Ecomm Integration – On Line and On Trend

It’s buzz word time again in the world of on-line shopping and the latest example is omni-channel. Those not in the know might think that as home shopping has moved from on-line to multi-channel to omni-channel it has gone through a series of revolutions, step change improvements in the way we operate. But the reality on the ground is rather different. Instead, as home-shopping has become more accepted and mainstream it has evolved, gradually becoming a little more integrated and offering more choice to tempt shoppers to part with their hard earned cash via ecomm integration.

Terms like omni-channel are somewhat misleading. If you read the rhetoric you could imagine we already have fully integrated services and that full integration is what customers want but the reality is that no one has achieved that yet.

The Logistics Business believes that we need to have a better understanding of what customers really want as we do not yet have consensus about that in the industry. We must remember that what people choose is not necessarily what they want or need. For example, same-day delivery. How many people really want that or do the few that choose it do so because they can? Indeed the same can be said for next-day delivery. Many e-retailers are adamant that offering next day delivery with late cut-off times is key to winning the e-commerce battle. Similarly, those that have come from a conventional, store based model believe that the rapid take up of Click & Collect is a sign that there is a big demand for it, but is there? And when was the last time a customer walked into a store and thought to themselves that the big thing lacking in their life is a fully integrated omni-channel shopping experience?

Of course there are customers who do want these services but research carried out by The Logistics Business into what the majority of customers really want suggests that it’s really quite simple. They want a predictable, reliable delivery date and time (ideally one they can choose) including weekends and they want it free of charge. One of the biggest causes of abandoned baskets is discovering that there is a delivery charge late in the process.
You may ask where the evidence is for this and here are a few of examples that illustrate the point:-

  • Companies like Amazon that offer both next day (to some areas, same day) services at a charge and 3-5 day free find the vast majority of customers selecting the free option.
  • The parcel companies that have the best service records are the ones achieving the best commercial success.
  • When bricks and clicks retailers offer free home delivery as a promotion, click and collect selection almost disappears. Most people only choose click and collect when it is free and if they are not confident when their goods will arrive. Only a proportion of those choosing this service do so for convenience.
  • When retailers offer too wide a selection of options it confuses customers and can become counter- productive.

Of course this is all well and good but home delivery is not free and predictable and timed delivery is not easy. So how can it be achieved?

Free delivery

First the free delivery. The cost of parcel delivery is rising. Of course, rising fuel prices are partly to blame but so is the growth in next day delivery, which now accounts for a large percentage of the market, and demand for later and later cut off times. Indeed some parcel carriers now offer nothing else.

But next day delivery causes problems :-

  • It means that parcel companies have to cram all of their sortation into a short time window leaving large parts of their infrastructure unused for much of the day.
  • Meeting service levels means having to run vans to and from some of the outlying parts of the country and increases the need for air freight to Northern Ireland both of which add to cost and environmental impact.
  • Vehicle fill is compromised by the need to meet service levels, increasing trunking costs – one of the biggest costs incurred.

So, is it just a case of offering a free 3 to 5 day service? Not quite. Again our evidence is that even when these longer lead times are offered the retailer uses much of the lead time to smooth their internal operations and doesn’t give more time to the parcel carrier who probably still ends up delivering the day after they receive it. Also, assuming you still want a next day option you will need to segregate the parcels otherwise the carrier has to treat them as if they are all next day. Give the parcels to the carrier segregated by service with at least 2 to 3 days left to deliver and they should be able to do that much more cheaply enabling you to offer free delivery even on relatively low value orders.

If an effect of this is the demand for click and collect diminishing some retailers might not be happy. Click and collect has been shown to drive additional footfall and sales into stores but we do not believe that click and collect is sustainable in the long run. The volumes will become such that smaller stores in particular will not be able to cope and just as fulfilling grocery orders from stores is becoming unsustainable and driving the creation of dark stores, so the same will happen with click and collect – it’s just a matter of time.

Predictable, timed delivery

The first thing to say is that we all know it is possible because it’s how grocery home delivery works. Customers can choose the date and time of their delivery up to 7 days a week, within quite narrow time windows and the system works well. So is there any reason why the same service cannot be offered for all deliveries?
And of course the answer is Yes. The big difference is that grocery deliveries are always carried out by the retailer’s own, internal transport fleets which means that the fulfilment and delivery systems are fully integrated. The customer can see which delivery slots are free when placing their order and choose the one that suites them best.

When it comes to deliveries using parcel couriers, retailers like to keep their options open, employing a number of companies and playing one off against another for the lowest price. The more canny use IT packages such as Metapack to further increase options and drive down costs. Over the years this has turned the parcel courier industry into a commodity service and as a result has stifled innovation. The only significant technology development in the last ten years or so has been in parcel tracking and this has been driven by revenue protection rather than improving customer service.

There are only three answers to this:-

  • For retailers to do their own delivery for non-food as they do for food and as Amazon are starting to do in key cities or;
  • For retailers to develop much closer systems integration with couriers enabling customers to select tight time windows and;
  • For everyone to open up 7 day delivery across the board.

If all of these changes can be brought about it will mean retailers developing a very different and much closer relationship with the parcel carriers. We predict though that it will have a significant impact on sales, reduce basket abandonment and much improve the one aspect of home shopping that has always, and still is, seen as the biggest challenge – the final delivery of the customer’s order. Get this right and we can truly start talking about the fully integrated world of omni-channel.