Convenience now drives logistics strategies, writes Chloe Rigby
In a world where many retailers sell the same or similar items online, delivery has become a competitive advantage in recent years. Getting the product to the customer fastest, or in the most convenient way, can often make the crucial difference that wins the sale. Fulfilment might be via home delivery or a range of increasingly sophisticated collection options, but the important thing is that it is convenient and meets the shopper’s needs. Walter Blackwood of WMB Consulting was previously head of logistics at Mothercare [IRDX RMOC] and chief executive of a number of courier delivery companies. Speaking at InternetRetailing Conference 2017, he said that while standard delivery can be improved on by adding features such as choice of delivery options and order tracking, those aiming towards best-in-class logistics strategies are now working towards an omnichannel experience where “movement from one environment to another is seamless”. For most, as yet, he notes, “It’s a real aspiration,” adding that returns is also becoming a point of differentiation, with shoppers starting to treat online shopping as they would a changing room, ordering extra sizes and colours to be sure an item fits, then sending back the ones that don’t.
Retailers working to improve their logistics strategies are doing so at a time when they’re dealing with larger volumes than ever before. The latest edition of the IMRG-MetaPack UK Delivery Index offers an insight into the scale of the challenge. It suggests that the number of parcels sent out by retailers in July 2017 was 16.5% higher than the same time last year. The number of parcels grew even faster than sales, with an 11% rise in revenue recorded over the same period. That, said the IMRG, was likely due to higher levels of discounting over the summer.
But while volumes were rising substantially over the summer, the busiest time of the year is yet to come. The run-up to Christmas provides an annual stress test for retail logistics systems as it’s the time of year when delivery really matters at such a scale. For Christmas shoppers aiming to finish their shopping in time, 25 December is an absolutely deadline and the rise of Black Friday over the last three to four years has served to bring that deadline ever earlier. As Terry Murphy, director of John Lewis’ [IRDX RJLP] National Distribution Centre, told audiences at InternetRetailing Expo this spring, “Black Friday has put an artificial spike in before Christmas that was spikier than anything else.”
Reviews site Trustpilot recently released research that suggested timely fulfilment was one of the top priorities for the 8,000 online shoppers who responded to its poll, ranking it ahead of discounting and flexible returns. That only intensifies in the run-up to Christmas. Trustpilot’s language analysis of reviews left on the site between October and December 2016 showed that by December, delivery was becoming a more critical factor. “Delivery” was mentioned in 17% of its one-star reviews in October, and 19% of those reviews left in December. Five-star reviews cited “great service”, “excellent service” and “fast delivery” with these terms appearing in nearly 22% of all five-star reviews on the site in December 2016.
Commenting on the findings, Don Ross, president of the Americas at Trustpilot, said, “As traditional and online retailers continue to battle over price, they’re creating a level playing field but there’s a limit to how low you can go. Shoppers are starting to look at other areas to help them decide what and where to buy. Furthermore, sellers who rely heavily on price but fail to meet post-transaction expectations are paying dearly in customer reviews, which have year-round ramifications on paid and organic search, click-through rate and acquisition costs.”
WMB Consulting’s Walter Blackwood told his IRC 2017 audience that getting logistics wrong would “make you go bust very quickly”. He added, “The first and most important thing with cost is to do it only once – get it right first time.” He also noted that good service helps retailers to retain loyal shoppers and that getting a customer in the first place can be expensive. “It’s critical to ensure that if you get a good customer, you keep them. That’s all about service and serving them effectively.” Today, he said, poor service is no longer between the customer and the retailer. “Don’t underestimate the power of social media. When you get it wrong, everybody knows, even those who have never bought from you. Now 100 people can be disappointed on social media about one poor delivery.”
“Incumbent organisations are not nearly as agile
as startups that are entering this market,
and retailers tend to be more agile as well”
Brody Buhler, Accenture
At the forefront of the industry, retailers are delivering highly convenient services that are improving all the time. Amazon [IRDX RAMZ] has long set the pace for delivery through the range of options offered by its subscription scheme, Amazon Prime. Prime members living in major UK cities can now routinely get their goods delivered on the day they order them, and sometimes in as little as one hour. Its Amazon Fresh service, delivering groceries in London and the South East in as little as an hour, appears to have driven change across the industry.
Leading UK supermarket Tesco [IRDX RTSC] this summer claimed a national first when it introduced a same-day grocery delivery service, adding to a same-day click-and-collect service in 300 stores. The service, which delivers shopping by 7pm that was ordered by 1pm, at a cost of between £3 and £8, represented an extension to a service that previously operated in London and the South East from 2014 onwards, and had seen an 18% growth in demand during the year.
