Dynamic delivery: changing the rules of retail

Consumers now expect brands to be "always-on", making delivery a key marketing issue, writes David Benady.

Dynamic delivery: changing the rules of retail

Delivery has been through many twists and turns since ecommerce exploded onto the retail scene more than a decade ago.

There’s been free, discounted and next-day delivery, free returns, click-and-collect from local stores and the current trend of offering free delivery above a certain value. There have been customer complaints, threats of legal action on the part of delivery firms, and videos on YouTube recording the vain attempts of delivery men and women across the UK to deliver parcels in trying circumstances. 

Delivery is a vital component in online retailers’ efforts to differentiate their brands in an overcrowded market. Nonetheless, a price war on costs is starving the delivery network of investment and undermining retailers’ attempts to make it faster and easier. Another outcome of the downward pressure on delivery prices is to train shoppers to view delivery as an add-on, rather than as a core part of ecommerce.

Much of the success of ASOS.com, the rapidly expanding online fashion retailer, is down to its free delivery and returns policy, which has encouraged a generation of young people to try on clothes at home – or at work – in the knowledge that they can send back items they don’t need at no cost and simply order more.

High priority

ASOS head of delivery Matt Rogers explains the importance of delivery to the brand’s success. "If a customer receives a negative experience of delivery, they are less likely to shop with us again," he says. "Customers place equal value on ASOS offering the best product at the best price as they do with on-time deliveries and being kept up to date with the progress of their orders."

Frenetic competition between online retailers means that shoppers are being trained to expect ever greater convenience coupled with lower prices and increasing speed of delivery. Simply waiting in at home for the goods to arrive is no longer good enough.

"Home delivery is becoming less convenient to customers and we are constantly working on new ideas for delivery, such as collection from local stores or diverting deliveries to neighbours," says Rogers. He confirms that speed is of the essence in fashion, where part of the shopping experience is the thrill of instant gratification.

"Next-day delivery is very important – 40% of our UK customers opt for it, and we are working to launch it to some of our European markets," he says. ASOS offers unlimited next-day delivery for a year for £9.95. This fee for "VIP" membership also gives customers early access to sales, exclusive sales and 10 copies of the brand’s magazine a year.

However, some fear that rivalry between retailers keen to cement their brand position risks creating a race to the bottom, which could undermine the significant levels of investment needed to ensure an effective delivery network.

The delivery chain is an important area to invest in as this ensures the right level of service"

Several retailers and delivery services have been berated for poor service; Yodel, which is owned by the Barclay brothers, who also own Littlewoods and Telegraph Media Group, has been a particular focus of customer anger via social platforms, and Amazon, which uses it to fulfil some deliveries, has been swamped with complaints about it. Indeed, there are many amusing videos on YouTube allegedly showing Yodel workers struggling to deliver goods. The company, which also handles parcels for retailers such as Boots, told Twitter to delete tweets and accounts it said were defamatory and "constitute a serious libel".

Yodel is the UK’s second-biggest parcel-delivery service after Royal Mail, with 17% market share, distributing 150m parcels a year.

The company’s management team was replaced last year. Its chairman, Dick Stead, who was brought in to relaunch the business, admits there have been problems, but insists that these are largely in the past. He says the intense competition on delivery between retailers is having a negative effect.

"In the past there was over-supply of parcel carriers, and retailers went for the lowest price possible, so there wasn’t much investment. Retailers are realising that delivery is a massively important part of their offer. If you want us to invest in building new services, we need to be paid more. The average consumer has been taught by retailers that they can get free delivery and it’s a low-price part of the deal. We’ve got to change that perception. Instead of giving away that value, we need to be paid for it."

ASOS’ Rogers agrees that this sort of investment is vital. "The delivery chain is an important area to invest in as this ensures the right level of service is achieved," he says.

The wheels of ecommerce turn fast and innovations such as col­lection and returns services are spreading rapidly, allowing shoppers to pick up and return online goods from third-party locations such as local convenience stores and petrol stations.

Transparency essential

Collect Plus, a package-collection service, which is a joint venture between Yodel and PayPoint, was originally used only for returns, but is expanding fast into collection. Marketing director Catherine Woolfe says online retailers need to be more open about their delivery charges and options.

"Delivery costs often aren’t up front on the website. It should be part of the buying process of the product, not hidden right at the end. Customers want to see something clearly transparent. The more information you give them, the more they trust you. They want to trade with someone they don’t think is going to try and dupe them by offering a lower cost and then racking up the delivery cost," she adds.

Woolfe believes there are clear opportunities for online retailers to differentiate themselves through delivery. Marketers need to understand the demographics of their customers and work out what type of delivery suits them best. Retired people or students may be available to receive deliveries at home, but those who are working may prefer to pick up their goods from a local grocery store or newsagent on their way home.

A service called Car Drop in Belgium installs a sensor in the user’s car, allowing a delivery person to open the boot and place the ordered item inside.

Delivery is already moving toward total convenience, where a parcel can be tracked online so customers know when and where it will be delivered. A service called Car Drop in Belgium installs a sensor in the user’s car, allowing a delivery person to open the boot and place the ordered item inside. The car can be tracked so deliveries can be made wherever the car is located.

Elsewhere, Amazon is trialling locker delivery, while Domino’s Pizza has even tested a remote-controlled drone "DomiCopter" to deliver orders in Guildford.

