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Ops Special: Etailers in the race for delivery

As consumers expect ever faster delivery times, retailers warn of the costs and losing the personal touch

Speed web

Speed web

The modern-day customer’s seemingly insatiable need for speed has forced fashion retailers into a fulfilment arms race that shows no sign of slowing down.

Retailers cannot ignore their customers’ desire for immediacy and cut-off times for next-day delivery have been pushed to the limits. Amazon is delivering products within an hour of ordering – to selected postcodes – through its Prime Now service. Whether or not there will be demand for one-hour delivery within fashion retail, there is no denying Amazon is changing consumer expectations.

There are still places available at the Drapers Operations Forum on 14 June at The Bloomsbury Hotel, London WC1B 3NN

Online retailer Boohoo, which prides itself on its speed of product to market, in March launched a midnight cut-off for next-day delivery. Andrew Thomson, ecommerce director at Boohoo, says a retailer’s fulfilment proposition “is becoming more and more important as a differentiator” as customers become increasingly demanding.

This “millennial” generation is the first to have grown up with online shopping, and this age group is shaping the future of the retail industry.

Matt Eames, chief commercial officer at customer feedback firm Feefo, believes retailers beyond just the grocers should introduce self-service checkouts to cut in-store queues. 

One innovation that has already taken off is click-and-collect – ordering online and picking up at a bricks-and-mortar location.

Paul Wheeler, senior logistics and distribution manager at Topshop, says around 40% of the retailer’s online orders are collected in store for free, and this is “only likely to go up”.

Delayed gratification

A multichannel retailer such as Topshop has an advantage over its online rivals when it comes to servicing customer’s desire for immediacy. 

Boohoo’s Thomson explains this advantage: “The challenge for online has always been the delayed gratification. You get the buzz from the purchase but you don’t get the real kick when you have the product in your hand [in store]. Anyone who sells online has to shorten that time between ordering and receiving.”

“It only gets faster and it is not plateauing as such,” says Wheeler, and ultimately it will come down to “cost vs customer”.

Unfortunately, the costs facing retailers – such as investing in distribution centres and IT platforms, and paying couriers for later cut-off times or delivering in the evening – are spiralling, while the economy remains sluggish. During the 10 years to 2014, costs in the retail industry soared 33.8% as consumer spending nudged up 2%, research from the British Retail Consortium and retail analyst Conlumino shows. By comparison, during the preceding decade, costs jumped 19.6%, while consumer spending rose 5%.

Fashion retailers do, of course, charge for faster fulfilment options to offset the costs, but charges must not become prohibitive.

David McCorquodale, head of retail at KPMG, believes the industry is moving towards a budget airline model when it comes to fulfilment: “Ryan Air and Easyjet brought tickets down to as cheap as they possibly could, and then they started to charge for additional services such as extra leg room or baggage. If retail got down to the same level, it comes down to consumer choice, but it has to be on the terms that this is special and you ought to pay for it.”

You get free next-day delivery, and that is where you see a lot of repeat purchases scale up

Luca Marini, founder and chief operating officer of womenswear etailer Finery London

Luca Marini, founder and chief operating officer of womenswear etailer Finery London, argues speed is not the be all and end all: “We still see that the vast majority of our customers are fine with standard delivery [two days between Monday and Saturday, 8am-8pm for £5 or free for orders over £75]. For me it is about the quality of the service and maintaining the promise when we offer next-day delivery.”

Finery London uses next-day delivery as a loyalty scheme incentive. This has reaped rewards in sales for Finery, which positions itself against retailers such as Cos at the top end of high street fashion. Customers who spend more than £250 within a six-month timeframe automatically receive membership to its VIP club, Fine Society.

“You get free next-day delivery, and that is where you see a lot of repeat purchases scale up,” says Marini. “We have evangelists and real brand ambassadors, and that is how we did £5m [in sales] in the first year.”

The Finery model is reminiscent of Amazon’s hugely popular Prime membership, which offers unlimited next-day delivery on a vast range of products for an annual fee of £79. 

Peak problems

Offering such speedy delivery can prove logistically impossible during peak trading. The Black Friday shopping extravaganza at the end of November places unprecedented demand on capacities of retailers and couriers alike, and has forced retailers to pull back on some of their faster delivery options to cope. Despite the desire for speed, shoppers are largely understanding when this happens, as long as they know the trade-off is that they are receiving their goods for a decent price. 

The customer’s need for speed extends beyond just click-and-collect and fast delivery, and this will play out in all kinds of new areas. The rise of automation and artificial intelligence (AI), particularly in improving the supply chain and offering instantaneous customer service, is likely to have an impact on everything from efficiencies in distribution centres to speeding up customer service.

In April, Facebook opened up its Messenger app to invite developers to create “chatbots” that can be used by companies for AI customer service. AI is able to provide immediate responses to customer queries, which caters to the increasingly impatient shoppers demanding instant answers.

The challenge for online has always been the delayed gratification

Andrew Thomson, ecommerce director at Boohoo

The Facebook chatbots were unveiled by founder Mark Zuckerberg in the US alongside a handful of partners including online flower retailer 1-800-Flowers. Zuckerberg claimed the move means customers “will never have to call 1-800-Flowers again”. 

Thomson says that, although younger shoppers spend their “lives in this ongoing message-based conversation that never ends”, he is not yet convinced by artificially intelligent chatbots. He adds that Boohoo prefers the “personal touch” provided by a human customer services representative and warns of the danger of losing the connection with the customer.

But Thomson has not ruled out implementing the technology once it develops further, and Wheeler can envisage a future where AI is used for a live real-time personal shopping experience on the website.

Marini believes the world as a whole is moving towards AI, but at the moment it is not a top priority because he is focusing on the basics at Finery – improving the checkout process, product pages and homepage, and investing in better product images.

“People try to run before they walk,” argues Marini. “But there are some fantastic players who have all the basics right and they should push the need for speed.” 

Those that do so successfully are set to win the race for supremacy in an increasingly fierce marketplace.

By Matthew Chapman

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