Delivery 3.0: Free or Fast?

Retailers are whipping their supply chains to win the ecommerce game. What is the next frontier in the fast moving delivery space? In Delivery 2.0, our European Head of Retail Mark Collin noted that fast delivery has become a source of competitive advantage. That advantage is shrinking, however, as more retailers begin to offer speedy delivery options. In this article, we look at brands and services that have used technology to improve the delivery experience, including Doddle’s university click-and-collect service; Uber’s delivery service, UberRUSH; House of Fraser and River Island’s single view inventories; and Amazon’s partnerships and predictive analysis.

Large retailers from John Lewis to Amazon have solved the high fidelity piece and are now focusing on convenience. According to recent reports, these retailers are starting to hit some road blocks. Last year, Amazon spent $6.6 billion on shipping costs, but only accepted $3.1 billion in shipping fees. Herein lies the conundrum, what do consumers want and value most: free delivery or fast, convenient delivery?

A recent Forrester study shows that customers are divided on their delivery preferences when shopping online. 53% of customers consider low shipping costs a significant factor in choosing one retailer site over another. This implies that 47% of customers do not consider shipping costs to be a deciding factor and are more likely to be motivated by speed and convenience of delivery.

This holiday shopping season, retailers need to learn from the debacle of Black Friday 2014. UK retailers experienced the wrath of customers due to late or failed deliveries. In order to avoid buckling under the sheer pressure of demand,companies need better analytics to identify flexible fulfillment and offer choices such as delivery anywhere, “click and collect” and reserve in store.

Amazon is once again leading the charge with its recent foray into predictive allocation of stock. Whilst investment in predictive data analytics is increasing, it has until recently been fairly unreliable. Some retailers may not have yet even considered it. Amazon uses data to determine what consumers are planning to buy next. This knowledge enables Amazon to pre-locate merchandise ahead of the customer’s purchasing decision, ensuring that when the ‘buy’ button is pressed, the stock is as near as possible to its destination.

Many retailers have yet to surface a single view of their inventories, and it’s the customer experience that suffers. Shoppers are too often frustrated when an item is out of stock online and they can’t see where to find it in a store nearby. If retailers were to crack this business problem then it would have a positive impact on sales and delivery. House of Fraser (HoF) and River Island have embarked on offering this in part. However, once customers have located the stock online, they still need to visit the store to complete the purchase, which is a shortcoming. Even still, it is commendable that HoF and River Island have recognized the need for single view of inventory and are offering visibility as a service to customers. Too few retailers do this, and as a consequence struggle to have a true and accurate view of inventory across the business in real time.

We see retailers trying to fix the problem of moving stock quickly and efficiently around their own supply chains. Some retailers manage this well - with fast fashion leaders ZARA enabling sales associates in stores to have real time views of inventory in store and in transit to store, allowing them to share product availability with the customer. Associates in GAP stores in the US can advise customers on the nearest stockist availability and have the functionality to reserve an item for customers to try before they buy. Doddle caters to the influential Generation Z shoppers who demand convenience with its innovative university click-and-collect locations.

The last mile delivery is a critical differentiator and one that, if executed well, allows retailers to gain critical advantage over their competitors. Amazon is trialing drones to deliver parcels efficiently, and Uber is set to completely upend delivery as we know it with UberRUSH – creating a freelance, on demand delivery industry for large and small businesses alike. By uncovering and adding value to thin slices of the delivery cycle, retailers are able to offer a superior and premium service, and many customers are willing to pay for it.