Modern retailers risk a 'race to the bottom' by satisfying growing desires for anytime, cheap deliveries without balancing the associated costs across their organisations for managing stock, delivery and any associated returns.
As consumers increasingly turn to cheaper delivery options without sacrificing their convenience, retailers must utilise new delivery fulfilment solutions to remain competitive while avoiding suffering financial lossesimpact on their operating margins. This is according to the latest research from Tryzens, a managed service provider of eCommerce solutions.
According to Tryzens' latest whitepaper in its Expert Research series, the number one priority for the consumer is direct delivery to the home or office at any time convenient to the retailer (67%) which, bearing in mind is often promoted as a 'free' option by online retailers, aligns with the second option of 'whatever is the cheapest' (65%). Free is – unfortunately for the bottom line – best for the consumer at this time, which often means 'free' for an online retailer. All in all, the top priority for consumers when choosing delivery options is making sure it's free and convenient for them.
Andy Burton, CEO of Tryzens stated: "What survives and thrives in online behaviour are the things consumers are most attracted to and can exploit to their benefit. Furthermore, the reality of competition between retailers is equally about adaptation, differentiation and ultimately the 'survival of the fittest', as already seen with the high profile loss of big names from the industry this year. Ultimately, if you combine the forces of consumerisation and retail competition you get a tendency for promotional offers and free delivery, where competitors seek tactical advantages over one another.
"There is a real risk of retailers getting caught in a 'race to the bottom' to win market share and 'share of wallet' by offering free deliveries and returns. Coupled with competitive pressure on websites for best product prices, eCommerce businesses face significantly squeezed margins which could impact their bottom lines," he said.
Online retailers need to innovate their fulfilment options to stay ahead, focusing on leveraging all stock (regardless of location), 'reserve' and/or 'click and collect' for multi-channel retailers, as well as new partnerships with couriers and local delivery providers to cut costs without risking service quality.
"A tangible key to success in eCommerce customer experience is the speed, efficiency and cost of receiving and/or returning goods ordered online. The courier and parcel delivery industry has flourished off the growing success of eCommerce, driving innovation in enhancing the consumer's choice and convenience of where to receive, pick-up or return a parcel. Retailers operating online need to ensure they have a complete and timely view of stock holding across their business and work closely with the courier industry to forge new cost-effective partnerships on a national and local level. In this way, they can still offer customers the fulfilment options they desire without risking their under-pressure margins in the process," Burton concluded.
Tryzens Expert Research tracks, analyses and forecasts the trends and preferences of 'Generation Consumer' based on detailed analysis of 1,000 UK consumers who were exposed to online shopping and had made at least one purchase in the past quarter. The Expert Research series was launched originally in 2015 to assist retailers operating online to quantify current consumer behaviour and preferences in order to more accurately and effectively evolve their eCommerce capabilities alongside evolving consumer trends.