Are Drone Deliveries the Future of Online Shipping?
Last holiday shopping season, Amazon.com shook up the shipping industry with the announcement that it's experimenting with a drone delivery system. The system promises faster-than-ever delivery times at 30 minutes or less. Quickly following that announcement, Amazon made headlines again for its anticipatory shipping model, which would allow the retailer to deliver packages before a customer even makes a purchase. Other companies like Google and DHL are also testing their own drone delivery capabilities.
The shipping and fulfillment landscape is changing, and the two-day shipping norm may be out the door soon in favor of hyperfast deliveries to appeal to customers’ need-it-now mentality. But is the 30-minute drone delivery model really the future of shipping? Is it even feasible for most major retailers that ultimately strive to minimize shipping costs and maximize margins?
The Future of Shipping
While the quest for faster shipping is an ongoing struggle for retailers and fulfillment companies, it's unlikely that drones or anticipatory shipping alone will be the key to faster deliveries. Instead, these services will be the gateway into a new shipping model — one that's customer centric, highly personalized and characterized by the following:
- Big data: With technological advances and an abundance of valuable business and customer data, retailers have an opportunity to dramatically improve forecasting and fulfillment efficiency. Although most retailers don't have the resources or time to invest in novel concepts like Amazon's speculative shipping model, they can still use big data in adaptive stocking scenarios. Adaptive stocking allows retailers to determine which items to carry in each location based on local demographic information and shopping history. Some retailers like Wal-Mart are taking a different approach by turning their brick-and-mortar locations into on-site shipping facilities. Wal-Mart currently ships approximately 20 percent of online orders from its retail store locations. This model allows retailers to expand their network of warehouses and delivery hubs to increase delivery speed, while reducing shipping costs for local shipments.
- Omnichannel flexibility: In today's hyperconnected, multitouch retail environment, retailers need flexible delivery and shipping policies to appeal to consumers in every channel. As the last touchpoint in the online shopping journey, deliveries play a large role in customer perception and repeat purchases. A strong omnichannel strategy incorporates compelling delivery experiences. Packaging should be Instagram-worthy, convey your core brand experience and live up to customers’ expectations.
- Free returns: Although few retailers offer free return shipping, it's a strategy that pays off with increased customer satisfaction and sales. According to the 2014 UPS Pulse of the Online Shopper, conducted by comScore, 82 percent of online shoppers said they would complete a purchase if they knew they could return the product in-store or via mail for no charge. Sixty-six percent of shoppers consult return policies before purchasing. Free return policies are important to shoppers. For consumers, free returns reduce the risk and buyer's remorse associated with purchasing a product online. It's a win-win for the retailer as well because it increases average order size and strengthens loyalty.
We'll see these shipping and fulfillment trends take hold over the next few years at more retailers. The most important component of a successful retail shipping strategy prioritizes the customer experience and embraces a variety of channels and touchpoints. By focusing on the customer and translating the brand experience into delivery and fulfillment, retailers can increase the likelihood of success in the new online shopping environment.
Maria is CEO and co-founder of Dotcom Distribution, where she has played an integral role in developing and defining all aspects of the operation, including sales and marketing, operations, finance and IT. Her strategic leadership helps the Board and senior management to establish long-range goals, strategies, plans, and policies. Maria has developed the systemic and procedural infrastructure necessary to provide timely and accurate analysis of budgets, financial reports and financial trends in order to assist the Board, senior executives and clients in performing their responsibilities. Maria holds a CPA. Prior to founding Dotcom, she began her career as an Auditor at Arthur Andersen and was the CFO of GoodTimes Home Video.