Jason Mander, head of insight at consumer insight specialist Future Foundation, which has researched the impact of ecommerce on the future of retail, says: "It will be anachronistic to talk about the high street versus ecommerce in five to 10 years’ time. There will be a fusion of channels and more of a connection between high street and online. Buying online then waiting for delivery will be superseded by more convenient ways to get goods."

Shoppers will make greater use of mobile commerce, trying out goods in showrooms and ordering them as they look round.

However, while Mander believes that customers will demand greater convenience from delivery, they will not want to pay for it. "Consumers are most unwilling to pay for extras like delivery. I don’t foresee a model where the consumer has to pay the costs; they will look for retailers that shoulder the costs," he adds.

Mander argues that Argos could be among those well-placed to capitalise on delivery by offering other retailers the use of its 700 high-street stores as locations for people to pick up their online orders.

Ecommerce has succeeded by undercutting high-street prices, but this is leading to declining margins for online retailers and a lack of investment in delivery systems. Getting goods into shoppers’ hands is likely to remain an activity fraught with difficulty, delays and funny YouTube videos for some years to come.

Customers’ attitudes to home delivery

Online shoppers switch to retailers that offer the lowest delivery costs, according to an online survey commissioned by Marketing. We asked market research company GMI to quiz a representative sample of 1000 UK adults from their online panel about attitudes to delivery. All respondents had purchased an item online then had it delivered.

Nearly 60% said they had switched retailers to get a better deal, rising to 64% among 18- to 34-year-olds. A majority – 52% - said they always try to buy from a store with free delivery, with women more likely to say this than men. Only 5% of the sample agreed with the statement "free delivery just means you are charged more for the items you are buying".

When asked to rank a number of statements in order of importance, the list was topped by the view that delivery should be free if you order a certain value of items.

But most were prepared to pay extra for speedy deliveries: 64% of 18- to 34- year-olds said they would pay extra for quick deliveries compared with 56% of those aged 35 to 54 and 41% between 55 and 64. Almost six in 10 had heard of websites that compare the overall cost of online goods including delivery, but just over one quarter claimed to have used them.

More than a fifth said they had taken a day off work to wait in for a delivery; 2% said they had called in sick.

Nearly half – 45% – said they had not returned an item because it was too much hassle and a similar proportion said they decided not to return an item because it was too expensive. Most – 89% – want their goods delivered to their home.

Three-quarters of online shoppers have had problems with delivery – almost half complained of late delivery, while 42% have experienced an item not turning up on a specified day or time. Three in 10 received an item that was damaged or their order did not arrive at all.

Given a range of options for collecting a parcel if they are not home, collecting from a Post Office or making use of a redelivery service came top.

Almost all online shoppers (91%) think they should be able to request a specific delivery date. Some 83% think they should be able to request a specific timeslot and four out of 10 would be willing to pay extra for this.

Amazon is the company that most people had ordered from, with 82% citing the retailer. Next came Argos, used by 24%, Play.com used by 21%, 18% for Next, 14% for Marks & Spencer and 13% for John Lewis; 7% had used ASOS.

They were asked to rate each company they had used from one to five (one being very poor, five excellent) on their overall delivery service, including charges, speed of dispatch and range of delivery options. Amazon came top with a median score of 4.3, followed by John Lewis on 4.2. Argos came bottom with 3.6; Boots, Next and ASOS each scored 3.8.

We asked people which were the strangest places a delivery had been left for them. More than a quarter said a parcel had been left in a dustbin, compost bin or wheelie bin. A number also said that they weren’t notified, so the parcel was taken away with the rubbish.

Others said packages had been left in the next-door neighbour’s coal cellar, in a rabbit hutch, "inside my underpants on the washing line", "under my car", in an outside toilet, and even thrown through a housemate’s window.

How the high street can use ecommerce

By Lysa Hardy, chief marketing officer at health-food retail group NBTY Europe

Retailers should be looking at advances in ecommerce as a way to save the high street, not erode it.

At Holland & Barrett, we know that more than 90% of the population live just a 15-minute drive from one of our stores. When you analyse this reach, you can see the huge potential that a service like ‘click and collect’ can give to a traditional retail business.

The success of John Lewis shows customers are already buying into these omnichannel models, which can drive both footfall and sales by offering convenience and service.

The strength of staff expertise is also an important differentiator that allows brands to stand out in the high street. It’s something we’ve been promoting in our recent wave of TV campaigns, which tells customers how every Holland & Barrett store now has a member of staff who is qualified  up to A-Level standard to answer their health questions.

Our data tells us customers value these healthy conversations so much that we’re now rolling out a new format including consultation areas in key stores to help provide more advice on the high street, enabling our stores to play more of a role in their local community.

Retailers should look at advances in ecommerce as a way to save the high street, not erode it

Value is still a big factor in driving footfall, too, and to ensure our online offer doesn’t compromise our retail sales, we have a policy that when a product is on special offer online, customers can get an identical deal in store. We also build promotions that invite trial and browsing, like our ‘penny sale’ or ‘discovery months’, as the act of browsing is still more familiar in a store environment than in front of your computer. This is where sampling, tasting and demos play their part in offering customers an experience and theatre in-store.

The advent of omnichannel also means marketers need to make sure their stores keep pace with digital change. We’re planning to connect all our stores to our ecommerce platform via iPads, to make our full catalogue of more than 5000 products available, even in our smallest stores. ‘Ship to store’ and ‘click and collect’ mechanisms make this feel safe and easy for customers, helping them shop, rather than trying to change their habits.

We have also been investing in bigger retail units in key locations. A store we opened in Manchester recently went on to become a top-10-selling location within weeks, showing that the high street is still an important place for business.