Argos has developed a hub-and-spoke approach to logistics that enables customers to order up to 10,000 products for fast delivery to its network for digital format stores, located in locations from London Tube stations to branches of supermarket Sainsbury’s [IRDX RSBR], its parent company, across the UK.
Speed of delivery is proving particularly important in fashion, where retailers now promise next-day delivery and collection from the store for orders that are placed ever later. At Next [IRDX RNXT], for example, the cut-off time for both is at midnight. Next has also recently launched Nextunlimited, a subscription scheme that offers unlimited next-day delivery for a flat fee of £20 a year. This is one of the latest examples of the kind of delivery subscription schemes that were first popularised by Amazon and the grocers.
Fashion retailer Asos [IRDX RASO] has put the focus on convenience, working with carrier DPD [IRDX VDPD] to offer highly flexible deliveries that can be rescheduled or diverted to a local collection point, a neighbour or another pick-up point, right up to the last minute. More recently, Asos has also started working with On the dot [IRDX VCSP] to provide same-day deliveries to London shoppers.
Online marketplace eBay [IRDX REBY] has focused on developing a click-and-collect service by partnering with both retailers and parcel collection shops with a strong high street presence, from branches of Argos [IRDX RARG] to, most recently, shops operated by Doddle [IRDX VDOD]. When the Doddle service launched, Jon Ford, head of shipping development at eBay, said, “Our buyers and sellers are at the heart of everything we do and we want to make shopping and selling on eBay as convenient and flexible as possible. That means providing as many ways to improve the delivery experience for buyers. We already have millions of click and collect-enabled listings on eBay and the collaboration with Doddle will help us extend our collection footprint while also helping sellers on eBay to enhance their fulfilment capabilities.”
The choice and speed of delivery options may drive logistics strategies among leading retailers but across the IRUK Top500, the median standard is still lagging behind. InternetRetailing research shows that across those leading UK retailers, shoppers have a choice of between two and three delivery options. Same-day delivery may be eye-catching but it’s currently offered by only 5% of retailers. Next-day delivery, offered by 57% of Top500 retailers, is the most widely offered of premium options that also include named-day, named-time, Saturday and Sunday delivery. But across the Top500, standard delivery still takes a median five days and costs a median £4.96.
Already, logistics professionals are putting automation to work in warehouses, enabling them to deliver on the fast pace of online orders, particularly around Black Friday time. John Lewis, for example, has used automation to speed up operations at its distribution centre, concentrating on operational efficiencies to remove logistics bottlenecks. Ocado [IRDX ROCA] has used small robots to speed up its pick and packing process in its Andover warehouse, and is developing the larger SecondHands robot to act as a warehouse assistant.
Robots are also being used in last-mile delivery, pioneered by food delivery companies including Just Eat [IRDX RJEA], while Amazon has landed the first UK drone delivery and continues to develop the technology for wider use.
Meanwhile, artificial intelligence is being used to help deal with customer order enquiries. Shop Direct [IRDX RSDG] is working with IBM [IRDX VIBM] using machine learning in a chatbot that, housed in the very.co.uk [IRDX RVER] mobile app, will answer natural language questions about the progress of their delivery.
In its recent report, The New Delivery Paradigm, Accenture suggests that artificial intelligence, robotics, autonomous vehicles, data analytics, augmented reality and the Internet of Things all have a role to play across the supply chain, from automated collections through to routing algorithms that use AI to place goods for faster and cheaper last-mile delivery. Even drones and self-driving vehicles are being considered. Adopting such approaches could create value of up to $400m (£300m) a year for the average post and parcel organisation, the report suggests.
Brody Buhler, global managing director of the post and parcel industry group at Accenture, thinks that while some retailers and delivery organisations are experimenting with these technologies, and while startups are bringing new approaches, most companies are currently waiting to see what happens. “As they experiment with new models at very different cost profiles, it’s going to be important for all of these delivery organisations to be rotating to these new ways of doing things and taking full advantage of their digital legacy,” he says. “Those that are standing on the sidelines watching and waiting may have already played it too long. There is an urgency here that they are not realising, and are not particularly well-suited to take advantage of. Incumbent organisations are not nearly as agile as startups that are entering this market, and retailers tend to be more agile as well.”
In the end, it is shopper expectations that will change the way consumers expect to buy and expect retailers to serve them. Buhler says, “Consumers have become less and less interested with who is bringing the parcel and more and more interested in ‘Can I get the features I want?’ Will it come when I want it, will it come as fast as I want it, can I control that delivery? Services such as DPD’s Predict offer a much more mobile-enabled, controllable delivery experience. Expectations are evolving.”
If consumers are to set the pace, it seems ever more likely that retailers will measure their service around the convenience that it provides to the customer. Doing so profitably will be critical but meeting the customer’s needs will be more important still.
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