Shipping Smarter: Rapid Delivery and the Need to Compete
The relationship between retailers and customers has always been about proximity: the closer, the better. However, as e-commerce and digital retail continue to transform the industry, there’s a new twist to the location equation. Instead of being about the location of the brick-and-mortar store, it’s now about the location of the customer. The challenge for retailers is no longer about getting customers to their products, but getting their products to customers in ways that minimize both cost and delivery time. According to research from CommerceHub, for every day a retailer can eliminate from an estimated delivery time, it experiences up to a 4 percent increase in conversion. In today’s instant gratification economy, customers have been conditioned to demand speed, selection, immediacy and inventory, all without extra cost.
There are loads of innovations impacting the customer experience, from personalization to geo-targeting, but rapid delivery has quickly asserted itself as a major influence on buying behavior. When picking a purchase channel, the delivery promise has become a make-or-break factor for customers, who quickly weed out sellers that can’t provide fast, easy and inexpensive (or free) shipping.
In a world where two-day shipping is a foregone conclusion, and retailers increasingly find themselves competing with delivery-first players like Postmates and UberRUSH, retailers may feel like they're losing control of their businesses. And it’s not an exaggeration to say that when a retailer makes a delivery promise and doesn’t deliver on it, customer loyalty suffers.
What smart retailers and brands are learning is that competitors aren’t just beating them by allocating ever-more resources and infrastructure to delivery; they’re winning by implementing strategic approaches on other, related key fronts, including assortment, customer insight and much more.
Truly competing in today’s environment means more than just speeding up existing processes; it means controlling for the interplay of assortment, margin, supplier response, scalability (i.e., efficiently managing the volume of packages shipped, especially during peak shopping seasons), carrier transit times and placement of inventory. Here are a few key areas where we’re seeing strategic shifts by winning organizations.
The Products Customers Want
Rapid delivery requires minimizing both fulfillment time and transit time. However, “fulfilling” consumers’ demands actually begins far before an order is received. When it comes down to it, a retailer can’t fulfill a demand for a product it doesn’t carry. In our experience, retailers see an increase in gross merchandise volume as assortments are increased. In order to meet customer demands — and get them the products they want quickly — start by focusing on expanding your product assortment.
‘Location Awareness’ and Distributed Inventory
The best fulfillers ship products on the same business day as orders are received (assuming the order is received by noon local time, or potentially even later). However, some fulfillers can be undermined if their inventory is concentrated in warehouses that are too far away from their customers. Those longer travel distances result in slower delivery (as much as five days or even six business days by ground) or necessitate costly air shipping.
By flexibly distributing inventory and using advanced algorithms to drive automated shipping decisions based on the location of inventory and the customer, you can make a major impact on margin and customer experience. According to Victoria Brown, senior research analyst at IDC Retail Insights, “[…] a DOM (distributed order management) can empower retailers to better meet the expectations of their consumers and in turn grow their sales and customer satisfaction.”
One Size Doesn’t Fit All
Against the pressure of competitors using aggressive delivery promises, some retailers find themselves applying a blanket approach to all orders, unnecessarily expediting shipments because they don’t have a reliable, real-time view into which orders need to be accelerated. Brands and retailers that are truly competing with rapid shipping programs leverage data to upgrade shipping in certain areas to meet a promise, while downgrading in others where acceleration isn’t needed. The end result is optimized shipping costs and minimized shipping times.
On the flip side, other retailers miss out on revenue because they don’t even try to offer a delivery window that would meet customer expectations. Consider how many shopping carts you’ve abandoned when you learned that delivery would take 10 days to 14 days. In a lot of those cases, shoppers simply go to another retailer that offers faster shipping. Retailers in this scenario will need to either innovate to better compete or accept continued erosion of business to faster competitors.
In the new delivery ecosystem, no brand or retailer can afford to sit back and rely on the old ways of doing things — or implement hasty solutions that will quickly exhibit significant drawbacks. Clearly delivery isn’t the final challenge retailers will face in the fight to remain competitive. New arenas will emerge and customers will vote with their dollars on the players that provide the most seamless experience from discovery to delivery.
Rather than throwing out all other considerations aside from delivery and customer shipping costs, step back and consider implementing flexible solutions that can shift and evolve as customers’ demands change. This investment will not only save money in the delivery process in the near term, but will also set up your business to tackle the challenges of tomorrow.
Eric Best is the chief strategy officer of CommerceHub, a provider of hosted integration, drop-ship fulfillment and product content management for retailers.
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Eric Best is a serial entrepreneur, CEO, executive leader and 20-year commerce visionary with strategic exits to Amazon.com, Liberty Interactive and the public markets (NASDAQ). He was previously CSO at CommerceHub through its IPO, CEO and founder at Mercent and Morse Best Innovation, and cofounder at Impresys, Emercis, and MindCorps.
Eric is a husband, dad, swimmer, urban gardener and aspiring DJ.