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The brave new world of fulfilment: who’ll be the winners and the losers?

Online sales are growing massively. In the UK alone they exceeded £100 billion in 2014 for the first time. But despite this impressive growth, retailers and logistics companies are still struggling to understand how their customers think and what exactly they expect after they’ve clicked the “buy now” button.

Niklas Hedin Chief executive Centiro

Niklas Hedin
Chief executive
Centiro

One thing is clear, though, that this rise in online sales has been matched by an increase in expectations among customers as they become less willing to tolerate problems and difficulties with deliveries. And when these glitches do occur, they don’t differentiate between retailers and the companies that are supposed to be delivering their purchases. A recent survey revealed that 84 per cent of consumers still hold the retailer rather than the delivery company responsible for any problems.

If you’re buying a rug online, for example, it’s pretty likely that you’ve spent quite a bit of time and effort on your research, comparing patterns and prices, among other things. You’re really looking forward to laying it out for the first time in your living room. It’s very annoying then if your rug doesn’t arrive when you expect it to, even if the delay is only a matter of days. The power of keeping (or breaking) a promise is huge. Even a slight delay means the delivery promise is broken.

A failure to recognise that customer expectations are constantly increasing and they therefore need to up their game accordingly by improving the reliability, flexibility and convenience of the service they offer, means many retailers, already struggling with squeezed margins, will find themselves under greater pressure than ever.

But as well as threats, this brave new world offers opportunities for forward-thinking retailers. Those that can meet and even exceed the demands of customers can gain a competitive advantage and increase margins as well as their market share. So, how do they do this?

Retailers need to seize control of the entire delivery experience and reclaim more responsibility from the carrier

Flexibility is the key differentiator for customers. Research published last year by YouGov reveals that convenience rather than just choice is also increasingly important. It showed that 20 per cent of adults in the UK believe the most important thing for them is to be able to change the delivery date or time slot for an order after it has already been dispatched. According to a further 7 per cent, it’s important to be able to change the delivery destination after they’ve placed an order.

Offering this kind of flexibility can create a positive customer experience, encourage loyalty and provide the retailer with a growing wallet share. Retailers should consider providing their customers with one option that can be adapted according to their individual requirements.

Given that customers do not differentiate between the company they’re buying a product from and the company that delivers it, retailers need to seize control of the entire delivery experience and reclaim more responsibility from the carrier for ensuring goods are delivered on time, to the correct location and in perfect condition. Retailers need to mix and match new carriers, to create a consistent user experience and to have complete visibility into delivery networks.

River Island, for example, offers flexibility with its “click and don’t collect” option. Customers can have an item delivered to their homes if they’re no longer able to collect it from a store. Retailers could also offer the reverse – if a customer waiting at home for an order suddenly decides they have to go out, they should also be able to opt to collect it from a store instead.

Retailers need to provide clear, usable information about costs and other delivery options on their websites. Customers will not devote time and energy to clicking through a series of different screens and inputting extensive information. Neither will they navigate complex menus – they’ll simply abort or cancel their order and shop elsewhere. On the other hand, make the customer journey simple, speedy and intuitive, and you’re already well on your way to engaging them and earning their loyalty.

You could, for instance, show them a range of pricing options that is clear and simple. These options could include same-day rather than standard delivery or a change of delivery address at the last minute. Retailers need to be ready to offer innovative and more flexible delivery options.

They also need to change fundamentally the way they think about returns. Rather than being seen merely as a cost-recovery exercise, an excellent returns system can enhance the customer experience and act as a way of rewarding loyal or affluent customers. Meanwhile, retailers can cut costs by limiting their returns service to less attractive customers, those who regularly return items and buy less.

Finally, retailers need to exploit the full potential of technology. Mobile can, for instance, make payment easier for customers as well as providing them with real-time delivery information. Having paid for an item with your phone, the courier can track your location and arrange where to deliver it to you.

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Meanwhile, big data is about to revolutionise the area of supply chain and last-mile delivery. With predictive analytics, retailers can identify where problems are likely to occur so they can take corrective action quickly and manage customer expectations. Using the information already available in delivery networks, combining it with unstructured data such as social media or weather, means old problems can be solved in new ways.

Not only can retailers service customers better, when applied on a strategic level, this means utilising inventory and existing infrastructure, such as stores, warehouses and other assets in the network, to achieve serious innovation to deal with both customer service, margin and capital binding. In today’s world, identifying technology is not the challenge – pragmatic leadership and vision are.

As online shopping powers ahead, the increasingly high expectations of customers can seem daunting. However, those retailers that are willing to take their game to the next level, to recognise and utilise effectively the tools that are already available to them, will see consumers coming back time and again.

For more information please visit www.centiro.com