GET LOGISTICS RIGHT FOR THE CUSTOMER AND THE RETAILER, AND MAKE OMNICHANNEL RETAIL MORE SUSTAINABLE, WRITES CHLOE RIGBY
Joined-up logistics may in the future see retailers able, as a matter of course, to deliver from any point in the business to any point the customer requests. But for most that’s still an aspiration. Consumers’ service expectations are rising fast, but what’s fast becoming clear is that sophisticated logistics must work for the retailer, as well as the customer.
“For the customer, omnichannel logistics means getting the right product at the right time,” says Roy Patrick, multichannel product director at Micros. “For the retailer, it’s never missing a sale, because you’re able to get the right product to the right customer at the right time.”
Retailers are now offering more flexible delivery options than a year ago, found the recent Micros Multichannel Delivery Report 2014, but companies already offering in full the kind of seamless services that consumer like to use remain firmly in the minority. For example, while 83 per cent of the 239 retailers whose services were tested over the course of last autumn for the report offered a choice of home delivery options, a minority (44 per cent) offered click and collect. Those who offered the online ability to go further and check stock in individual stores were in a small, but cutting-edge, minority of 11 per cent.
At the moment, says Craig Sears-Black, UK managing director of Manhattan Associates: “There are a handful of companies providing exceptional service options. Then at the other end of the spectrum there are some just offering a single delivery option. Where I think we will be in five years time is that service will have become the differentiator.”
Consumers would rather have online orders delivered to their home. So said 85 per cent of those questioned for Hermes ’ 2013 Parcel Deliveries Usage and Attitude survey. But truly flexible home delivery solutions, such as the real-time tracking solution developed by DPD for Asos , offering 15-minute delivery slots, are few and far between. A third of retailers (34 per cent, according to the Micros study) offer only two delivery options, while 27 per cent offer more or more options; standard, next-day and Saturday delivery are the most common options.
Flexible home delivery costs, and consumers usually opt for the free option. When lockerbox business ByBox tested free delivery with one online retailer, volumes soared. When it introduced a charge that equalised the cost of lockerbox delivery with the next cheapest option, volumes fell by 75 per cent. ByBox chief executive Stuart Miller says: “We thought people would pay a small premium for convenience. We now realise that people will tolerate a small inconvenience as long as it’s free. Anyone who thinks they have a real role to play in omnichannel logistics is going to have to find a way to do it for cheap or free.
DOING IT FOR FREE
No surprise then that usually-free channel-linking click-and-collect services is on the way to becoming mainstream. Some 44 per cent of retailers tasted by Micro's researchers offer click and collect from store, up from 32 per cent.
Among those that do is Tesco . The company said that over Christmas 70 per cent of online orders for fashion or homewares were collected in store, while Neil Weightman, sales director at e-fulfillment specialist iForce, says that a 60 per cent store collection rate for online orders is not exceptional among its clients. Shoppers gain from the convenience of free delivery to a nerby store, while retailers also cut delivery costs, at least when click-and-collect consignments can be carried on store replenishment runs. Lead times for click and collect are often shorter than the typical replenishment runs, and a significant number of items will be sent via carrier, most likely at a loss. However, says Weighman, retailers may decide that's worth it since customers coming into the store to collect a parcel are more likely to buy another item. "you only have to get one purchase out of maybe five or six click and collect customers and you've paid the carriage, "he says.
Andrew Starkey, head of e-logistics at etail trade associations IMRG, suggests that consolidating these deliveres could be a way to cut costs. He says: "It would be possible for a retailer to say, "We know our store in Covent Garden is going to have 18 click-and-collect orders being dispached from our warehouse tomorrow. We have to treat them separately but we want the carrier to recognise ther's 18 parcels going to that one address, and we want a consolidated price.' If I was a carrier I'd be doing that and it's an elegant solution."
EXTENDING THE FOOTPRINT
Click and collect is no longer only an option for multichannel retailers. Pureplay and multichannel retailers alike are extending the company footprint through parcel shop networks that are located where online shoppers live and work. Asda , Tesco and Waitrose are offering collection from London Underground stations, while Network Rail has taken the parcel shop to mainline stations, with the opening late last year of its first Doodle outlet at Milton Keynes Central. Lockerbank collection points are also presents at railway and tube stations.
IMRG 's Starkey predicts that by the end of this year there will be 30,000 third-party collection points. Hermes, for example, is on track to have 5,500 myHermes parcel collection points by the end of October. That, says Hermes sales and marketing director Gary Winter, will mean 95 per cent of the population will be within a mile of one of its parcel shops.
But retailers considering using parcel shops to extended their footprint may consider how collection points reflect their brand. Questions to ask, says Starkey, include: "Is it the same set up, can I get those third party companies to add those little details that I deliver to my customers when they come to my store?"
