by Daniel Martin
Delivery and fulfilment has become the new online retail battleground. From the explosion in Click & Collect to Amazon’s plans to offer same-day delivery in some US cities, the speed of fulfilment and range of delivery/ collection choices is fast becoming a critical differentiator for the retailer.
Changes to the free-shipping threshold and the profile of Click & Collect can have a significant impact on consumer behaviour. However optimisation is not just about understanding how to present or price delivery options; it is about ensuring expensive investments in new logistics services and processes are working and reflect customer demands. The ability to test new processes and delivery options in real time is becoming increasingly key to tracking the development of new logistics models.
One of the most marked shifts in online retail over the past 18 months has been the emphasis on customer delivery and fulfilment options, not least the huge growth in Click & Collect and the increasing interest in Collect Plus where goods are delivered to a nearby hub, such as newsagent.
The option to buy online and collect in store is compelling for a number of different reasons. From a consumer viewpoint, it provides choice and avoids the need to wait for deliveries – or rely on a friendly neighbour. From the retailer perspective, Click & Collect overcomes the problems associated with failed deliveries, which cost the industry £851m in 2012 according to IMRF; while offering customers the chance to try the purchased goods in store when they collect can also avoid costly returns handling if they decide not to buy.
More importantly, it drives the consumer back into the high street store where experienced sales staff can up- and cross-sell products, leveraging the existing retail estate and the skills of sales staff. Click & Collect also fits into the new multi-channel model by supporting the evolution from siloed multi-channel strategies towards proactively driving business between channels to maximise overall, rather than channel specific, revenue.
There are significant opportunities to differentiate the brand based on a flexible, timely and efficient fulfilment model: retailers can improve conversion by optimising the way these options are presented to the consumer. But this is a fast changing business model, with consumer expectations changing in line with new delivery choices. While some retailers now boast 70% click and collect rates, others – especially those with smaller products – are achieving just 30%. And while growing numbers are experimenting with Collect Plus, and similar services, this is not a model that works well for all brands.
It is clear that from consumer profiles to product mix, fulfilment and delivery options will vary considerably and it is therefore essential to test consumer response to different delivery options to maximise performance. However, testing in this model is more complex and must address the entire process from order through delivery/collection and returns.
With far more variables that can influence customer behaviour and affect the cost base, organisations need to combine multiple measures. It is in depth analysis of delivery costs, the in-store time spent managing collections, as well as online conversions that will provide true insight into the cost/value equation of different fulfilment options.
The first step for any retailer must be to optimise the way delivery options are presented to the consumer. Raising the profile of Click & Collect on the site, ensuring customers can rapidly identify the nearest store and understand availability options can have a significant impact on uptake. But changes to Click & Collect should not be considered in isolation. For example, by varying the minimum price at which free shipping is applied, a retailer can test the market elasticity and ascertain the threshold which prompts the largest uplift in customer order value. But how does the Click & Collect option perform in comparison to free delivery? What is the impact on Click & Collect uptake if the free delivery threshold is changed? And what about the returns profile? Are individuals more likely to return goods in store if they Click & Collect – but will they also opt to try on and buy something else? Testing is the only way a retailer can truly gain insight into how their customers react in real time to permutations on these questions.
Fulfilment optimisation is clearly far more complex than ensuring the check-out process is effective, or product page correctly presented. Changing the free shipping threshold, for example, will have an impact on the delivery demand, impacting the logistics processes. It is therefore essential to carry out tests in conjunction with logistics team to ensure any spike in demand is expected and managed; whilst tests must also extend throughout the entire buying lifecycle, including returns, to understand true conversion costs.
To optimise this complex delivery and fulfilment model online retailers need to create the big picture. A dashboard must provide clear insight into the way different aspects of the business are affected by online optimisation strategies, from the way the changing logistics costs alter the overall cost base to the impact on sales and acquisition costs.
This information will underpin what must be an evolving fulfilment strategy. For example, whilst 12 months ago consumers were unsure about using Collect Plus, retesting the option of picking up goods from a local newsagent today may well prompt a very different response.
There is a similar shift in mobile behaviour, with the latest generation of transactional mobile sites driving increasing retail sales and debunking the belief that consumers research via mobile, buy via tablet or desktop. If consumers now have the option to look at a product in store and order a cheaper online option via the mobile for immediate or next day delivery from the competition, retailers need to fundamentally transform the speed, efficiency and quality of the delivery model.
And with the growth in behavioural targeting, there is also an option to target different delivery options based on customer segments and/or previous behaviour, such as the use of Click & Collect or Collect Plus or similar services.
This is a fast changing environment. Just recently US giant Wal-Mart announced it plans to use retail stores to fulfil online orders. The implications for every aspect of the business are significant, with customers now expecting a consistent experience from the time of order to the time of pickup, and every other touchpoint along the way. But this model also provides Wal-Mart with the opportunity to personalise not only each individual’s online experience but improve each subsequent experience online and in store.
With such radical shifts in customer service experience now becoming possible, the pressure to get the right delivery and fulfilment processes in place is increasing fast. The ability to test new processes and delivery options in real time is becoming increasingly key to tracking the development of new logistics models and maximising the investment in new these services.
Daniel Martin is head of retail at Maxymiser