Online retailing: benefit or bane for parcel shippers?

The growth of online retail is a welcome boost to the retail industry, but is it possible for the carrier market to keep pace with the increase in parcels to ship, teamed with a growing number of delivery options? It wouldn't seem so, with industry executives estimating in December that over 200,000 packages failed to arrive on a daily basis. Evan Puzey, CMO at Kewill Ltd, takes a view on why the carrier market should adapt in light of this area of growth, to not only capitalise on it but ensure they can continue to deliver on customer service, as the online channel picks up pace.

According to the Interactive Media in Retail Group (IMRG), an online UK retail trade organisation, global business-to-consumer eCommerce sales will pass the 1 trillion euro ($1.25 trillion) mark in 2013, and the total number of Internet users will increase to approximately 3.5 billion from around 2.2 billion – that's greater than 20% growth. Regionally, Europe is currently the largest eCommerce market in the world, according to the European Multi-channel and Online Trade Association, which said European online business-to-consumer sales posted 19% growth in 2011 to reach an estimated $307 billion, surpassing North America at $297 billion.

I doubt that anyone reading those numbers will be the slightest bit surprised (and if you've read the original reports): online shopping has become not only ubiquitous for consumers, but a critical growth strategy for retailers of every stripe.  Although, along with this strategy come challenges, some of which are not obvious.

Much has been written about the "customer experience" during online shopping.  Which is no different than the importance of that same experience in store, at say an M&S, Harrods' or Selfridges etc. How the customer is treated online is critical to the success of a sale.  Unlike a store visit, the retailer only has one chance to convert that shopper to a customer.  No shiny objects to divert attention, no seven year old to demand a sweet – Just the shopper, a keyboard, a display, and a website.

According to industry data, the average online shopping cart abandonment rate is in the 70% range*.  Of that, 44% or so is directly related to the cost of shipping.  Think about your own experiences: how often have you been ready to by a £25 item, and then presented with a £5 to £10 shipping cost?  How often have you gone ahead with that purchase?  Apparently, 44% of people fail to do so.  Hence, missing the point that shipping costs are as much a part of the customer experience as the website or the range presented on that site, is a clear problem for the retailer. The clever retailer should seek to take advantage of a more sophisticated approach to calculating and offering up shipping options—including free shipping—to encourage the sale.  The systems to support that model are easily identified, incorporated, and deliver a quick return on investment.

But what about the parcel shipper?  On the one hand, his services are needed more than ever.  As transactions move from customer purchase-and-carry to order-and-ship, volumes of deliveries will continue to grow.  That sounds like good news, but greater demand puts pressure on the carriers to provide competitive pricing, and more importantly, unique service levels that differentiate them—and by extension, their retail customer.  In markets like the US where so much volume flows through the giant FedEx and UPS machinery, that's hard enough to achieve , and the big guys tend to be less flexible or creative.  While there are a number of regional carriers in the States who are working to challenge that status quo, there's still a lot of work to be done!

In the UK and on the Continent the challenge is even greater, as there is a myriad of regional and local carriers providing a great deal of the shipping capacity.  Hand-in-hand with complexity comes confusion, but out of confusion can come great opportunity.

That opportunity comes from the more enterprising local/regional carriers creating specialised services—sometimes bespoke, sometimes generally available—that offer unique features: cost, of course; unique customer service options such as photographic proof of delivery or scheduled delivery times; delivery to a specified delivery point, rapid turnaround from order to delivery, and even same day delivery.  All in all, any competitive edge that a carrier can offer is often a very valued capability indeed.

There's a catch though: to take advantage of these special services the retailer has to find a way to incorporate them into their supply chain.  What would work just fine for a local high street shop with a limited clientele and manual processes doesn't scale to a retail chain or e-retailer which ships thousands of packages a season.  For that to work, the supply chain execution (SCE) software that they are doubtless using needs to be made compatible with those special services, or more likely, the carrier service needs to be made compatible with, and "connectable" to the retailer's shipping system.  That can, and usually is, a custom integration on the part of the retailer or, if lucky, the supplier of the shipper software.  Recently, at least one vendor has announced a tool to enable this process to be done more quickly, easily and with much less cost, but the general rule still applies: with the rewards that derive from using shipping methods as a competitive advantage, there is risk that lies in making the connection between your automated systems and the carrier.

So where does all this leave matters?  For the retailer, it is incumbent upon him to make sure that delivery options are considered a strategic part of the overall customer experience and ensure those options are seamlessly made available to the consumer.  This requires creative thinking on two levels: first, to consider how shipping options contribute to business growth and customer satisfaction, and second, to be open to shipping options that are not driven by the mainstream carriers (unless there is a real competitive advantage to doing so).

For the parcel carrier, creative products, cost advantages and specialised services must be complemented by  supportive relationships with shipping software vendors. More important, they must be proactive about creating compliance that can be automated and integrated into that software, and by extension, to the retailer's systems.

By bringing these pieces of the puzzle together it's a win win situation for the carrier, retailer and consumer: which doesn't happen very often.

  • According to SeeWhy, a website conversion service. They reported that shopping cart abandonment rates rose from about 71 percent in mid-2010 to 75 percent by June 2011. Other industry sources range from 65%-75%.

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