Moore Stephens, one of the top ten largest independent accounting and consulting networks in the UK has been looking into the significant number of delivery companies becoming insolvent. This number of businesses becoming insolvent has jumped up 11% this year, even though e-commerce is going from strength to strength.
Moore Stephens has said that even though e-commerce is expanding, the logistics industry associated with this market is crowded and competitive which means that some companies can struggle to keep afloat and win enough business to stay profitable. Research has shown that there were 164 insolvencies in the logistics and delivery sector in the 2016/17 year, this figure is an increase from 148 in the previous year.
Another factor that is causing problems for logistics companies are the increasingly exacting specifications of e-commerce platforms and technologies as well as increased customer expectation for services such as free delivery, next-day services, two-hour delivery windows and a no-hassle returns option. Moore Stephens has said that these demands would require a significant amount of investment into a fleet as well as the creation of a range of new platforms and technologies such as real-time tracking apps and SMS/email updates. This level of investment made by logistics and delivery companies are likely to be increasingly more challenging for SMEs. The tough competition that is apparent in the logistics sector or a thriving e-commerce market is creating a great deal of challenges for companies.
Large companies like Amazon for example have been increasing the demand for low-cost and rapid-turnaround delivery as well as the relatively new commitment to offering to collect returns, this then puts a pressure of pricing and this situation is made more intense during the peak Christmas shopping season. According to Moore Stephens and Barclays Bank’s survey of key decision makers, it is investment in technology that is considered a central part of future success and can help businesses to be more efficient in their operation, while also working to reduce costs and relieve pressure on margins.