Shoppers want convenience and free delivery, both of which can eat into retail profits. Some believe that providing a wide range of delivery options at realistic prices is the answer, while others are expanding low-cost collection models as parcel shops proliferate, writes Penelope Ody
1 Offer the options your customers want
Delivery choices used to be limited to ‘standard’ – up to a week – or ‘express’ – within a day or so. Today, delivery information pages on many websites require significant scrolling, with the options from top retailers extending to evening, nominated day, nominated time, next-day, same-day, Saturday or Sunday. Prices vary, with premium delivery options understandably proving quite expensive. Currys ??, for example goes from free for standard delivery (within five working days) up to £29.99 for a four-hour timed slot next day for large items. At Argos ??, which stands out for its speed of service, timed next-day delivery for large items is £24.99, while at Halfords ??, ‘bulky items’ are £39.99. Accessorize ?? has fewer options, with standard at £3.95 (free on orders over £40) or £5.95 for next day or weekend deliveries.
Customers are often satisfied with more basic services, as highlighted in the recent eDelivery white paper, Are you delivering what your customers want? While 31% of consumers surveyed cited next-day delivery as their most popular option, 26% were happy with delivery within three days and 22% content with delivery between three and five days. Take-up for Sunday or evening delivery may be low but if carriers are happy to provide such services, then there’s no reason not to offer them to customers – at a price.
2 Calculate cost to serve
The true ‘cost to serve’ is an important parameter for multichannel retailers and one which many neglected in the early days of online shopping, when orders were few and the cost of processing and shipping consequently minimal. Today, things are very different. With online accounting for 40% or more of sales in some sectors, many retailers have seen their profitability plummet and the past year has seen some of them introduce charges for click-and-collect or raise the order value needed for free delivery. John Lewis ?? now charges £2 for click and collect on orders under £30, although that may have as much to do with trying to manage queues at the collection desk as cost to serve calculations.
At Marks & Spencer ??, standard delivery is free for orders over £50 or £3.99 for next-day (curiously, the delivery FAQs don’t reveal price of delivery for orders costing less than £50). At New Look ?? it is £3.99 for standard (free over £45) or £5.99 for most other options (free over £100). Halfords has next-day as ‘standard’ which is free over £40 or £3.99 if not.
Even some pureplays are upping their price. Asos ?? still boasts ‘free delivery’ but that only applies to standard orders (within five days) costing more than £20. Otherwise, it is £3 or up to £7.95 for a more specific time. Freemans is still free, although £4.50 if you want it the next day. And some are still managing to ‘lose’ the cost of delivery elsewhere in their pricing structure. Schuh ?? offers free standard delivery and just £1 for next day, ‘choose your day’, and Sunday deliveries, while a 90-minute delivery service via Shutl ?? was free, at the time of checking, on orders over £75. All these options are well below their actual cost.
But whichever choices are on offer, understanding just how much packaging, processing, carrier,and maintaining a collection desk actually cost is essential in order to protect the bottom line.
3 Find a real place
With pureplays from Amazon ?? to Farfetch ?? taking a foothold on the high street, creating a real-world presence is clearly important – not least for the collection and return of items. Rather than actually buying a bricks-and-mortar operation, joining the physical world can involve partnership deals with established chains. It’s been possible to collect eBay ?? purchases from Argos for some years, while Asos orders can be collected from 61 Boots stores. Asos was also an early customer for Asda ?? toyou, which now handles returns and/or collections for more than 20 others, including Wiggle ?? and Chain Reaction cycle stores ??, Fat Face ??, Yours ?? and Missguided ??.
4 Expand collection and drop off options
When it comes to parcel collection services, etailers are spoilt for choice. Options include Collect+ ??, Doddle ??, Hermes’ Parcelshop ??, UPS’ network of convenience stores and DPD Pick Up ??, the latter working with a range independent and multiple retailers, including Halfords and Sainsbury’s ??, to provide convenient pick-up points for customers. Collection options are generally offered at the checkout, as with Gear4music.com ??, where local delivery locations may include convenience stores and retail stores such as Halfords. With such options steadily increasing, it’s important to keep up to date with new entrants in order to maintain the best choices for your customers.
5 Tell them who your carriers are
When it comes to delivery firms, many shoppers get to know the regular drivers and have pet hates: the driver who always dumps parcels on the doorstep and never rings the doorbell, the one who always leaves the garden gate open so your dog gets out, those that push that irritating card through the letter box before you’ve made it to the front door, or the one who just tosses parcels into the garden. Make it quite clear on your site which companies you work with and encourage feedback about any poor courier service. Freemans ?? includes “Which courier service do you use?” among its FAQs (it’s Hermes). Jaeger ?? does the same (Yodel ?? in the UK, TNT for international orders). GO Outdoors ?? goes one better, not only working with DPD but also including a link to DPD’s tracking service on its delivery information page.
6 How quickly do your customers really need their stuff?
There has been much talk of ‘one-hour’ deliveries in recent years, with the likes of Shutl ?? offering a 90-minute service in urban areas. Sometimes, this kind of service adds value. River Island ??, for example, offers Shutl as an option for customers using click-and-collect, which is a good tactic since unexpected last minute problems can occasionally prevent a shopper from collecting a vital item.
A study by McKinsey & Company, Parcel delivery: the future of the last mile, found last year that while around 23% of global consumers questioned would pay a premium for same-day delivery (€3 or US$3), only 2% were willing to pay much more than this, while around 70% would still opt for the cheapest delivery option. As McKinsey says: “This is somewhat surprising, as many startups and some large ecommerce players target precisely this small niche with their offering.”
