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Innovation momentum for 2016 (IRM56)

The final mile has been growing in prominence as businesses recognise the importance on customer experience of everything behind the buy button. Sean Fleming, Editor of eDelivery, looks at how delivery is disrupting the retail industry.

The first 10-15 years in ecommerce were a land-grab period, where frontier fights were all about making your site easier to buy from, your products easier to find on Google, your promotions the most attractive. The wild west outlook cannot last forever though.

As a growing equilibrium – or commoditisation of propositions, if you prefer – has developed in the online retail space, the frontier has begun to shift.

From the abuse you get on social media when one of your carrier partners fails to deliver, through to cart abandonment, from disgruntled customers finding ‘sorry you were out’ cards on their doormat to convoluted returns processes. Wherever you look it’s impossible to miss the influence on your brand, and on your sales, of things that were once safely confined to the back room.

Customer expectations have matured and you have to keep pace with them or get left behind – there’s no getting away from it. Nowhere is this more evident than when it comes to the not-so-small matter of delivery; getting purchased items into customers’ hands in an efficient and timely manner is the new frontier, and there’s no room for cowboys.

Disrupt yourself

There are only two places to look for innovation and inspiration, from within your organisation or from an external source. The same can be said of that frequently over-used word disruption, and if you consider just briefly the evolution of Amazon you get a sense of what disruption really involves.

Amazon started out selling books and soon became the world’s largest online bookseller. Then it ignited the market for e-readers and electronic books – effectively competing with itself by disrupting the publishing world. At one end of its value proposition, Amazon has books, content, stories. At the other end, it has readers. The formats and mechanisms that bridge that gap are less important than the bridging itself; Amazon is the conduit, and it wants to stay as such.

You can do a lot to limit the chances of someone coming along and disrupting your market by following your own strategy of planned self-disruption.

Well it’s easy for Amazon, you might well be thinking. Not everyone is in such a well-appointed position, obviously. But maybe you don’t need a visionary business strategy based squarely on the ethos of disruption. Maybe you just need to make some improvements. If you want to focus more closely on the here-and-now and make sure you’re giving the customer what they want, you need to think about how they respond to the delivery choices currently on offer.

Cost is a great excuse

In a recent survey of more than 2,000 people across Europe (Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland, and the UK to be precise) eight out of 10 people said they’d abandoned a cart at least once in the last six months thanks to high delivery costs. That research was commissioned by ecommerce consultants B2C Europe, and it also found that for 39% of shoppers it’s a monthly occurrence.

You may feel that the cost of delivery is something you are somewhat constrained by. You may even feel that it’s a subjective thing, and that one shopper’s ‘too expensive’ can be another’s ‘value for money’ experience. But are you really happy with 80% of customers potentially using cost as an excuse for dumping you at the checkout?

Why not combat cost perceptions by providing choice? The more choice a shopper has when it comes to figuring out how they’ll get their purchases, the more likely they are to place that all important order. In fact, you can up your conversions by about 10% in this way, according to GFS a delivery solutions platform provider. You need only look at the growth of providers such as Collect+ and Doddle to see this in action. People aren’t always at home and therefore actively want alternative safe places for their purchases to be sent to. If they can order from you and have next-day delivery to a place of their choosing, why wouldn’t they place that order?

Playing the innovation game

Among other things, 2015 was the year Uber didn’t try to disrupt the UK delivery market, as had been predicted by some. Who knows, maybe that’ll happen this year. There is certainly a widely held expectation that the sharing economy will work its way into retail logistics somehow. But will we soon see an army of people with spare time and car boots picking up and delivering parcels?

It’s unlikely; your standard, common or garden, motor insurance policy won’t cover you for commercial use, and obtaining commercial cover might undermine the profitability of your new part-time delivery job. So much for the so-called sharing economy? But don’t rule it out just yet.

With a substantial fleet of vehicles making thousands of journeys day-in, day-out, Asda is putting its spare capacity to work. A new service called ToYou will see Asda put its network of vehicles and stores at the disposal of other retailers, so that shoppers can elect to have items sent to their local Asda for collection. By 2019, Asda reckons there’ll be an annual increase of 40 million visits to its stores by people picking up shopping from other retailers courtesy of ToYou.

From latent capacity to a possible 40m additional visits to your stores each year. It’s not an app, and there probably aren’t any bearded hipster startup types involved, but that’s a great example of innovation.

Argos has been at the innovation game too. Having re-engineered its replenishment model around a network of hub-and-spoke stores, it pushed a little further and started to offer same-day delivery for just £3.95. That move was only possible because it had gone through the hub-and-spoke process, developing the infrastructure required for such an undertaking. The invisible costs of being able to do this cannot be insubstantial.

The cost of not doing it, however, might have been seen by Argos as a mistake too great to risk making. Regardless of that though, Argos’s Central Stores Operations Director Andy Brown reckons that even at just £3.95 the Fast Track delivery service is paying its way.

The lesson here is to take what you’ve got and improve upon it. Not just by making it faster or cheaper. That’s not what happened in the case of either Argos or Asda. Instead the outlook was one of ‘what can we do with what we’ve got that we’ve never thought of doing before?’

It’s a value-add not a take-away

What do shoppers want once they’ve placed an order? They want their shopping, of course. If you and your customers are gathered in high population density areas, then offering same-day delivery has to be a no-brainer. Can’t do it yourself due to capacity constraints? Get involved with a third party, there’s plenty of them – albeit mostly in London, as far as the UK market is concerned. But Doddle, On the Dot, and Shutl are just three such new market entrants offering super-fast delivery. The newest cohort of businesses into the UK government’s Tech City ‘Future Fifty’ initiative contains several other standout names in the delivery innovation field, such as Deliveroo.

However, if your customers are more likely to be found in the provinces, then an option like the Asda network as an additional pick-up point could be worth considering.

Outbound parcels aren’t the whole story, of course. When it comes to returns, many of the same factors apply – speed and convenience are important both in terms of the customer getting the item back to you and you issuing a refund.

Amazon returns sent via Collect+ shops can trigger a refund in an hour. Retailers such as Sole Trader are able to issue refunds to customers who’ve paid with PayPal within minutes if an item is returned to a store. That kind of joined-up thinking and speed of service leaves a lasting impression on customers.

If you’re limiting your ambitions to being able to offer faster, cheaper delivery, someone will out-do you. There’ll always be someone out there committed to doing it cheaper or faster. How they’ll do it might not always be immediately apparent. but when you’re playing with such clearly defined parameters it’s an open invitation for others to come along and cut corners.

Adding choice, flexibility and service layers are easier positions to defend; find new ways of being better at what you do with what you’ve got.

You don’t always need to re-invent the wheel. Sometimes it’s enough to find a new use for it.

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