Last month, in a guest-authored article from Dan Murphy, a partner the global management consultancy Kurt Salmon, home delivery was referred to as the ‘sinking ship’ of the retail sector.
Even though there has been remarkable growth of e-commerce sales, the cost of home delivery has become unsustainable, he argued. It was an argument that prompted a lot of responses from eDelivery readers.
We published some responses here, and you can now find more below.
John Pincott, Shopatron
John Pincott, European MD, Shopatron:
“As much as delivery offers convenience and customer satisfaction, when not managed effectively, it can prove too costly for retailers. Too often than not, retailers ship from a central distribution centre as opposed to stores which are actually closer to customers, unnecessarily impacting delivery times and cost. According to Shopatron research, this is directly detrimental to customer satisfaction as 87% of shoppers will promote a brand if their goods are delivered within five days or less.
“The most efficient way to put products into the hands of customers without unnecessary time and cost is by optimising the dealer network and shipping from every possible storefront available. Shopatron’s research reveals that 47% of dealers are closer to customers than warehouses or DCs, vital for retailers wanting to reduce the cost of delivery.
“In contrast, click-and-collect is another service that not only delivers on customer convenience, but cuts out delivery costs entirely. Providing the tools to search and locate all available and local stock is just one way that retailers can integrate their online and offline channels, provide greater customer choice, and incentivise shoppers to return and visit their local stores.”
Josh Pitman, marketing manager of PrioryDirect.co.uk:
“Delivery is never really free for any company, there are costs involved and we have found the best stance is to be transparent about them, this enables us to give the best overall value and choice to our customers.
“Consumers should be made more aware of the cost implications of free delivery so they can avoid hidden charges. Essentially, they need to ask themselves: does this actually represent good value or could I be getting a better price overall by paying for delivery separate to the product?
“We’re committed to helping our customers save when they buy from us – and this includes delivery. Our Accumulator Saver pricing model helps reduce their delivery and consumable costs by incentivising larger, less frequent orders – it can reduce the number of deliveries needed and their subsequent impact on the environment.”
Adrien Nussenbaum, co-founder of Mirakl:
“The problem is that the rise of Amazon has changed consumer home delivery expectations forever. We live in an era where people feel time-pressured like never before and they expect products as soon as possible. This used to be next-day delivery – in many cases it is becoming same-day delivery – and if consumers don’t get that, they are prepared to go elsewhere.
“That is a major challenge for etailers and not a service that can be offered for free on a long-term basis. It’s also one reason why we have seen the marketplace model really take off over the past few years. This enables an etailer to offer a far greater breadth and range of products, without the cost and hassle of inventory. The third-party sellers on a marketplace are responsible for delivery and can factor that into their pricing policy. Also, the buyers rate the sellers which helps ensures high quality of service and often faster delivery than with classic ecommerce. Mirakl has signed 22 new customers so far in 2015, including GAME and Halfords in the UK, and a major attraction has been the ability to open a new ecommerce channel without having to get involved in the day-to-day operations, including delivery.”
Nigel Doust, Blackbay
Nigel Doust, CEO of Blackbay:
“Now is the time for the retailers to begin to re-educate their customers that free delivery is a thing of the past. Home delivery is, and always has been, a luxury and like all luxuries has to be paid for. Consumers have to bear some of the cost.
“To minimise the cost of home delivery for the consumer, retailers need to partner with delivery companies that are able to provide services consumers want. Services that give people control around when, where and how deliveries are made plus two-way communication between the delivery driver and the consumer.
“Not just communication the day before a delivery, with the option to change the location/time etc, but during the last mile and in the very final stages of delivery. Two-way communication that allows consumers to divert a delivery to a safe place/neighbour if they suddenly find they will no longer be at home.
“Some delivery companies are already leading the way in meeting the demand for home delivery, at the same time as ensuring it is profitable for them. For example, they are looking at sharing the cost with other carriers and consolidating deliveries.
“It is these initiatives, borne out of collaboration between delivery companies that must be replicated between retailers and their chosen carriers. Everyone must be working together and singing the same song – home delivery comes at a cost.”
Eric Fergusson – Head of Retail Services, eCommera:
“Although home delivery is a good option in terms of customer satisfaction, the costs associated may not currently make it the most sustainable option for retailers. However, even though there are other services available, such as click-and-collect, these may not be the most cost effective options either. For such options to be cost effective, they must be fulfilled from that store’s stock, which requires an OMS and one view of stock. Retailers must consider the costs that these services carry too, for example the ongoing investment in appropriate technology, processes and staff training.
“The question around being a profitable retail business should never be about any one service or any one channel. Instead, retailers should focus on the lifetime value of each consumer. With customers now shopping across multiple channels and expecting more from the service they receive, looking at the cost of a service in isolation does not give a complete enough picture and could cause retailers to make the wrong decision about a service. Rather than automatically opting for the fulfilment option with the lowest cost, retailers should consider the quality of the service and customer experience, in order to increase the probability of repeat purchase for instance.”
Jim Wilson, MD, Born Gifted:
“My company sells children’s gifts for any occasion and we have only ever sold online. Up until recently our unique selling point was free delivery on all orders. Obviously with increasing delivery costs (we mainly use Royal Mail) this had to stop as some point and so in 2014 we started charging for delivery. Interestingly this didn’t make any difference to our sales.
“I put this down to sensible pricing. We simply worked out the average cost price for sending a parcel (approx £3) and that is what we charge the customers. If they want their goods in a hurry then they can opt for one of our premium services which incurs a higher cost. I don’t think customers expect free delivery as standard anymore, just look at what Amazon have done recently, you now have to spend £20 to get free super saver delivery.”
Stuart Rivett, B2C Europe (UK)
Stuart Rivett, Managing director, B2C Europe:
“In general, retailers in the UK offer all or nothing in terms of delivery options. Unfortunately, delivery companies are walking on thin ice by focusing their attention on outcompeting each other by price alone. We now know that consumers are willing to pay for 2-3 day delivery and extra for next-day, but as the article states this is not an economical model.
“The only way for the industry players to turn things around is to increase the price on delivery. This will most likely result in a quick drop of customers but I think this will be temporary. What the delivery companies need to do is settle on an industry average price to level the playing field, and communicate this with the retailers and customers.”
Rich Rodgers, CEO of GoSend:
“Retailers have it rough, balancing customer demands against the logistics of cost-effectively transporting a product from one place to another, especially when Amazon is always lurking. Couriers face three types of challenges — getting deliveries to the destination reliably, quickly and cheaply — and can often only address two at the expense of the last, much to the frustration of the customer. Around half of customers simply abandon their online carts altogether when they get through to the screen that gives them the delivery options.
“However, I’m a firm believer that building loyalty through customer engagement is one way to manage this balancing act. Retailers must be upfront about delivery times and the cost way in advance of the customer hitting the pay button — especially during peak holiday times — through marketing such as on-site notices, email reminders, social media and targeted advertising. Retailers often turn to ‘free’ shipping to customers to drive loyalty and more sales, but of course, shipping is never actually free. However, by using such rewards and maintaining a high level of product quality retailers with build loyalty which can offset the cost for customers.”