Lockerbank companies are also thinking about how they can do things differently. ByBox chief executive Stuart Miller tells how the company is trialling locker banks in a number of Oxfordshire towns ad a way to help bring shoppers to high streets. Part of the trial includes testing new ways of sending local discounts and offers to people via their parcels; such offers could theoretically pay for the cost of delivery.
SPEAKING FROM EXPERIENCE
“I think what consumers are increasingly looking for is predictability: a way to selffulﬁl
their order in a way that suits them for that order."
Andrew Starkey, head of e-logistics, IMRG
“Which channel [the order] came in is irrelevant to the fulﬁlment provider.”
Neil Weightman, sales director, iForce
“If we continue to create the solution for omnichannel in the future based on where we’ve already been, it’s just not going to work.”
Stuart Miller, chief executive, ByBox
The closer products are to the customer, the faster delivery can be. Shutil pioneered 90-minute delivery of stock held in stores local o the end customer.
Amazon is building a network of city hubs, essentially forward stock locations, close to major cities, that enable it to make same-day premium deliveries. AO.com is offering same-day delivery for large electrical items via a network of outbases served from a central distribution warehouse. Argos is trialling same-day options via a hub and spoke store network. All are betting that consumers are, after all, prepared to pay for convenience.
Stuart Higgins, retail partner at LCP Consulting, detects a trend. “Omnichannel retailers are tending to move their inventory further up the supply chain and hold it for longer in central locations so they can respond to the varying demands of stores, and of online channels and deploy the stock to meet the sale as late as possible in the process,” he says. “That is also tending to lead tothe growth of larger mega sheds, with single points of stockholding, but also in doing that it becomes easier to view your inventory as a single pot of inventory and dynamically allocate it to where the point of sale is.”
All this requires full visibility of inventory, whic Manhattan Associates’ Sears-Black describes as “a powerful tool”. “By extending the product availabilityto store stock you are able to sell anything in your network,” he says. Debenhams’ Endless Aisles service offers customers the chance to buy stock from across its locations, from the fulfilmentwarehouse to a store, the latter enabled through in-store picking and packing and courier delivery.
A recent report from eBay Enterprise suggested that shipping from store could boost retail sales by 20 per cent.
But logistics is no one-way service. Consumers haveto be extended. Shop Direct says returns rates of 30per cent to 40 per cent might be typical in sectors such as fashion. “We’ve been distance selling for a long time and we understand that customers see their front room or bedroom as their changing room,” says Chris Haighton, head of retail logistics at Shop Direct. Speaking to InternetRetailing.net ahead of IRX 2014, where he will be speaking on the subject of returns, Haighton said retailers should seereturns as an opportunity – not a failed sale. Shop Direct itself offers customers of brands that include Littlewoods.com and Very.co.uk free returns through channels including home collections, Post Office and collection point drop off, and return to lockerbank.
“We see returns as a USP, with the opportunity for hassle-free returns through a number of different routes – customers can select the easiest and most convenient route to suit their lifestyle,” says Haighton. He adds: “It’s about encouraging customers to shop with confidence."
Hermes enables its retail customers to give customers a choice of returns, whether through courier pick up or drop off at a parcel shop. “Once we started offering parcel shoppers the option of quite a few of these things, the take-up rate was massive," says Winter. "It quickly becomes first choice for returns because of that convenience – and
that’s part of the omnichannel experience.” Neil Weightman of iForce cites the experience of Tesco in enabling shoppers to return their online Tesco Direct orders in store: he says customers simply prefer to return in store than to the post office.
Stuart Higgins, of LCP Consulting, says such seamless returns will be a priority in the omnichannel retail experience. But all this raises the question of what to do with stock returned to different parts of the business.
Most returned stock – iForce’s Neil Weightman puts the figure at 60 per cent - has no fault, and getting it back on the shelves is a priority. Shop Direct and iForce, for example, both employ staff and technology to repair and renew goods, getting returns back into inventory quickly.
But when returns are omnichannel, should products go back onto the shelves of the store where the return is made, or be taken to central fulfilment centres? At the moment retailers must calculate the cost of selling locally, perhaps at a discount, against the cost of returning it to the centre so that it can be potentially resold at full price. In the future, believes Higgins, retailers will in future look to sort returns close to store collection points. That, he says, will reduce the cost of managing returns, while also improving the speed at which returns go through the process. And that’s good for the shopper. “As a customer if you return the goods, typically your account won’t be credited with the value of the goods until it’s been sorted and registered as received back,” he says. “The faster that can happen the better, from the customer’s point of view.”
Shop Direct’s Chris Haighton, head of retail logistics, and James Harper, head of returns, will be speaking about returns in the Operations and Logistics Conference at InternetRetailing Expo 2014 on March 27 2014. www.internetretailingexpo.com
With the growth in ecommerce volumes and market share, omnichannel is no longer a minority interest. Convenience is no longer the main driver of online delivery: cost matters more when volumes grow.