What UberRUSH Means for Retailers

The incredible growth of e-commerce coupled with growing consumer demand for shipping flexibility and convenience have given rise to a plethora of last-mile delivery options that retailers can use to help move goods from point A to point B quickly and effectively. Uber recently launched a pilot version of its merchant delivery offering called UberRUSH, joining startups like Sidecar, Postmates and Deliv in responding to this demand from consumers, and in turn retailers, for flexible and convenient last-mile delivery options.

Even e-commerce giant Amazon has joined the trend, launching its own network of independent contractors to deliver packages quickly through its own carrier service, Amazon Flex, which will enlist private drivers to deliver packages to consumers from centralized warehouses.  This not only relieves Amazon from its complete reliance on the U.S. Postal Service, UPS and FedEx, but also allows for tighter delivery windows, increased customization and potentially faster and cheaper delivery methods. 

The problem for retailers
While these solutions seem to be giving consumers and retailers more and more delivery options, the majority of these services only operate in localized — specifically urban — areas and are usually limited to online or phone orders. That's part of the reason why most of these services only have a limited number of retailers participating — and it's a large part of the reason they've had a relatively limited impact on the industry overall thus far.

Still, this last point is surprising. Given the changing nature of consumer expectations for shipping, it would seem fairly obvious to retailers that these up-and-coming last-mile delivery services could provide a powerful way to address the growing demand for more accurate delivery windows, shorter delivery times and low costs. So what gives?

Many retailers still consider fulfillment outside of the total cost of the transaction. For consumers, on the other hand, shipping has become an integral part of the purchase process. Studies show that the leading reason consumers abandon online shopping carts is a surprisingly high cost of shipping that isn't shared until late in the checkout process. That is why shipping is the Achilles heel of e-commerce, with the potential to cripple retailers who can't fit flexible shipping options into their overall user experience and cost structure.

The solution
To remain competitive, e-commerce merchants will have to find a way to meet consumer demands without sustaining heavy losses — and the way to do that is to utilize data.

The e-commerce industry now has access to data that can be tracked, managed and utilized to drive greater efficiency and profits, if only retailers would equip themselves with the proper tools.  Retailers, especially smaller ones, often find themselves estimating delivery costs rather than calculating them precisely, and typically pricing shipping too high — thereby deterring customers — or too low — drastically reducing margins. 

The reality is that online retailers don't know where buyers are coming from or what they will put in their carts until they arrive, so setting shipping prices or subsidies in a vacuum is a losing proposition. Instead, retailers must use real data, in real time, to intelligently manage inventory and assign pricing strategies. Inventory management and logistics automation software let retailers present the most cost-effective shipping methods for each buyer and item, data that can be tracked over time and used to optimize future pricing strategies.

Nevertheless, many retailers are still wed to doing things the old way, too intimidated or overwhelmed to get a handle on their data and use it to improve their business. For retailers that do take the data plunge, however, the benefits are clear: a smarter, more transparent supply chain that will boost margins and grow trust with consumers.

Where the new wave of delivery services fits in
The new delivery methods offered by startups and industry giants alike present a huge opportunity for retailers that are capable of harvesting data from their systems to help manage margins and set delivery policies. Their data-based delivery platforms are prime for integrating with businesses that smartly utilize the wealth of information at their fingertips. Moreover, most of these platforms operate without high switching costs or long-term contracts, allowing retailers to experiment with last-mile delivery services until they find the best and most effective method for their particular products and customer base. 

The time is now. Retailers should leverage the shipping process itself for its trove of data, and invest in technology that will help them maximize every sales opportunity. Though doing so may take time, effort and investment in the short term, in the long term the stakes – profits and customer satisfaction – couldn't be higher.

Jeremy Bodenhamer is the co-founder and CEO of ShipHawk, a logistics automation platform that streamlines the shipping process from cart to customer. He is a leading expert on the intersection of shipping and e-commerce and has been featured in The Wall Street Journal, TechCrunch, and Fortune. Bodenhamer lives in Santa Barbara with his wife, educator and youth advocate Bethany Bodenhamer, and their three sons.

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