The Delivery Conference: Retail Systems reports
Written by Glynn Davis
Delivery is becoming an increasingly important aspect in the way retailers are differentiating themselves from their rivals, and it is the UK that is leading the way in the number of options retailers are providing their customers, including next day delivery.
Speaking at The Delivery Conference 2017 held in London on 31 January, Carol Kane, co-CEO of Boohoo.com, told delegates: “The UK has taken the lead in delivery, with the ‘next day’ option becoming 60-70 per cent of our demand. This is not happening in any of our other markets. How important will it be in the US we wonder? When next day becomes important [in each country we supply] it will reflect where our distribution centres are in the world and where our inventory sits.”
With 40 per cent of their sales overseas, these considerations are vitally important for Boohoo.com. But regardless of the market, offering flexible, quick, seamless delivery is undoubtedly part of the appeal of online shopping. This has helped the company carve out a sizeable chunk of the fashion market that would have belonged to the existing players.
“Part of the growth we are seeing is the organic shift of people who are now comfortable with shops online. They are getting away from going out at lunchtime and shopping,” says Kane, who suggests this is requiring a continual scaling-up of the business’s logistics capability.
Customers in control
This scaling-up involves incorporating increasingly responsive capabilities because consumers are now arguably in full control of the shopping experience and want their hands on the levers of delivery.
Patrick Wall, CEO of Metapack, noted: “Customers are in control. Increasingly it is smartphones where the action is taking place and Millennials expect a hugely responsive environment in e-commerce... and a critical part of this is delivery options.”
Brody Buhler, group managing director of Accenture, agreed that consumer expectations are being driven by smartphone adoption, which is providing near-instant access to data. He forecast that this will result in 50 per cent of all e-commerce transactions being derived from mobile devices by 2019.
“Next day and free delivery is the expectation. We are also seeing new ways to receive goods because customers want to be in control. Mobile-based shoppers want the shipping of their goods to also be ‘mobile’,” he says.
Continued growth of click and collect
One of these ways is through click and collect (C&C), which is growing at a rapid rate, according to Paddy Earnshaw, chief customer officer at Doddle, who says the percentage of multi-channel retailers’ volumes that go through C&C has grown from 22.5 per cent in the third quarter of 2015 to 29.6 per cent in the same period of 2016. He cites John Lewis as having a significant 52 per cent of all its online orders now going through C&C.
Even in the building materials market there is a demand for C&C. Duncan Kendal, supply chain director at Wickes, revealed that his customers now have high expectations because they have been “trained” by the likes of Amazon, Ocado and Argos to expect speed and precision with all their online orders – regardless of product type.
But despite C&C playing a part in such a healthy proportion of online sales, Earnshaw is puzzled that retailers are somewhat relaxed in the way they deal with it: “There are few heads of C&C in retailers. It’s a bit that sits between people with nobody having responsibility for it.”
He also suggests that “lots of data is flowing through C&C but it’s not being used”, and that retailers should be looking at where automation can be brought in to speed up the process of delivery for customers.
Proximity of inventory to customers
Buhler agreed that speed is increasingly a battleground and that placing inventory in the supply chain closer to the customers is one of the ways to quicken the time taken for delivery. He points to Amazon – that now has 16 warehouses in the UK – and the emergence within some retailers of hub-and-spoke configurations whereby online orders can be shipped direct from stores.
One of the biggest advocates of such a strategy is Argos (which recently became part of Sainsbury’s) and which has one in six of its larger stores acting as hubs for the spokes. Bertrand Bodson, chief digital and marketing officer at Sainsbury’s Argos, said: “We wanted to leverage the store assets and become more of a technology company. We’ve removed the slow moving items from the spokes and shifted them to the hubs. If we’re unable to serve [fulfil] an online order from the spoke then there are three deliveries made per day from the hubs to the spokes. This is replenishment on demand.”
This has enabled Argos to open stores of only 2,000 square foot versus its traditional 15,000 square foot, which includes ‘shop-in-shops’ in Homebase and Sainsbury’s. “We’ve now got 2,000 points of presence in the UK and access to 27 million shoppers who visit Sainsbury’s every week,” Bodson noted.
He added that the hub and spoke strategy had prompted the launch of next day delivery, which enables customers who order before 6pm to have the goods available by 10am the next day at a local store for a fee of £3.99. As part of this transformation of Argos he said there had been a culture change in the company: “We’ve taken some pretty strong steps. There is still a long way to go to be a technology company but inside it feels like a startup.”
Frictionless customer experiences
Such a shift is also very clearly recognised by Richard Pugh, head of logistics at Marks & Spencer, who has been working hard to bring about change at M&S: “To move from High Street to digital retailer has taken a cultural shift. We’re now using data and making insight-driven decisions to keep the customer at the heart of what we do.”
Data from various sources within the company is being used to develop the delivery capability for online orders, which focuses on three key pillars: that communication is maintained throughout the customers’ journey; that there is certainty of delivery, whereby if there are any problems then this must be transparent to the customer; and that there is maximum convenience for the customer, including pain-free returns policies.
For Cane at Boohoo.com it is essential that returns are free and easy for the shopper to deal with: “We want to take all the friction away from customers. We don’t want them to worry about returns. If we make it easy for them [to return goods] then their frequency of shopping with us improves.”
Removing friction to create a seamless delivery experience will ultimately grow the market, according to Accenture’s Buhler, who says this is the strategy being undertaken by Amazon. The same could undoubtedly be said for home delivery food company Deliveroo, which has empowered restaurant chains to offer the home delivery option and made it easy for customers to eschew eating out.
Not quite rocket science
Justin Landsberger, commercial director for UK&I at Deliveroo, said: “It’s not rocket science. We provide great service and our customers respond to this and there is then retention of the customer.”
The closest thing to rocket science in the model is the use of customer data to determine where there are untapped areas of the country for restaurants to service. In these areas Deliveroo is setting up kitchens in which the restaurant brands can prepare their dishes ahead of them being delivered. Potentially there could also be some consolidation of orders from different restaurants.
“We’ve data on where customers live and what they order, so we can tell what restaurants are lacking in certain areas,” added Landsberger, who is very much playing his part in ensuring that the delivery infrastructure for customers in the UK is sufficiently responsive and capable to be able to satisfy the increasingly demanding appetite of consumers.