The current ecommerce boom is great news for retailers. Or at least it is at first glance. While more people are shopping online than ever before, the costs of operating ecommerce can also be notoriously high, and the slightest inefficiency can quickly eat into profit margins. Savvy ecommerce retailers know that the best way to make the most of the ecommerce boom is to lower cost to serve. But how?
More scalable multi-carrier fulfillment
According to McKinsey, the last mile of delivery can be responsible for over 50% of the total logistics cost. In the longer term, to establish regular and scalable last mile fulfilment, most retailers are looking to carriers and the discounts they can offer for larger volumes.
Many retailers have turned to a multi-carrier strategy to enable a wide range of choices to serve different sectors of the market effectively. In our most recent Ecommerce Delivery Benchmark Report, research conducted by RetailX found cost and speed are favored interchangeably among different consumers. A retailer might deploy one carrier to offer next-day delivery at a premium price while offering a slower but cheaper standard or free option for another.
The progress of automation is removing the need for operators to manually intervene in order to assign tasks to different drivers. This can be done automatically based on pre-configured rules, with tools available that can create a bespoke route for each driver, ensuring the fastest route between their deliveries and pick-ups.
HelloFresh, a meal box company which has seen revenues more than double year-on-year in 2020, recently expanded its choice of carriers to over 400 using Metapack’s Shipping Software. The company will now be able to automatically select the best carrier for an order based on availability and requirements, without the need for individual onboarding.
Lower reverse logistics costs
Returns are just as notorious for increasing cost to serve as the last mile, if not more so. They’re not commonly called the billion-dollar problem for nothing – according to KPMG, returning an item can cost up to twice as much as it does to deliver it².
And more online shopping means more returns. According to the Ecommerce Delivery Benchmark Report, 75% of consumers had returned at least one product bought online in the last month, while 19% had returned more than half of the products they had bought online. This is probably why the same report found that 89% of retailers are now analyzing reasons behind returns.
Customers said they would be less likely to return items if product information (54%) and product imagery (43%) were better. Some bodies have proposed adding a mandatory delivery charge, but the survey suggests this would not stop the majority of returns since only 27% said a returns fee would make them less likely to return items.
Avoid unnecessary customer contact
It’s not just the cost of getting an item to customers (or back to the retailer) that counts, but also the cost of communicating throughout the process. Handling requests through customer service centers is essential to maintaining trust and ensuring a transparent experience, but the cost of maintaining these services quickly adds up. This is especially true when they become inundated with inquiries. According to one study, contact center call volumes for retailers have risen 69% during the pandemic1.
Communicating proactively with customers reduces the chance that they will choose to directly contact the retailer to ask for information about their order. Another way reduce unnecessary customer contact is by providing clearly, user-friendly tracking.
Many retailers chose to centralize the delivery tracking experience under their own brand. This allows the retailer’s site to serve as a one-stop shop and means it does not have to cede the customer relationship to the carrier. For example, gift and card retailer Moonpig began offering branded delivery notifications through an expanded contract with Royal Mail. Customers who choose the Tracked and Special Delivery options will receive daily updates with Moonpig’s logo as well as that of Royal Mail.
The All-Delivery economy has brought huge opportunities. Ecommerce retailers are looking to leverage the current online demand, but they must do so without threatening profits. For those wanting to make the most of the ecommerce boom, don’t overlook the importance of controlling cost to serve.
For more insights to thrive in the All-Delivery economy, read the Metapack Ecommerce Delivery Benchmark Report 2021.