Will cross-border deliveries become even more significant? Traditional incumbents and home deliveries Same day Innovations go mainstream Couriers will be employees Still at home Discounts Drones Cross-border delivery Local fulfillment Parcel shops
  22. 22. 21 Huge opportunity, but extremely hard to chart the strategic course until 2025
  23. 23. 22 The sky is the limit in e-commerce logistics
  24. 24. 23

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