Deals struck in China have implications for ecommerce and logistics across the globe. Laws introduced by the European Parliament to unify returns costs will have a greater impact in some countries than in others. And in Germany, the march of the millennial generation is yet to dent the online might of those a little older. We take the pulse of retail operations and logistics in China, Germany and Ireland and the state of returns across Europe, taking on board the views and opinions of a range of industry watchers.
Chloe Rigby, editor of InternetRetailing:
Alibaba Group is taking a 19.99% stake in Suning Commerce Group as part of a deal that the two say will change the way commerce happens. The RMB 28.3bn (£2.87bn) deal makes the Chinese marketplace the second-largest shareholder in Suning, a leader consumer electronics retail chain in China.
However, the deal resonates beyond the Chinese market because it’s an example of a new kind of online and offline commerce model. It echoes the collaboration in the UK between eBay and Argos, which enables eBay shoppers to pick up their online purchases from high street branches of the general merchandise retailer.
Alibaba says this is a strategic collaboration that brings online and offline retail closer together. Between them the two say they will provide more holistic and more convenient shopping experiences as well as improving the customer service available to shoppers buying online and via mobile devices. Suning will open a flagship store on Alibaba’s Tmall.com platform, while Alibaba will benefit from Suning’s well developed logistics network, which covers more than 90% of China’s countries and has eight national distribution centres, 57 regional ones, and more than 1,700 last-mile delivery stations. Marrying these resources with the intelligent delivery solutions that Cainiao, Alibaba’s logistics affiliate, offers should mean, says Alibaba, that customers can soon expect to receive their orders in as little as two hours.
Jack Ma, executive chairman of Alibaba Group said: “Over the past two decades, ecommerce has become an inextricable part of the lives of Chinese consumers, and this new alliance brings forth a new commerce model that fully integrates online and offline.” He added: “This alliance will benefit consumers and merchants by cultivating an open and transparent integrated ecosystem that will be the backbone of the future economy.”
Zhang Jindong, Suning’s chairman, said: “The collaboration between Alibaba and Suning is a milestone in China’s retail industry and its influence on ecommerce and offline retailing will be enormous. This collaboration signals a new trend in the internet age: strengthening China’s traditional industries by leveraging the power of internet. It will also help transform China’s manufacturing industry and broaden the global horizons of Chinese brands.”
Katy Phillips, communications & PR manager of Idealo Internet:
In July 2014, a new EU directive ruled that online retailers are not required to refund return postage costs for customers, unless the item purchased is faulty. While for many consumers, the initial concern was an increase in the number of companies leaving customers to pay the return postage costs, data from idealo.co.uk shows otherwise.
Research for the UK market found that 54% of British retailers in the study fund returns for all items, but how do the online shops in nearby France, Germany and Spain compare?
Back in 2014, just 7% of French retailers in an idealo study were generous enough to offer free returns. In 2015, the number had risen to 22%, meaning consumers there need not worry.
Germany presents us with an interesting case. A huge 88% of online retailers in Germany covered the return costs, however compared to 94% in 2014, it is a backwards trend which isn’t going to be popular with consumers.
Our 2015 study found that just 14% of online retailers offer free returns. Although the 2014 data for Spain wasn’t recorded for this study, it will be interesting to see what the situation is by next year.
It was found that in many cases, retailers introduce certain parameters that must be observed in order to qualify for the free return. For example, only valid for purchases over €40. Similar to 18% of the UK retailers footing the returns bill, 10% of the German shops and 4% of the Spanish shops did so via a free returns label.
On the European scale, it is Germany that is a cut above the rest in terms of generosity, followed by the UK, France and then Spain.
Jonathan Matchett, UK managing director, wnDirect:
With a firmly entrenched mail order culture, Germany has embraced the digital age and ecommerce with open arms. With 41 million online shoppers, Germany is predicted as having the highest growth potential of all the Western European markets; in 2013 ecommerce turnover was €63.4bn.
