In this feature from earlier in the year, InternetRetailing’s Senior Researcher Martin Shaw takes a look at the changing dynamics of delivery costs and the expectations on Black Friday.
In September 2015’s edition of eDelivery, we looked into how delivery options have changed over the last 12 months for customers of the UK’s 100 largest retailers. In that column we noted that the standard delivery options available to customers have changed markedly in terms of price, flexible time slots and time to fulfillment when compared to those on offer this time last year. Of particular note was the fact that the price retailers charge for a basic delivery increased in 20% of cases and decreased in only 7%. However, when it came to stock returns this ratio was reversed with more retailers having lowered the price they charge compared to the number that raised it.
In this edition I will consult our most recent research – conducted last month – in the hope of gauging to what extent these changes herald a divergence from competitive delivery pricing that characterised the early success of Amazon and others, and whether the prices paid by consumers are changing more in some sectors than others.
Customers need to pay a price. Multichannel retailers who previously subsidised logistical costs to sustain ecommerce growth have become so significant that customers need to pay a reflective price. It’s about decreasing flexibility too. A retailer with a third of its sales online can’t deal with a doubling of deliveries due to a promotion – especially when delivery costs aren’t fully paid by customers – as well as it could 10 years ago when online sales were a tiny fraction of their business.
With the annual retail free-for-all of Black Friday, it is worth asking what effect the changes to delivery or returns pricing might have on consumer behaviour and whether they will assist retailers in meeting this year’s pre-Christmas surge or whether logistics companies should prepare for a repeat of Black Friday 2014’s shambles. Over the past 12 months, there has been a 28% increase in average delivery cost charged by the 100 largest retailers in the UK. Companies in the Home, Garden and DIY sector led the way with an average 96% increase. Health and Cosmetics was the only sector to drop rates, on average, and that by a marginal amount.
Turning to returns, more retailers are lowering consumer costs than raising them. Research by Barclays in March identified that most shoppers are influenced by refund and return policies prior to purchase. Of the 19 largest 100 retailers to drop returns cost, the average reduction was 25%. The Apparel and Children’s Goods sectors saw the steepest declines, but Sports and Leisure retailers bumped their average cost to consumers by almost 100%.
We’ll be monitoring how delivery firms live up to their commitments this coming Black Friday and Cyber Monday. Will measures introduced this year mean an orderly, if busy shopping period? Although decreases in the cost to consumers will likely exacerbate the warehousing issues around returned stock, this will occur within the context of more achievable fulfilment expectations. In a year that has seen a resurgence of paid delivery, my money is on customers opting for cheaper and slower fulfilment with logistics firms dealing with a surge that can be realistically met.