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Balancing the books: The right delivery strategy for retailers

Retailers need to strike the correct balance between online delivery offerings and scaling the business, especially post-Brexit, says logistics group GFS.

It is now well understood that a strong and well-executed delivery strategy can drive growth for retailers, attracting and retaining customers and the associated sales that come with it.

Every aspect of delivery, from online checkout to the doorstep (and back again), has an impact on the customer experience and directly impacts the likelihood of that customer purchasing from that retailer again. In fact, the latest stats from retail body, IMRG suggest that 63% of shoppers have been encouraged to repeat purchase because of a good delivery experience.

On the flip side however, poorly executed delivery costs retailers dearly. The latest 2018 estimates are that failed deliveries generate up to £1.2bn in avoidable costs each year, for UK retailers delivering to UK shoppers.

So, with that being the case, what aspects of delivery should retailers be investing in, and how do businesses find the right balance between spend on delivery and the income it generates?

Customer experience – are we getting it wrong?

Over the past two to three years we have seen retailers rush towards ‘next day/no cost’ delivery but operational and commercial common sense tells us that there can be no such thing as ‘free delivery’ and that the online supply chain has a finite capacity for an ‘everything tomorrow’ approach.

Is it possible to sustain this approach under the pressure of tighter retail margins and the need for operational agility to meet dynamic customer demands?

Are retailers now simply over-promising and under-delivering when the average shopper doesn’t necessarily need a premium delivery option every time?

The reality is that every shopper is different, and every delivery may have different requirements depending on what it contains, and why and when it has been ordered.

Your last-minute shoppers will always want ‘fast and free’ but what most shoppers really want is a clearly communicated delivery offer where the promise, once made, is met. Perhaps retailers should instead be looking at offering a broader range of delivery options and the chance to specify when or where the delivery will arrive. Customers wants convenience, so retailers need to offer the widest choice of delivery options they can to appease them.

This is emphasised by the latest research into consumer delivery from IMRG and Global Freight Solutions, which outlines that in 2018, 41% of consumers indicated they had abandoned their cart due to insufficient delivery options.

The impact of Brexit

As the deadline for Brexit looms ever closer, the more its impact on delivery comes into play.

So far, it has provided opportunities for online selling into Europe with a weaker pound making UK retailers a more attractive proposition to EU shoppers. Since the referendum decision at the end of June 2016, we have seen the proportion of UK cross-border volume going to Euro destinations, increase.

However, this may all be about to change. With so much uncertainty still surrounding Brexit, there will be a lot to understand about dealing with the EU in the coming months and years, so common sense suggests contingency plans must be made, which should legislate for:

  • Longer cross-border delivery lead times
  • Planning for changes in customer messaging, in order to manage expectations
  • Reviewing all HS code classification to ensure products attract the correct duties and taxes
  • Enabling transparent delivery and duty cost information at point of checkout
  • Implementing growth strategies in non-EU markets (eBay, Etsy, Alibaba)
  • Implement paperless trading (PLT) services for non-UK destinations to speed customs clearance and reduce transit times

Even the most optimistic of retailers are now anticipating longer and more complex duty and tax processes, and higher delivery costs with longer delivery lead times into EU markets. Retailers will need to reach out to carrier management experts to navigate this new territory and ensure it doesn’t hamper their business.

Doing more at an affordable price

The challenge for retailers is how to provide a delivery offering that gives a more specific and sustainable customer experience with better control of costs in both the UK and cross-border environments. That’s not an easy task.

To make this possible, a multi-carrier approach is required, enabling access to a range of delivery services, using order characteristics and specific customer requirements to offer the right solution from a sensible set of options relevant to the destination country.

So, for online retailers, what are the fundamentals their delivery strategy should offer? What do they need to invest in as a bare minimum?

  • Delivery to a designated address
    • A standard ‘free’ or at low cost option
    • An express option at a small premium
    • A timed/specified day option at a higher premium (weekend or evening delivery)
  • At least one click & collect option (if available):
    • Free in-store collection
    • Third-party (pick-up point/locker) at a lower cost than the standard designated address delivery

These are all solutions that are readily accessible to retailers, it’s often just a question of pulling them together. But when you are busy running a business, it can be difficult to prioritise.

The constraints holding retailers back on delivery

Even if consumers want to offer that ‘Amazon-style’ delivery of both choice and convenience, to compete with the likes of the Amazon Prime offering – they are often being hampered by their own internal constraints. For example, the cost and complexity of integrating more delivery options and carriers into their systems may prove a stumbling block. Or further to that, the effort in managing multiple carriers at once, particularly for an SME, might be too much. That’s before considering the expertise needed on knowing which services to offer or how to access them.

A sustainable delivery approach

The blanket approach of ‘next day/no cost’ delivery, is unsustainable and not necessary for most customers. As long as a well-communicated, well-executed service offer is provided, then retailers can ensure they remain competitive.

Not every retailer has the same volume and resources, so it doesn’t make sense for them to follow the herd. Each retailer should think about their specific delivery offering in the context of their capability, capacity, customer demographic and commercial strategy. You don’t need to break the bank to offer a great delivery experience.

Furthermore, retailers need not be restrained by what can only be done in-house – there is assistance available through managed service experts who can help emerging retailers scale their business cost-effectively. Customers may not always want fast and free, but rather more convenient delivery options available to them and clear communication at all aspects of the delivery journey.

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