How Retailers Can Tackle the Amazonification of Supply Chain

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How Retailers Can Tackle the Amazonification of Supply Chain

By Mike Comstock - 08/25/2017

In the progressively competitive e-commerce world, retailers endlessly hunt for new ways to grow sales and lessen costs to profitably compete. Cultivating the customer experience is of the utmost importance in generating and retaining ecommerce shoppers. Clearly, a well-oiled, global supply chain plays a significant role in guaranteeing fulfillment success.

E-commerce shoppers, particularly millennials, increasingly prefer to shop on their mobile devices. Customer expectations for delivery are driving faster, and time definite, delivery alternatives. In addition, the expectancy of free delivery, along with the ability to easily shop for the best price on the internet, has put a death squeeze on many merchants’ margins. In fact, a recent study by JDA and PwC found that only 10% of the 350 global retailers surveyed are making money fulfilling e-commerce orders.

Some may feel that it is “game over” with Amazon’s astute e-commerce execution combined with its far-reaching loyalty programs. With indisputably deep pockets and subsidizing revenue channels, Amazon’s approach is difficult to compete with. That said, based on recent CPC Strategy report, more than half of online shoppers check prices elsewhere and do not simply turn to Amazon by default.

While the CPC Strategy report shows that price was the driving factor behind their purchase for 23.1% of shoppers, delivery ranked a close second at 19.8% of survey respondents. In a recent study commissioned by Metapack, 87% of e-commerce shoppers stated that they would highly likely/more likely to shop again with an online merchant, following a positive delivery experience.

When the Metapack survey respondents rated their delivery experience, Amazon was well ahead of other e-commerce retailers. If we look to the acknowledged leader, what can we learn from Amazon that can be implement to improve the customer experience?

The attributes of Amazon fulfillment that set them apart from most others includes:

Delivery choices

More than half (61%) of respondents in the Metapack study said they had bought goods from one retailer over another because they provided more delivery choices. Home Depot recently found that when they tested same-day delivery at a fairly significant upcharge, it was very infrequently chosen. However, overall order volume rose noticeably simply due to the choice in delivery options.

Delivery choices should be offered in a way to establish customer expectations. Having a specific expectation for delivery is a well-established feature of Amazon.

According to the 2016 UPS Pulse of the Online Shopper Study, 48% of shoppers find guaranteed delivery dates important when checking out online. And while customers desire a variety of shipping services, 42% of the time they choose ground economy over other modes. In addition, 46% of shoppers abandoned their shopping cart because the delivery time was too long or not stated.

Of course, once the customer expectation is set, the delivery must be made as promised. It is essential to deliver as promised. E-commerce shippers must have comprehensive service performance reporting from their carriers.  They need to use analytics to determine the best carrier for each service level to specific destinations.  Choosing a national carrier for the entire US oftentimes is sub-optimal in terms of service and cost.  For international shipments, the carrier selection can be a good bit more complex but here again analytics will assist in determining optimum carrier selection.

Visibility

While delivery speed and flexibility rate very high with shoppers, order and delivery visibility is a close second. Once an order is placed, Amazon and the top tier ecommerce retailers provide a seamless status of the order. From order confirmation to ship notification to checkpoints along the journey to delivery, visibility is important to the customer.

The 2016 eCommerce Packaging Study, Driving Customer Loyalty With Fast Delivery and Quality Packaging by Dotcom Distribution showed that almost half (47%) of shoppers have chosen not to order from a retailer again because of poor order transparency or a lack of insight into the status of a package throughout the fulfillment and delivery process.

In a Convey survey, 75% of shoppers believe proactive communication is important with 38% expecting to be notified immediately in the event of an issue. The 2016 UPS Pulse of the Online Shopper Study found that 30% of shoppers cited an option to receive a text when the order has shipped as important when checking out.

Here again, selection of carriers is critical.  Only those carriers that can provide the needed visibility, suitably integrated into the customer facing platform, will provide the competitive visibility expected by customers.

Returns

According to the previously referenced 2016 UPS Pulse of the Online Shopper Study, returns play a critical role in consumer satisfaction with e-commerce retailers. 

Amazon has set a lofty goal for quick, easy returns. The process is fully integrated with the consumer’s order history and is completely self-serve with free return shipping in most cases.  Credit is usually applied when the return package is scanned by the returning carrier, not when it’s actually received.

Building a convenient, consumer friendly returns process touches all key components of a company’s ecommerce value chain. Starting with the merchant’s website, the return policy and procedure must be easy to find and understand. During initial fulfillment activity, return instructions and labels may be included as is a common practice with many ecommerce sellers today. Online initiation for returns should trigger the process including return label and shipping instructions, credit for returned item, return process tracking and final disposition confirmation.

An important consideration in the return process is the location to which the item is to be returned. The UPS study cited 60% of consumers prefer to return to a retail store. However, for pure play e-commerce retailers this is not available.  So, for the consumer who ships their return package, access to a carrier location needs to be convenient. In the same UPS study, 55% of consumers preferred to drop off at a carrier location or access point and 21% preferred to leave the return in their mailbox or front porch for US Postal Service pickup.

Nearly all carriers have a returns service that is designed to make returns easy. But here again, there may be a need to offer the consumer a choice since carrier access is a critical factor in returns convenience. While there are a number of ways to structure returns, the overriding requirement is that the process be convenient, simple to understand and hassle-free.

The e-commerce landscape is changing quickly. So are customer expectations, led by Amazon’s effect. An e-commerce operation that executes effectively in delivery choices, order visibility and returns, will go a long way in nearing equivalence with Amazon.

 

 

Mike Comstock is a Senior Adviser at GrandCanals, the market leader in Analytics-Driven Fulfillment.  Mike is also the co-founder of Ursa Major Associates, LLC, a strategy consulting firm specializing in express, postal and logistics business transformation. He also has held senior positions at DHL Express as well as several ecommerce and logistics companies.