According to Forrester’s VP and Principal Analyst, Sucharita Kodali, the retail last mile creates a critical touchpoint for that can make or break customer experience (CX), and if not executed efficiently, can also drive up costs for retailers.
In this podcast, EFT and Forrester dive into how retailers can drive post-purchase cost savings, customer satisfaction, and loyalty. Learn as Kodali talks about what technologies retailers can leverage today to create outstanding last mile CX experiences, and what delivery of the future will look like.
Listen to the podcast below, and if you’re interested in learning more about the research behind the podcast, download our eBook behind the research: “The Perfect Order: Overcoming Roadblocks In Last Mile Delivery.”
EMMA (EFT): Today I’m interviewing Sucharita Kodali who’s a retail industry analyst from Forrester. Hi Sucharita, thanks for having me.
SUCHARITA KODALI (Forrester): Thanks, Emma, glad to be here.
EMMA: No problem. The topic Sucharita and I are going to delve into today is the last mile, which is an entire topic we can talk about for days and days, but we’re trying to give you a bit of insight in this next 10 minutes. So Sucharita, let’s start: How much does last mile delivery play into customer service feedback?
SUCHARITA: It’s a huge part of the overall equation, and ultimately, I would argue, it determines a lot of the satisfaction in the moment that matters, and that moment is when the consumer gets their package. One of the single biggest reasons that retailers get calls to their call centers is that consumers often want to know where their package is, or why it’s late. So having visibility into that last mile and having better processes around it are things that can be really helpful to the customer experience, at least in eCommerce.
EMMA: Absolutely. We’re doing this in line with a recent survey around last mile, and that leads me to my next question — one of the questions was “To what extent was last mile delivery a priority to your business?” I was quite surprised that the majority of respondents said that at the moment there’s still hesitation around investment in the last mile because they’re not sure there’s a return they’re going to get. Does that surprise you?
SUCHARITA: It does! 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. The hesitation around it may be driven by limits of what retailers think they can do, and the reality today is that most retailers don’t own their own delivery network and they’re still dependent on other companies and carriers to execute the last mile, and maybe there’s a sense that it’s difficult to reduce costs, and there’s a sense of not knowing what you can cut in an experience that you don’t control anyway. So I wonder if that’s some of the hesitations in measuring the ROI there.
EMMA: I think you’re right. Maybe the hesitation is like opening a can of worms. It takes a lot of planning once you do it, so maybe all of those elements came into play when they answered.
You actually led quite nicely to our next question. Should retailers have more management of the delivery experience? I think gone are the days when, say for “Joe Bloggs,” it didn’t matter how they were with you, and how they were presented. So now delivery is part of the experience. So, what kinds of trends are you seeing?
SUCHARITA: I mean, we don’t really see retailers owning their delivery networks, and there are exceptions, right? I mean, Domino’s owns its delivery network when it delivers pizza. And there are a handful here and there, some high-end, some luxury department stores. But they don’t have a ton of volume, so they would maybe have an owned-delivery network if they have a store associate hand-delivering an item.
But for the most part is that there’s not enough volume to really justify owning your own delivery network. That’s why to get the costs down and get your items to customers, you usually put together a patched-together solution of lots of different carriers, and it may be common to carve out a deal with a single carrier because that’s usually where you can get the greatest volume discount if you promise all of your volume to a single carrier. I know it’s a little different in Europe, where the delivery landscape is more fragmented and there are more guys with trucks that own that space. That’s something that’s only now being cultivated in the US, where you see a guy with a truck realizing, “Hey, if I, every week or every day, drive between two cities, then I actually have a business that’s viable.” But that’s relatively new. That’s something that I don’t think entrepreneurs in the US realized until just recently.
But to get back to my point of why don’t more companies own their own delivery networks is because there’s not enough volume that any single merchant has, and if you are going to do that, you can probably do it, like in the Netherlands, where the buyer-base is compacted in a small area, and you can get a number of deliveries to certain addresses or regions where it’s cost-effective. In large markets, where buyers can be anywhere — they can be hours apart — it’s really difficult for merchants to do that.
EMMA: How about the way that retailers deal with in-transit issues? Do you think that they’re well-equipped at the moment, or is there room for improvement?
