News

Still Closing The Last Mile Gap
E-Retail Industry Report 2008

by Patrick Wall
CEO
MetaPack

Here are two considerations on delivery: one, market place trends; two, why they increasingly matter.

Delivery standards seem to be improving, but there is still a long way to go. Royal Mail’s Home Shopping Tracker points to a general improvement in satisfaction on delivery. However, looking at both this survey and the IMRG eDigital Research from 2007 there are still around 20% of internet shoppers who are dissatisfied with delivery and a greater number who do not shop on line because of concerns in this area. These are typically working households who cannot rely on leave safe or neighbourly generosity and, given the internet skew to ABC1 households, the UK’s urban density and the greater proportion of people living in flats and apartments, this is still a very serious issue.

New initiatives
For this influential group of consumers there are a number of initiatives that are helping to close this last mile gap. The initiatives that are having undoubted success are customer self-tracking, email and SMS customer care and well thought through delivery options. Initiatives that are still important but not yet making an impact on the wider market are alternative collection points and lockboxes. 

Customer self-tracking, email and SMS are related and the market in this area is being pushed forward by retailers, some carriers and software partners. It is quickly becoming a requirement to allow your customer to track their order from the retail website or from an email sent out on despatch. To name but a few, John Lewis and Amazon send out an email with tracking advise (as do many medium-size retailers). John Lewis also send out an email on a carded status to help the customer arrange a successful delivery. Parceline has a very innovative customer SMS system which allows the shopper to confirm or rearrange delivery and Parcelforce also offer email and SMS services. No doubt other carriers will soon be offering these services and increasingly retailers are providing these services on their own behalf.

Lock box systems
There are still a wide range of lock box providers around, such as ebox, Bear Box, Podbox, Bybox, Giraffe Marketing, and Hippo Box. Systems are becoming increasingly sophisticated and a recent entrant to the B2C market, BDPX, offers an innovative, secure system that provides end-to-end tracking. Nonetheless, for the time being the appeal of these systems appears to be limited, driven as it has to be by consumer awareness, household modifications or changes to patterns of behaviour. It is this latter point that also seems to be holding back alternative collection points. Delivery to the workplace is popular, and there appears to be reasonable tolerance but specialist organisations are still not picking up significant traffic. Clearly the Post Office network could offer some help in this area, but there is no sign that they will open up their locations to other carriers.

Interestingly, there could be a segmentation opening up in the provision of services, between courier based companies that are offering a more competitive price (including HDN, Parcelnet and DHL@home) and “mixed carriers” (i.e. traditionally offering B2B and B2C) who are focusing more on the premium services. That is not to say that the former courier based operations have inferior technology, not necessarily, but some of them cannot currently provide the same quality of tracking, email and SMS. This of course begs the question: do you go with one or more carriers? The trend seems to be moving firmly towards multicarrier, not only because of network specialisation (how carriers transport, sort and deliver) and payment structures (deliverers paid on a drop or a parcel), but also because of contingency and the increasing need to offer a broader range of delivery options to meet the wide range of customer requirements. Yes, if you have a consistent profile of product weight/shape and your customers are happy with a narrowly defined service offering, then one carrier could make sense. However, this does not seem to suit most retailers and their shoppers.

An etailer will typically spend as much money on parcel delivery as their warehousing and pick and pack. Often more. Yet, while huge amounts of time, money and system resource is spent managing the pick and pack operation, little or no time might be spent improving the delivery offering. This is particularly the case amongst many bricks and mortar retailers where stock availability, pick accuracy and despatch commitment are key competencies. Well, that’s fine if you are delivering to a store, but a wholly incomplete approach if you are delivering to a customer’s home.

The competitive environment is at last creating pressure on all retailers to improve their delivery standards. The Snow Valley research released in August 2007, shows that more retailers than ever are now offering a wider range of delivery options: they state that “just under two-thirds of companies intend to increase the diversity of their delivery times”.

Range of options
This makes sense from a service point of view and provides a ready made cost case. A range of delivery options provides greater first time delivery success: fewer contact centre calls, fewer returns, lower cost to serve and more satisfied customers. However, to a certain extent delivery is still a victim of eCommerce success. I still hear large retailers saying they will not focus on building customer loyalty when there is so much growth in the market. Remarkable but true. The smarter ones have realised for some years that delivery is a real source of competitive advantage.

Finally, some retailers still persist in drawing false conclusions from real data. It’s decreasingly the case, but there are many retailers who cite their own research and argue that they do not have a delivery challenge: complaints from their own customers are not that significant, there really isn’t much of an issue. Well that’s a bit like running a burger bar and saying there is no demand for haute cuisine. Customers simply go elsewhere.

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