eCommerce growth has transformed retail operations in recent years, but how many retailers have fully optimised the new logistics models? Online activity now comes in a variety of shapes and sizes – from monthly/weekly subscriptions to one hour convenience deliveries - retailers have a range of ever expanding, complex and costly operational models.
The challenges associated with fulfilling high levels of customer demand and expectations, combined with rising wages and energy/fuel costs, continue to squeeze margins. In the current climate, logistics innovation is fast becoming a key differentiator for retail brands - it is vital to gain rapid, accurate insight into the cost and customer impact of different eCommerce models. How economically viable is a convenience delivery service? What are the options for eco-friendly delivery for brands with a strong environmental commitment?
Playing catch up
For most retailers, the pandemic-inspired escalation of eCommerce inevitably outpaced any planned investment in new logistics solutions. Traditional warehouse operations could not seamlessly shift from a ‘pick to store’ to a ‘pick to consumer’ model, leaving retailers to explore options such as in store fulfilment, the creation of smaller local warehouses, even outsourcing direct customer fulfilment to third parties, while retaining traditional store fulfilment operations in house.
With the fast evolution of new forms of eCommerce, including subscription and convenience deliveries, many retailers are struggling to catch up.
Yet still the problems remain - from the financial and environmental cost of returns, to difficulties in meeting customers’ delivery expectations and the impact on repeat business. With the fast evolution of new forms of eCommerce, including subscription and convenience deliveries, many retailers are struggling to catch up.
Determining where to prioritise investment presents a significant challenge. When online-only retailers can deliver an optimised, accurate customer service from dedicated fulfilment centres, the best approach for omnichannel retailers is less clear. Will they have the edge in providing convenience deliveries when they can be picked quickly in a local store? Can an online-only provider offer a ‘greener’ service that will entice a certain customer demographic?
Competitive differentiation
Whilst retail logistics presents challenges, it also offers a key area of competitive differentiation. Every retailer will have its own specific set of customer demands and business opportunities – with delivery expectations now added to the traditional merchandising, marketing and customer experience requirements.
The ability to make data-driven decisions, fast, is key.
The ability to make data-driven decisions, fast, is key. Retailers are awash with information that provides essential insight both into existing logistics performance and opportunities for innovation. However, many are still constrained by traditional, siloed data resources which make it impossible to make truly accurate inferences about the impact of decisions and performance across the business. Are customers motivated by environmental options such as e-vehicles, for example? Are they still expecting free delivery and returns or will they pay more for delivery certainty? And with costs continuing to rise, how can a retailer meet customer expectations and still retain any margin?
Without a holistic view of the complete customer experience, how can a retailer determine the true impact of a late delivery on a customer’s long-term commitment and buying behaviour? How can a business undertake robust ‘what if’ analysis to assess innovations such as the use of e-bikes for in town deliveries from stores?