Just as retailers were starting to get their arms around “fast and free shipping,” Amazon’s recent announcement to make one day shipping a new standard has retailers scrambling to find new solutions to win over shoppers.
What are the Stakes of an Amazon-Like Shipping Experience?
Amazon Prime has gotten more successful over the years with its “fast and free shipping” mantra, most notably, sweeping up 49% of eCommerce market share and 10% of retail market share, driving up competition for others.
Due to the rise of eCommerce and the Amazon Effect, online shoppers expect nothing less than seamless shipping from cart-to-door. According to our annual delivery survey “Last Mile Delivery: What Shoppers Want and How to #SaveRetail,” 98% of consumers hinge their brand loyalty on great delivery experiences.
Although Amazon Prime has an upfront membership fee to offset some shipping and transportation costs, it’s important to remember that Amazon has no qualms about hemorrhaging profits for the sake of better customer service. And it can afford to do so — evolving Amazon warehouses and Amazon distribution centers to fit the standard from two-day delivery to one-day delivery will put the company back $800M. Most retailers don’t have the luxury of spending as much as Amazon on the last mile — nor should they have to.
The Cost of One-Day Shipping for All Retailers
At D3, Sucharita Kodali said that faster delivery is not necessarily the right solution for all retailers. In a Wall Street Journal article called “Retailers are Warned to Step Slowly into One-Day Shipping,” she emphasizes that the secret sauce is a smooth customer experience (CX), and not necessarily faster, or more, delivery options. In the article, she says, “A lot of ultrafast last-mile delivery solutions that consumers don’t even ask for… are high-cost endeavors that don’t necessarily help a retailer’s bottom line.”
Kodali echoed her WSJ statement in a recent Convey survey, saying, “It [Investing in the last mile] is something that is important, and it drives a lot of costs for retailers, especially when consumers don’t know where their package is.” [Listen to her podcast here.]
As it is, 84% of customers will not return after a poor delivery experience, causing eCommerce and customer service teams to spend time answering and resolving “Where is my order” (WISMO calls — which cost $3-7 in labor, per call), and many times, causing companies to spend more in appeasements trying to retain customers. According to our data, these WISMO calls can amount to 10%-30% of the average retailer’s overall call volume.
Online returns also create additional complications in satisfaction along the customer journey — 70% of shoppers say that returning online items makes them anxious, causing additional WISMO calls. They need to know when their orders will arrive back safely and when they can expect to be reimbursed. According to Steve Dennis, returns are a ticking time bomb for retailers as well, and they can’t go unchecked.
“When a product is returned or exchanged, not only does the retailer experience incremental supply chain costs, but often the item cannot be resold at the original price owing to damage, wear and tear, or obsolescence/devaluation given the passage of time.” -Steve Dennis
He says, “When a product is returned or exchanged, not only does the retailer experience incremental supply chain costs, but often the item cannot be resold at the original price owing to damage, wear and tear, or obsolescence/devaluation given the passage of time.”
Maintaining High Gross Margins in Last Mile Logistics with Exception Recovery
For years, customers have said that at a basic level, they expect their retailer to know when a delivery experience is about to go off the rails with a delivery exception, and at a minimum, 93% of consumers agree that their retailers should send them a proactive notification.
However, retailers such as Bodybuilding.com and UncommonGoods have discovered that it is more manageable and scalable to proactively root out and take action on delivery issues before they reach customers. Through the visibility, analytics, and the ability to take action — Delivery Experience Management — both companies have been able to reduce their WISMO calls and uphold their delivery promises. [Learn what Delivery Experience Management is here.]
Even more, retailers aiming to grow should not overlook the power of high gross margins — the higher the gross margin, the more profitable each dollar of sales becomes, as it can help fuel growth, expansion, and additional services to increase revenue.
Fast-growing, FMCG company, Grove Collaborative knew that their customer base was affected by damaged packages and incorrect address exceptions, so they created a dedicated exception management team to resolve these issues before they could reach customers, which both made customers happier (it raised their NPS scores by 9.4%), cut costs from exceptions, and shortened customer service queues with less WISMO calls. The team had so much time and additional cash, the company started customer service initiatives that would increase its Average Order Value (AOV) by 50%.
Scale Up Growth without One-Day Delivery Options
Although Amazon is aiming to create new delivery standards such as one-day delivery, retailers shouldn’t feel threatened and compelled to make the same moves in order to keep up. By investing in the last mile through improved analytics, connecting data systems and teams together, and leveling up processes, retailers can continue to grow — even Blitzscale — their online revenue.