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Four approaches to operations and logistics

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Delivery is more complicated when it comes to bulkier items
Delivery is more complicated when it comes to bulkier items
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Four approaches to operations and logistics

Customers want speed and convenience when it comes to online fulfilment – but with demand set to outstrip supply, how will leading retailers keep ahead? Penelope Ody highlights best practice among IREU Top500 retailers.

 

1. Make it easy to return bulkier items too

 

Returning a book or a dress is a simple matter of posting it, but for larger items – such as furniture or household appliances it can be a different matter. Europe’s DIY retailers try to be helpful – especially French company, Leroy Merlin, which gives shoppers six months, or a year for loyalty card customers – to return an item. Return labels can be obtained from the company’s customer service department and items can be returned to stores, by post, via Collisimo or Mondial Relay parcel shops, or for heavier products the company will arrange collection.

 

German DIY company OBI takes a similar approach with its smaller items having a free return label and larger ones collected by carrier. OBI does not specify an acceptable time limit for returns, only that they are “within statutory rights”.

 

B&Q is not quite so upfront with its information: items can be returned to stores within 45 days of either store purchase or home delivery. Alternatively, they can be collected but the company “may charge a fee for this service (the fee will depend on the products returned, but will not exceed £50)”. Would-be returners are also advised to click through to “terms and conditions” to check that their return will be accepted. If you printed them out the T&Cs would run to 43 pages of closely typed A4 in the middle of which is section “8. Cancellations and returns” running to 23 paragraphs. Not exactly a user-friendly way of reassuring shoppers that returns will be easy.

 

2. Time to reconsider delivery charges…

 

For many retailers free delivery is regarded as a competitive differentiator – even though it can damage margin as the proportion of online sales for omnichannel businesses grows. The supermarkets began charging for delivery back in 2000 with the launch of Tesco.com – but its initial £5 delivery charge was widely estimated by retail insiders to be less than half the actual cost of servicing a delivery. Today, Sainsbury’s has a minimum order value of £25 and a £7 charge for orders under £40, while spend must reach £100 before the free delivery threshold is reached. In contrast Waitrose deliveries are free for a minimum spend of £60 (also the minimum order value) while at Carrefour Belgium there is a standard shipping charge of €9.95 for all deliveries.

At La Redoute there is free worldwide delivery for orders over €89; at Asos, Schuh and many other fashion retailers, it is free for a minimum £25 spend, with a £3 charge for delivery below that level, while Zalando – which has gown rapidly since its launch in 2008 – has no minimum for free delivery. Dutch retailer bol.com, which sells books, toys and electronics, has free delivery and collection for any spend over €20, otherwise it is €2.49. Struggling House of Fraser, which announced a planned CVA (company voluntary arrangement) in May, still has free standard delivery on all orders, while at Debenhams it is now free only for orders over £45.

 

While free delivery may be attractive for customers, it is a significant expense for retailers – many of whom have little idea of the “total cost to serve” for any of their orders. Raising the threshold for free delivery may encourage some add on sales, but can also help to maintain margins in a difficult trading environment. The risk of losing money on every home delivery order – as those early online grocers often did – is unsustainable when online sales account for 40% or more of sales.

 

3. …and to rethink premium deliveries

 

Next day, same day, nominated day, within two hours… those premium delivery options have proliferated in recent years with leading retailers now including lengthy lists of options on their information pages. A study by YouGov for Ampersand last year suggested that next day delivery was the preferred option for 52% of UK shoppers, while another by UPS found that 63% of shoppers say speed is an important consideration when shopping online.

 

Wanting such immediacy is all very well, but Europe is facing a massive shortage of delivery drivers. Logistics experts in France suggest a shortage of around 20,000 truck drivers. In the UK the figure is generally put at between 45,000 and 52,000, while international road transport organisation, IRU, estimates that over the next 10-15 years around 40% of German truck drivers will retire, which, given current trends, will create a shortfall of 150,000 drivers.

 

The result has been significant increases in driver wages and reports of £100 bonuses per shift as demand outstrips supply. While this may increase costs, the shortage also reduces the industry’s capacity for next-day deliveries. For retailers it may mean capping the number of next-day orders they can accept, introducing earlier cut-off times for placing next day orders or increasing the charges to help reduce demand. Managing customer expectations will become more important to avoid those irate "where is my order?” phone calls.

 

4. Don’t ignore drive-by

 

Popular in such geographies as France, Spain, Belgium and Luxembourg, IREU Top100 supermarket chains Auchan and Carrefour provide ’Drive’ services, with shoppers able to order online and then collect at drive-by locations at the stores where the goods will be loaded into the boot. Typically orders can be collected within a couple of hours of placing them. Carrefour takes a slightly different approach in Dubai with a ’valet trolley’ service where shoppers simply leave their filled shopping trolleys for later home delivery at an agreed time, while in Poland Auchan has a more conventional van-based online grocery operation – both highlighting the need to adapt successful trading practices from the home market for different geographies.

 

Curiously BricoDépôt also offers a Drive service – collect from “la zone d’enlèvement” within two hours while for the UK brands of Kingfisher Group – B&Q and Screwfix – customers have to collect in store. Given that many purchases from B&Q can be bulky one wonders why the popular French service has not been implemented in the UK.

 

This feature first appeared in the IREU Top500 Operations and Logistics Performance Dimension report, part of the IREU Top500 series of reports. You can explore this series of reports by clicking here.

 

Image: Fotolia

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