SUCHARITA: Well, there’s definitely room for improvement. When we say in-transit issues, it could be anything from incorrect addresses, where the package goes to the wrong house, or somebody decides that they want to change the address to a destination. Those are slowly emerging. Both Fedex and UPS have been putting in programs over the last few years, almost like loyalty programs, and if there was a package that was coming to their main address, they could have the opportunity to have that package picked up at a nearby store, or you could change and divert where that package is delivered if you’re on vacation. You can even sign for that package, I think, because certain packages have a signature or program on delivery where you can do that.
So it’s definitely emerging, the technology is there, but not every retailer leverages this to their advantage, and definitely not every consumer leverages this to their advantage. I was talking to a carrier, a large national carrier the other day. They were saying that ~20% of packages need to be re-delivered. That’s a huge percent! I don’t know how consistent that is in the UK or Germany, but I imagine it’s a lot in those markets, and it’s a lot in the US. It’s expensive! And if you can get visibility and force the consumer, encourage the consumer, and consent from the consumer to let the carrier know when they’re available to receive that package, that’s a really good thing.
So I think we’ll eventually get there; I’m frankly surprised that carriers haven’t pushed it more, especially as eCommerce grows, there’s a huge cost, and everyone wants that cost to go down. That seems like it’s a very inefficient part of the supply chain that can be fixed, relatively easily. I’m a little baffled why it [technology] hasn’t been more adopted on both the carrier and consumer side.
EMMA: That should be a next survey question! Finally though, it’s all about balancing the cost and speed. Meeting the margins vs. having the quickest delivery company, company to get you the products. When you’re looking at balancing experience and cost, what would you say are the best practices at the moment?
SUCHARITA: I think that in the early days of the internet, what we saw were costs being what mattered a lot. And sometimes that would end up with packages being delayed from a shipping standpoint, or not always focused on the speediest delivery. And then as internet pure-play came in to play, and Amazon really raised the bar, then I think that you see more companies investing in speed of delivery. The pendulum really swung in the other direction, even at the expense of cost, -er customer experience in lieu of cost.
There was almost an over-investment in trying to get speedy delivery, when in fact, most consumers — with some exceptions in categories of course, like food delivery, like if I’m getting food delivered tonight, it makes a difference, and that’s its own discussion. But when we’re talking about parcel delivery, or even heavy-package delivery, like a sofa or appliances, it’s not so much about speed. Especially when someone is delivering a sofa, no one wants to pay $1,000 for delivery, and people want to save a little bit of money if they can avoid delivery charges. The bigger issue that I think retailers haven’t focused on transparency. Focusing on issues like “Where is the package? How far away is the package? When will it get to me?” Usually when consumers have to bear the full cost of the delivery, they’re more happy to get it delivered more slowly so they don’t have to pay the full price.
But the challenge for retailers is that the trade-off is that you give consumers a pretty precise timeline of when they can expect that package, and when you get closer to the delivery date, that you provide more and more visibility on “Where is it? Where is the truck? How far away is the truck from you, and where do you expect the truck to show up?” That is where retailers are still lacking in visibility, and I think the best way to think about it is we have expectations that have been shaped by Uber for instance, on where things are and how far away they are from us. Very, very few companies in the delivery ecosystem provide that visibility.
And I’m not saying you need a mapping solution where you see the moving truck coming to your house, but people expect some frequency, especially the morning, or 24 hours before you’re getting the package. You should get an alert, or email that the package is on the way, and you should expect it. I think FedEX in the US can do that if you’re part of their email subscriber base, and I think part of that visibility ecosystem is that they tell you after a package is delivered, so you know especially if you didn’t sign for it, or if it’s just lying outside waiting for you. Even Amazon is doing that where they take photos of packages that are left behind. They’ll have a record of the delivery having happened, and it provides a little bit more comfort for the recipient.
So there is a lot to do! And it has been generally overlooked. It’s an opportunity. It’s a big part of the experience. It’s not as sexy as the box that something comes in, and it doesn’t lend itself to the unboxing experience that makes its way onto Youtube later, but it is an important part of the experience, and it is something that if done well, can be a big part of the competitive advantage.
EMMA: Absolutely! My personal opinion is that some of the big brands now have an amazing last mile service, and that’s just me as a consumer, and my experiences shopping online.
It [investing in the last mile] is important, and it drives a lot of costs for retailers, especially when consumers don’t know where their package is. It’s not as sexy as the box that something comes in, and it doesn’t lend itself to the unboxing experience that makes its way onto YouTube later, but it is an important part of the experience, and it is something that if done well, can be a big part of the competitive advantage.