How Retailers Are Using Customer Delivery Personas to Protect Profit Margins
Despite record levels of inflation and rising interest rates, there’s good news for retailers: holiday spending was forecasted to be healthy. According to the National Retail Federation (NRF), holiday retail sales in the U.S. during November and December were expected to increase 6 percent to 8 percent from 2021 levels to between $942.6 billion and $960.4 billion.
On the e-commerce front, the NRF expected 10 percent to 12 percent growth to between $262.8 billion and $267.6 billion for the recent holiday season — with 63.9 million consumers expected to shop on Cyber Monday alone. This surge had the potential to overwhelm unprepared retailers, compromising home delivery execution, damaging customer relationships, and cutting into already slim margins.
Last-Mile Delivery Eroding Profits
Accounting for 53 percent of the total cost of shipping, home delivery is a complex and costly undertaking that can eat into retailer profits. A 2021 study found that retailers recover only $8.08 of the average $10.10 delivery cost per customer order, while the delivery cost for larger items (e.g., furniture) runs even higher, taking an extra bite out of profits.
With complex routes, inefficient route planning, idling and downtime, and failed deliveries, last-mile challenges are compounded by continued ecommerce growth and rising customer expectations. With parcel volume expected to double in the next five years, e-commerce retailers need a sophisticated last-mile strategy that meets customer delivery expectations while mitigating the bottom-line implications that go hand-in-hand with shipping peak order volumes.
What Do Customers Want From Their Delivery?
Meeting customer expectations for a tailored delivery experience is critical for building brand loyalty and driving repeat orders beyond holiday shopping. Today’s consumers demand choice — largely around when they will receive their package. Customers want to self-select the delivery option that best suits their needs, priorities and budget for every purchase they make.
Whether it’s free delivery, a designated date and time window, same-day service, or delivery via an electric vehicle to minimize carbon footprint, the ability to choose is paramount. But how do retailers meet their customers’ expectation of choice while reining in fulfillment costs? The answer is simple: customer delivery personas.
Delivery Segmentation Drives Profits
In the same way that buyer personas are created based on purchasing habits, savvy e-commerce retailers are segmenting customers and building delivery personas that reflect the delivery expectations of their customers. Delivery personas help retailers to improve service and reduce fulfillment costs to maximize top- and bottom-line performance. Last-mile benchmark studies have identified five basic delivery personas:
1. It’s All About Money
Delivery choice for these customers is based on cost. They're extremely cost-sensitive and will choose the slowest delivery option if it saves them money. Less concerned with the timing of the delivery, these customers are happy to wait if the price is right.
2. Parcel Mentality
Typical parcel deliveries (e.g., books, apparel, household wares) are fast, but not necessarily “time definite” at the point of purchase. These customers enjoy a fast delivery cycle and are happy for the package to be left at their doorstep at any point during the day.
3. Convenience Matters
These customers prioritize a precise time window over speed; they often need their goods on a particular date and time and value the convenience of knowing the delivery will arrive at the scheduled time of their choosing. This persona is often characterized by the delivery of large-format items. For example, during a home renovation, these customers want their water heater delivered during a specific time window when the plumber is available for installation.
4. Timing is Everything
Time-poor and cash-rich describe this delivery persona. These customers want their delivery ASAP and are unwilling to wait around all day for it. Most importantly, they're willing to pay a premium for a quick delivery within a tight time frame. Notably, it doesn’t take too many of these customers to offset a significant amount of a retailer’s overall delivery costs. These deliveries are often high-value impulse purchases, replacement items, or building materials, for example.
5. Sustainability First
This emerging persona describes customers seeking eco-friendly delivery options. In a recent consumer sentiment study of e-commerce home delivery, 65 percent considered the environment when placing an order. For younger consumers, environmental considerations were even more important, with 85 percent of 18- to 24-year-olds and 75 percent of those 25 to 34 years of age assessing the environmental impact of potential purchases. This persona can be combined with any of the other delivery personas.
Astute retailers are establishing delivery personas like these as the backbone of their last-mile strategy. While no individual persona is more important than another, or applicable in all cases, some combination will provide the right balance of speed, precision and cost — plus the potential for an incremental revenue stream to reduce or even offset the high cost of last-mile delivery, a welcome boost in an unpredictable marketplace.
Chris Jones is executive vice president of industry and services at Descartes, a provider of on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses.
Related story: Poor Home Delivery Performance: A Wakeup Call for Retailers