Consumers increasingly want their products fast and they want them delivered for free, and this is becoming more of a deciding factor in their retail decision making.
If you are a retailer who isn’t willing to absorb the financial consequences of a get-it-there-at-whatever-the-cost shipping operation, you could be missing out on a lucrative market. Forrester reports that by 2021, online sales will constitute 12% of Europe’s total retail sales, reaching €378 billion, with the UK, France and Germany particularly dominant.
In its Online Retail Forecast 2016-2021, the research firm suggests the region’s online retail growth hinges on improvement in customer experience. The report states “European consumers will research and buy more products and services online, largely thanks to ubiquitous connectivity via multiple digital devices and services such as convenient, cost-effective fulfilment options that directly improve the customer experience.
Here, Ken Chrisman, division President of Sealed Air, a global leader in packaging technology, discusses the impact of offering free shipping for businesses, and the additional operational complexity this can have on the fulfilment centres and back-of-store operations.
Dispelling the myth
Let’s be honest – there is no such thing as free shipping.
Yes, true, we all know we could go to almost any major retailer’s website right now and get what we want sent directly to our front doors without paying anything extra than we would in a store.
But offering this service comes at a cost – and not just a financial one.
Consumers’ expectations are higher now than ever before. They want their products fast, and they want them free. And all with the same great service and price they are used to.
The risk with offering free shipping is that it breeds operational complexity in fulfilment centres and back-of-store operations, leading to unfulfilled or unsatisfactory orders, ultimately leading to unhappy customers.
So why even offer it?
Impact of offering free shipping
Free shipping draws in new customers and higher volume, with a report from JDA and Centiro suggesting that 80% of European online shoppers will spend more for free delivery. So if you aren’t offering this service, you could risk losing customers.
But it isn’t as simple as that.
The 2016 JDA/Centiro Customer Pulse Europe report also shows that 63% of consumers would likely switch to another retailer if they have a poor experience with delivery, so it’s vital businesses get this process right.
On top of that, free shipping creates waste. Lots of it. Inefficient use of labour, misuse of valuable warehousing space, and – perhaps the most visible of all – an excessive waste of packaging materials.
And this, in particular, is something that affects businesses working within the EU as they must hit targets set out under the guidelines of The EU Waste Framework Directive.
It’s a viscous choice for businesses to have to make: meet consumer demands, or meet financial and legislative targets.
It isn’t good for your brand as consumers increasingly expect free delivery. It isn’t good for your business as it costs more to pack and ship. And it isn’t good for meeting waste targets as more waste is produced because of wrong-sized packages.
But, with Forrester predicting online sales growth across 22 product categories in 17 countries in Western Europe, and the increased demand for free shipping from European consumers, it is becoming difficult for businesses not to offer free shipping.
On top of all that, a new type of consumer has appeared: the serial returner. Consumers are now buying multiple items with the knowledge that they will return a number of them. This is detrimental to retailers’ bottom lines – free shipping is a painful cost to bear, and free returns double the pain. There are also more chances for damaged products and damaged customer experiences if returns aren’t processed quickly and correctly.
What’s the antidote?
Businesses can’t stop offering free shipping but they can ensure that more and more of their packages are right-sized, resourcefully produced, easily returnable, and recyclable from the start.
It is unrealistic for a business to think automation alone will solve the complexities in its operations. To understand the total efficiency of the entire operation, you must first stand back – way back.
It’s people, processes and systems that bring about big results – focusing only on the machinery is bound to be a costly mistake. You need to ensure all these elements marry together to deliver productivity, efficiency and a great customer experience. Once a business has taken an all-encompassing view of its delivery operations it should then look to boost fulfilment speeds and lower freight costs through automated right-sizing
Other ways to reduce costs include redesigning ship-from-store stations to maximise efficiency and reduce waste and damage. And, using innovative protective packaging solutions that use less waste, waste less materials, and cost less to store, handle, and ship.
There is no such this as free shipping, but smarter, faster, more sustainable shipping? That is very, very real.
Ken Chrisman is division president of packaging technology company Sealed Air.