Convenience means fitting into online customers' lives, and that's why last mile delivery is one of the most crucial touch points. A recent McKinsey study found that the last mile accounts for 50 percent or more of total package delivery costs.
Adding to the challenge for retailers, shoppers expect a different level of service for each purchase made, depending upon the circumstances. A household commodity like paper towels isn't viewed the same way as an expensive holiday gift like a watch or gaming system.
Most retailers get it, but they struggle to get it right. According an Eye for Transport white paper on final mile delivery, 83 percent of retailers report that customer experience is now a company-wide goal, and 67 percent said that gaining greater control of the customer experience was crucial to delivery.
Following are three actions that retailers can build into their supply chain to help make that last mile work to help create a competitive advantage.
This much is clear: Shoppers want delivery options. And a lot of them. In the 2017 UPS Pulse of the Online ShopperTM study, economy ground, ground and 2-day were all expected by about 70 percent of shoppers. Next-day delivery was expected by 46 percent (up 3 percentage points on the last survey) and same-day by 20 percent (up 4 percentage points).
While a growing group of consumers desires faster delivery, most remain highly price sensitive. Same-day delivery may be gaining serious traction, but the UPS@ study also indicated that customers are willing to wait an average of seven days for purchases with free shipping and six without it. This means that while midsize and smaller retailers don't always have to compete with the big guys on standard shipping times, faster options are a must.
The two-day delivery service enjoyed by the 90 million Amazon Prime members in the U.S. (as of September 2017) has had an impact on shoppers' expectations for delivery. Most recognize that speedy delivery often comes with a cost. Case in point: millennial consumers are willing to pay up to 30 percent more for same-day delivery, according to a recent McKinsey report.
According to the UPS study, four in 10 shoppers have used same-day delivery in the past year, but only 4 percent said they used it "most often." Urban areas where accepting deliveries can be problematic are ripe with opportunity to offer same-day delivery. Shoppers often are willing to pay, especially for groceries, diapers, and other goods that need frequent replenishment.
Receptivity will continue to grow. The McKinsey report predicts that by 2025, same-day delivery will account for 20% of all deliveries. "Same day delivery is quickly becoming table stakes across every retail segment," says Daphne Carmeli, CEO and founder of Deliv."With Deliv, retailers can offer their customers that same exceptional level customer experience without the need to invest in their own asset-based delivery fleet."
Convenience also means putting the shopper in control. That's why leading delivery companies offer a way for customers to manage their deliveries. For instance, one in four U.S. households (and 40 million worldwide) have enlisted in UPS My Choice®, which enables them to choose the day and even time of delivery, as well as hold or redirect a shipment.
Alternate delivery locations are key, too. In the UPS Pulse of the Online Shopper study, 52 percent of shoppers showed interest in shipping to alternate locations, and 30 percent of online shoppers already have had orders sent to alternate locations. Whether it's to a local coffee shop or a delivery locker at a convenience store, services that are customized to shoppers' needs and schedules can help retailers win and keep customers. That's especially the case among millennials and urban shoppers, according to the UPS study.
This strategy can also extend the reach of omnichannel merchants who may want to acquire more urban customers, said Bala Ganesh, marketing director at UPS. "Retailers may choose to extend their store network into urban areas for more convenient pickup by using some of these access points and alternate locations," says Ganesh.
Offering customers ship-to-store provides them with convenience and the retailer with an additional opportunity for more revenue. In the same UPS study, half of shoppers reported having an online purchase shipped to a retail store for pickup in the past year, and 44 percent made an additional purchase in store.
Because the "ship-to-store" delivery option is projected to grow, retailers should consider using technology and knowledgeable associates to make the pickup process smooth and efficient. More than seven in 10 shoppers in the online study said that getting in and out of the store quickly is ideal.
This option is a benefit for both retailers and customers. "Convenience options like pickup-at-store and at alternate locations actually simplifies the last mile delivery and, in many instances, helps rein in costs," says Louis DeJianne, director of retail at UPS.
Working with an experienced logistics provider that already has the infrastructure in place and technology tools can make all the difference.
For example, UPS already has a network of lockers and locations available to busy--and demanding--customers. Shopify and UPS also have recently teamed up to help small- to mid-size retailers take advantage of shipping tools, processes and discounts.
"Convenience is key to a positive customer experience, said DeJianne. "So the rewards of optimizing your supply chain based on customer convenience can be substantial."
Discover more insights about what customers want. Download the UPS Pulse of the Online Shopper study, Volume 5.
For the 2019 UPS Pulse of the Online Shopper™ Report, download here.
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