HARD YARDS IN THE FINAL MILE

As someone who has a big interest in all things to do with supply chain management I quickly realised that decisions made in this space have a major and long-term impact on the customer. By extension I see major overlap between supply chain management and marketing management.

Nowhere in my view is this more prevalent than in the case of the retail sector.

Let’s reflect for a moment.

If you make a perusal of retail articles and coverage in the business and academic press over the past few years you cannot fail to notice that retail strategy, particularly in the case of the large retailers has shifted its focus to what we call “the last mile”. This refers to the gap between when shoppers make a purchase and when they receive the item.

Traditionally of course shoppers made a purchase in a store and picked it up from a shop assistant. We have moved on a long way from that type of purchase situation. Online shopping delivery originally revolved almost fully around postal delivery – largely reliant on the national postal service. That has been superseded by a range of delivery options which have been driven by changing patterns of consumer behaviour when it comes to shopping.

As we have noted in the book, many shoppers are “time-poor”; they no longer have the time or enthusiasm to visit retail outlets. This has extended to their expectations about when and where they should pick up or receive the items purchased either online or if they deign to visit a store to make a purchase.

In the last couple of years shoppers are now exposed to a bewildering array of delivery models and options that have been developed by retailers in response to the changing needs and expectations.

We have discussed the concept of omni-channels in some detail in the book and I do not intend to revisit the general trends in this area within this blog. However I make the strong point that the “last mile” is very much part of the shopper experience and has great importance for the successful implementation of the omni-channel strategy.

A study referred to in this link (http://www.netdespatch.com/news/its-do-or-die) gives us an indication of the responses of retailers to the issue of delivery. Among its findings it reveals that 42 per cent of retailers surveyed would be happy to work with partners to meet the expectations of the shoppers (120 retailers surveyed). It also identified the fact seven in ten retailers do not make use of locker services as a pick-up option for shoppers.

The survey identified three barriers in the following order of importance.

  1. Cost.
  2. Technology
  3. Collaboration issues.

The last barrier interests me (the first two are obvious). This suggests that fundamental problems such as an unwillingness to share information can scupper any plans to drive efficiencies in the “final mile” management.

Another survey also highlights some interesting findings (http://www.retailtimes.co.uk/gap-between-retailers-delivery-models-and-customer-demand-widens-temando-survey-reveals/).

This study focused on responses from around 200 UK retailers of different sizes and considered both their strategies in the area of delivery frameworks and the expectations of shoppers.

From a shopper’s perspective around 86 per cent have or indicated that they would use a time-slot delivery option. However only 38 per cent of the surveyed retailers offer this particular option. Around 78 per cent stated that they would like same day deliveries and 47 per cent of them indicated that they would pay a premium for this service. 80 per cent favoured in-store collection and a quarter would be prepared to pay a premium. However only 55 per cent of retailers offer this particular option.

The issue of cost is an interesting one. While the study (see the above paragraph) suggests that a feasible number of shoppers see no problem in paying for specific services, 60 per cent indicated that they have abandoned a purchase because of a lack of transparency or confusion with respect to the details about specific charges that are associated with the delivery option.

85% of retailers acknowledge that by offering multiple shipping options they are in a stronger position to meet the needs and expectations of their target market.

The main obstacle to improving delivery options in this survey was highlighted as a lack of back-office and channel automation.

What are we to make of these evidence-based surveys?

Firstly it reinforces the importance for retailers of addressing the post-sales aspects of the shopper experience. It is not sufficient to provide an omni-channel strategy which provides a consistent and seamless shopping experience in terms of the pre-sales and sales areas. Lack of transparency with regard to the costs associated with delivery, a lack of multi-shipping options and collection points will undoubtedly weaken the retail strategy and encourage would-be shoppers to migrate to competitors.

There is also a perception which can be gleaned from the above surveys that some retailers see the challenge of developing delivery models as being a major cost centre as opposed to an area for potential advantage and as a point of differentiation. Despite evidence to suggest that increasingly complex options are the way forward some retailers still have not moved “last mile management” higher up on the strategic agenda.

We have discussed the potential use of drones in earlier blogs and I do not wish to revisit the topic here except to say that they are still being tested and their use in retail delivery is still some way off.

More interesting developments include crowdsourcing as a means of building up a delivery model. The Uber concept which shook up the taxi business world-wide has spread to retail delivery models. Uber Rush supplies suitably qualified drivers to take part in the delivery process. Other companies such as Instacart have also emerged and are largely based on crowdsourcing principles.

This approach actually addresses the cost issue and means that retailers can outsource this part of the process. The downside of course is retaining control over such a disparate range of drivers and third-party operators. This could lead to inconsistencies in delivery promises and ultimately rebound on the retailer.

Put simply retailers are looking at all avenues to explore in their quest to provide a customised, differentiated and diverse range of “last mile” delivery frameworks.

A recent example can be found in a collaboration between Ocado, the online retailer and Marks and Spencer. The latter retailer has been notably slow in becoming involved in online food delivery but appears to have woken up to the inexorable trend. M&S has also been dubious of the cost effectiveness of online delivery methods. This is not surprising given that some commentators estimate the cost per customer to be around £12 in the UK.

However their views are shifting as the food area increasingly is the key aspect of their business operations: they continue to experience difficulties in the clothing area.

They are not alone. Morrisons has been involved in collaborations with Amazon Fresh and Ocado. Interestingly Ocado has specified in its contract with Morrisons that it cannot work with other supermarket groups. Of course this does not preclude any collaboration with retailers such as M&S.

Such collaborative arrangements are the way forward in my view, as long as there is no potential for a conflict of interest. It addresses to thorny issue of cost and can generate efficiencies for both parties.

The “hard yards” are only likely to get harder. Let’s watch this space.

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