If instant delivery is seen as a key differentiator, then it is likely that those offering such services will have to bear the bulk of the cost – rather like Schuh with its free Shutl option. ‘Losing’ the cost of delivery within your cost structure may be viable for small numbers of deliveries but McKinsey predicts that same-day and instant delivery will probably reach a combined share of 15% of online sales by 2020 and “significantly grow further beyond this date”. Is instant delivery really such a vital key differentiator? Or is it just an option that’s nice to have?
7 Make returns easy
Returns are the bane of any e-tailer’s business model. They’re expensive to process, often result in damaged goods and tie up stock in transit which might otherwise be sold to new customers. According to a JDA study, CEO Viewpoint 2017: The Transformation of Retail, 74% of retail CEOs believe that the cost of customer returns is eroding profits to at least some extent.
InternetRetailing researchers found that almost 75% of the Top500 will accept returns by post, although only 25% offer drop-off at a third-party location (such as Doddle or Collect+) as an option and just 40% allow returns to store. Even fewer (15%) provide some means of prepaid return and 23% will arrange to pick up unwanted goods from a home address.
For clothing retailers, good sizing charts or tools such as Fits Me and Virtusize can help, yet many shoppers will still order three of each item and return two once they’ve tried them all on. Debenhams ?? has a neat idea as it moves to integrate mobile and store operations. In future, shoppers may be encouraged to use their smartphones to reserve a fitting room when they collect their ordered garments from a store. In this way, they can quickly try all items on there and then and choose which they want to keep. This saves shoppers the hassle of returning them later and ensures that unwanted items are quickly returned to stock.
8 Think subscription
Amazon started it all with its subscription delivery service, Prime, but many are following and some analysts suggest that the subscription model, for goods as well as services, could be a major growth area in the years ahead. Online grocers have been offering various low-cost subscription models to encourage loyalty and repeat purchase for some time and, as with Prime, Sainsbury’s, for example, also provides additional benefits to its ‘Delivery Pass’ holders such as bonus Nectar points, prize draws and priority booking for Christmas delivery slots.
The model has also spread to the fashion sector: Asos has ‘Premier Delivery’ for “unlimited next-day or nominated-day delivery with no minimum order” at £9.95 for the year. New Look has ‘Delivery Pass’ providing unlimited free delivery (across all options) and click and collect, as well as free returns, for £9.99 a year. Boohoo ?? Premier’s unlimited next-day delivery is also £9.99 for a year while Selfridges+ ?? costs £15 a year but is available to both UK (all delivery options) and EU (standard delivery only) customers.
Obviously, the cost of providing free delivery for a year to an avid shopper eats into that customer’s profitability, but if it persuades them to shop more often with you, it may well be a price worth paying.
9 Make it trackable
Customers like to know where their parcels are in the delivery cycle and, even better, roughly when they will arrive. It’s information that can also help reduce all those WIsMO – where is my order – calls to contact centres. Research by NetDespatch published last year found that when asked to identify key aspects of their delivery experiences, 33% of those surveyed put the ability to track their order online first, while 32% gave it as their second key factor; 25% put being notified of the steps in the delivery journey in pole position while for 27%, being given an exact time window for the delivery was the most important factor.
Many delivery companies have already taken such views on board and customers are regularly now emailed on the morning of the delivery day with a time window. Not that it always goes according to plan though. An hour after the previously emailed time window of a recent UK Mail delivery, all this shopper could find on the tracking information was “sorry we appear to be running late.” The parcel eventually arrived the following day. If you are going to provide tracking data, it really does need to be accurate and up to date.
10 Opt for multiple sourcing
Depending on a single supply source is never a good idea and the same applies to services. The threat of strikes by Royal Mail ?? staff in the run-up to Christmas this year may present many retailers with major problems as they face their period of peak trading. If such strikes coincide with Black Friday, on November 24, this could create a significant backlog of parcels to be cleared just as the Christmas rush gets underway and at a time when many carriers will already be working at full capacity. Working with more than one delivery service provider not only means retailers have existing contracts and relationships on which to capitalise when trouble looms, but also allows them to offer a choice at the checkout so that picky shoppers can avoid their least favourite delivery companies.
11 Think global
A recent study from ReBound looking at the returns policies for some 200 fashion retailers, The Great Returns Race, found that only 18 of them tailored their policies to more than five geographic markets. Asos and Matchesfashion.com had policies appropriate to every market while Paul Smith covered 71 countries, but 86% of the 118 others who provided only one version of their returns model, tailored this message to the UK alone. Since, according to ReBound, almost two-thirds of fashion shoppers check the returns policy before buying, this lack of country-specific information could clearly be impacting cross-border sales. A significant number of these retailers also only accepted returns within the mandatory 14 day period – another deterrent to overseas shoppers who may need rather longer to return their goods.
12 Streamline click-and-collect
Four out of 10 (43%) shoppers experience problems with their click-and-collect orders, according to a recent report, JDA & Centiro Customer Pulse 2017. Long waiting times due to a lack of staff is the biggest pain point, followed by staff unable to locate items in store and the lack of any dedicated area for collecting goods, which leaves shoppers queueing at checkouts or trying to find an assistant. The study also suggests that 26% of click-and-collect customers made an additional purchase – either planned or an impulse buy – while in the store.
Click and collect is popular but it can also be an expensive option for retailers to manage since it is one of the fastest-growing areas for carriers, who must collect individual items from distribution depots and deliver them overnight to the relevant store for next-day collection. It would all be a great deal easier if store fulfilment were possible but that requires real-time stock data, by store, to be available on the website so that a shopper knows exactly where and when an item is available for collection.
This is possible though and a few retailers – around 16% of the Top 500 – do this. At Halfords, for example, you can check availability in your local store online and be told that collection will be available within the hour. You can pay in-store as well: a quick, easy and attractive option for shoppers.