To discover the impact these developments are making, and learn how retailers can respond, we speak to Javelin Group’s Director of Operations, Will Treasure. He shares insights gleaned from his work, helping consumer brands react to changing shopper habits and rapidly-evolving retail technologies.
What are the benefits of offering fast delivery?
There have been studies that look into how lead times on delivery affect returns. They’ve found that the longer the gap between ordering and delivery, the higher the chance that orders are either cancelled or returned.
Longer waits have been proven to result in higher returns rates, which are of course incredibly expensive in the online world.
This is true whether we’re talking about sofas and dishwashers, or something at a lower price point. There’s scope for fast or on demand delivery to be relevant across almost every different category, whether it’s fashion, homeware, food or luxury. Even considered purchases like a washing machine can be ordered through ao.com for delivery the next day.
Is there price sensitivity around the cost of delivery?
As drop density falls, the cost of delivery rises. But customers don’t want to pay for delivery, and they certainly won’t pay for the full cost.
If you look on most retailers’ websites, you’ll see maybe six delivery choices. Typically there’s a free option, and then various gradations of paid versions where retailers can recover some of the costs.
But the reality is that the price of delivery is set by the competition. Consumers have a number in mind that they consider acceptable, which will vary according to what the competition are charging.
The challenge retailers face is offering a great service at a great price, whilst getting consumers to pitch in and pay at least a reasonable portion of the cost.
The matrix around what should be free and paid for is always changing, and charging for delivery is something retailers find difficult to get right.
Sometimes a whole industry can get it wrong, and take out some of its profitability. We saw it in UK grocery industry, where the average fee per delivery over a period of two years dropped from £4 down to about £2, which impacted profitability across the board.
We’re seeing it start to rise again now, but it shows that industry leaders have an important role to play in setting consumer expectations on price.
What impact has technology made on the retail industry?
The CIO’s role has changed from managing a back office, to managing the front office.15 years ago, a retail IT director was looking after the major back end systems: the ERP, the merchandising system, the finance system, the point of sale system.
Now, technology serves as a retailer’s entire consumer interface. The whole front end, consumer experience is now dependent on technology. Your CIO is now the enabler of the entire customer experience across mobile, tablet, desktop, and even in store.
What is the role of the bricks and mortar store in this landscape?
We make a distinction between high engagement and low-engagement shopping. High engagement shopping is all about the experience. You want to touch and feel product, get advice from expert staff. The store will always be the primary vehicle for providing that.
With low-engagement categories such as grocery, there is very little reward for shopping in store. You do it because you have to. This means that there’s more scope in the market for subscription services that eliminate the store entirely.
However, from the grocer’s point of view, stores are a much cheaper sales channel than online. The economics plays a part and they are keen to keep customers shopping in supermarkets.
How should retailers be thinking about personalisation?
Everyone thinks that they want a personalised experience, but what people really want is an easy shopping experience: one where they’re able to either discover new products or find what they’re looking for easily, checkout smoothly, and receive their products quickly.
Retailers have to work out what they are trying to achieve through personalisation. If your goal is to ensure people find the product they want, then you might be better off making sure your e-commerce site has really effective search and navigation, to help customers find it themselves.