In other markets it is millenials who have embraced all things digital, including ecommerce. However, it is the over 55s who lived through a divided Germany and have more disposable income that are showing a willingness to spend online. With nearly €1,300 worth of goods per person being purchased online by Germans, the 45-64 year old segment has experienced steady growth and the over 55 market in particular is being targeted for its purchasing power.
German shoppers purchase freely from outside of the country with clothes, shoes and accessories featuring at the top of the list. The bulk of these sales originate from five key countries with German e-shoppers purchasing across these locations – the UK (46%) or the US (48%), followed by Austria (33%), China (17%) and Holland (16%). In 2013, 14.1 million shoppers spent €7.6bn on cross-border ecommerce. By 2018, this figure is expected to rise to 15.8 million shoppers with a spend of up to €11bn. Average cross-border transactions are €66.80, while the total spend per shopper is approximately €987.
However, as with all good things, ecommerce in Germany is not without its challenges. There are significant cultural differences, high returns being at the top of the list, which must be taken into account by retailers if they are to succeed in the region. Germany has one of the highest product return rates with estimates putting the figure at around 50%. This isn’t because Germans are necessarily more difficult to please, although they are well-known for their insistence on quality, but because of the strict regulations which protect consumers rights as well as consumer behaviour; so they tend to order multiple colour and size options with the confidence that they can return the unwanted items.
Consumers in Germany also like choice, speed and value for money when it comes to delivery options.
Neil McDonnell, general manager, Freight Transport Association of Ireland:
Eircode has been live since 13 July. Welcomed by some, disparaged by others, one thing is for sure, Ireland has taken a path on postcodes which is unique in every way.
Ireland has a significant problem with non-unique addresses, which make up approximately 35% of the total. A postcode was the natural solution to the issue.
The formal process to set a national postcode started in 2006 with the National Postcode Project Board (NPPB) report. The NPPB consulted widely with stakeholders, whose preference was for a fixed grid system. However, this was ruled out by the then Data Protection Commissioner (DPC), who felt that a Fixed Grid would facilitate a unique identifier postcode. The DPC felt this would impact personal privacy. The NPPB therefore recommended an “ABC 123” postal sector postcode, consistent with electoral boundaries. This would have 219 Post Towns, composed of sub-units called Blockfaces with a maximum of about 50 addresses each.
However, when Eircode was announced in late 2013, its format was radically different. It was to be a letterbox code in an A65 F4E2 format, with an individual postcode for each private and commercial address. The A65 part of the code is the Routing Key, a large area of up to 80,000 addresses. The second part is the Unique Identifier, which corresponds to an address’s location in a database. Crucially, it does not define the address as part of a locality.
Eircode is not usable for non-postal addresses. Worst of all, the code is an un-structured, non-hierarchical, randomly allocated code. This means that adjacent addresses have the same Routing Key, but completely different, random unique identifiers. Autoaddress, the key Eircode delivery contractor, has advocated the use of Googleplus codes, GoCodes and what3words codes as solutions for non-indexed locations, but has given no guidance on how they can be used together with Eircodes.
This presents a significant challenge to the parcel industry, which not merely wants to find an address, but wants to optimise deliveries to all addresses. We are told that industry “value-added resellers” will produce solutions for these problems, but so far only one VAR of the 18 listed on the Eircode website claims to have a routing solution for Eircode. All the rest are database, GIS, anti-fraud, addressing and direct mail/marketing companies.
In summary, if you’re upstream in e-tailing, Eircode will probably add value for you. It functions well as a database-tool, assisting online payments, customer segmentation, statistical analysis, validation etc. However, don’t expect it to save money in down-stream distribution or delivery optimisation. It’s simply not designed that way.
Main image: Alibaba Binjiang Park by Danielinblue. Licensed under CC BY-SA 4.0 via Commons –
This feature was published in the third print-edition of eDelivery Magazine (EDM03).