Maintaining Last Mile Retail Profits in the Age of Amazon

The mantra among online customers who order everything from gadgets to garden gnomes has long been “fast and free.” Thanks to the Amazon effect, consumers want their purchases shipped two days or less, and they want their retailers to bear the cost of shipping. Recent news from Amazon suggests that this two-day standard may dwindle down to one-day shipping. 

Balancing Last Mile Costs and Customer Experience in eCommerce Shipping

One slip-up in that process can wreak havoc on customer attraction and retention. A Convey study shows shipping wields an enormous impact in terms of customer satisfaction and loyalty. In fact, 84% of consumers in our study say they refuse to do business again with an e-commerce company following just one poor experience with delivery, forcing retailers to spend time and money in appeasements, aiming to win the customer back. 

As such, free shipping not only involves the cost of shipping itself, but also the cost of potentially losing dissatisfied customers. In return for fast and free shipping, what are retailers giving up? The two-word answer: profit margins.

As noted by Digital Commerce 360, fast and free shipping, along with price and convenience, are the key drivers for Amazon customers. Although the last mile is filled with variables that retailers can’t control, and exceptions affect 11% of all shipments, consumers expect responses, and in many cases, appeasements and future discounts for missed expectations. However, enticing offers like free shipping and merchandise discounts can lure consumers to other online retailers.

Last-mile delivery determines much of an online shopper’s satisfaction. Harnessing the power of data to enable better last-mile delivery can drastically reduce the high volume of WISMO calls that retailers receive from customers about the status of their packages.

Keep in mind that transportation costs allocated to last-mile delivery can constitute 8% of annual turnover, thus eating into profit margins.

Consumers Want More Than Just Last Mile Shipping Options

Especially for companies spending efforts and money in re-aquisition, the importance of a retailer fortifying its delivery process through proactive measures cannot be overstated, particularly as Amazon continues to dominate the online retail market. Today, 93% of customers expect a proactive alert and a response when a delivery goes off the rails. This can’t be done without the ability to pull disparate shipping data together in real time, analyze results.

A 2018 survey by same-day, last-mile delivery service Dropoff found 67% of consumers had abandoned a gift purchase due to slow delivery times, a 16% jump from 2017. Additionally, last-minute shoppers are 39% more likely to not go through with a purchase for the same reason.

On the flip side of that, 90% of shoppers surveyed by Dropoff were likely to recommend a retailer to others after buying a gift that arrives on time or early, underscoring the need for a robust supply chain network that incorporates delivery experience management.

Let’s face it:

  • Losing customers cuts into your profit margins.
  • Handling WISMO calls cuts into your profit margins.
  • Inefficient shipping cuts into your profit margins.
  • Storing and re-delivering shipments cuts into your profit margins.
  • Refunding damaged or delayed orders cuts into your profit margins.

Build a Sustainable eCommerce Channel

Amazon, the reigning champion in online retail, knows all too well how the delivery sphere cuts into profit margins. In 2017, Amazon spent a whopping $21.7 billion on shipping. The company still manages to turn a profit — a record $3 billion in the fourth quarter of 2018, during the holiday shopping season — but the company admits that this isn’t from shipping. Not every retailer has an endless cash pool to dip into, and any sustainable business should be mindful of building a healthy business.

As long as Amazon and its hundreds of competitors keep stepping up their delivery offerings — and consumers come to expect better and better delivery — delivery management systems will need to become even more sophisticated.

For a retailer to boost customer satisfaction, and thereby bolster profit margins, it’s imperative to put a solid data-driven infrastructure in place that helps plan, track and complete the order-to-delivery journey. If that fails to happen, then profits could dry up faster than a one-day delivery.

Want to learn more about last mile delivery and delivery experience management? Learn what it is and why it is a last mile imperative for retailers. 

About the Author

Convey

Convey is an agile team of supply chain and technology professionals. Bringing entirely new data intelligence and real-time visibility, Convey helps companies maintain a strong brand with their customers and unlocks true growth potential. Convey on LinkedIn