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Doorstep challenge: How retailers are innovating on delivery and fulfilment
Every retailer selling online in 2018 needs great shipping options for customers who have got used to an expanding list of choices. How are some retailers developing the proposition, and where does technology fit into the equation?
If it goes smoothly, the simple act of delivering a parcel or package on time, with an unblemished product inside, and with tracking of the purchase on its journey en route, will go a long way to keeping the online customer satisfied.
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It sounds simple. But for customers, it’s not so long ago that staying in for a major delivery – a new washing machine, let’s say – involved an all-day wait at home without a precise indication of when the promised item would arrive. And when it did show up, any problems with the item could take some serious sorting out: long-winded calls to contact centres and, for the really unlucky, more waiting in for the return to go back out and the replacement to arrive.
Today, there are inevitably still deliveries that aren’t delivered time – and some nuisance caused along the way. But the growth of e-commerce, and the parallel march of delivery options and technologies that support logistics, has gone a long way to changing doorstep deliveries forever. And for the retailer, it’s become a question how to keep adding to the mix of delivery options to stay ahead of the competition, whether through partnerships or in-house innovation.
Modelling the last mile
Above all else, perhaps, one aspect of delivery that has shifted is consumers’ increasing demand for precision just as much as speed in last mile delivery, says Will Lovatt, vice-president for Europe, the Middle East and Africa at the supply chain software specialist Llamasoft.
“Speed has long been at the heart of last mile delivery. Where next day delivery was once the benchmark for retailers competing to provide convenience to consumers, same day delivery is now often the standard. Going further, though, precision in the last mile is what consumers are beginning to demand, and retailers are responding.”
With the likes of Amazon having pulled the volume out of more traditional delivery networks through its data-driven capability to offer delivery in precise time slots, it’s clear that any retailers relying on conventional supply chain networks are having to adapt.
“Many of the larger retail organisations are already chipping away at their traditional supply chains to fashion a more agile approach,” says Lovatt. “Those that are succeeding are doing so by repurposing their existing networks in inventive ways, implementing ‘dark stores’ that solely hold a stock for online orders, utilising stock rooms in retail stores as localised delivery hubs and even picking stock ordered online from the shop floor.”
Early adopters of the push towards precision have gained a competitive edge, says Lovatt, but the challenge very often is finding a viable route to providing precision delivery that is practical for the specific organisation and the types of products it supplies.
“Retailers could all too easily become distracted by emerging technologies that are neither mainstream nor established as the answers to transforming their supply chains.
“Technologies such as drone delivery and delivery by a self-driving fleet will no doubt change the supply chain in the long run, but those that need to transform their supply chains now can do so by taking stock of their existing assets and recognising more inventive ways to use what they have.”
How Wickes is delivering
DIY-and-trade-products business Wickes is one that is on that journey right now. It is improving the proposition for customers by making buying easy – and that includes giving choice when it comes to shipping and in-store collection.
Mike Mills is head of customer fulfilment at Wickes, and his job title says it all: he is responsible for fulfilling customer orders efficiently and seamlessly in this multi-channel era when expectations about convenience have gone through the roof.
“The challenge for Wickes, in many respects, is to make the most of our 240 stores. It’s a big fixed cost to us, of course, so it has to deliver strong benefits at a time when some of our competition is e-commerce- and some are online pureplays,” says Mills.
What’s good for Wickes, however, is that convenience is especially important to the tradespeople that are a big slice of its customer base – so all those legacy stores have a crucial role to play. (And, indeed, convenience clearly counts for a lot as Wickes is still adding to its store estate, rather than shrinking it.)
“If we stock pick and deliver from our stores, we’ve such good coverage across the UK that nearly all deliveries are under 20 miles away – and most are under ten. That gives us an immediate opportunity when it comes to delivery, so long as our systems are up to it,” says Mills.
The company’s systems evolution tells its own story, in fact. Three years ago, Wickes launched click-and-collect services, enabling customers to elect a local store for a pick-up. To make this happen, it relied on a stock management API that tracks stock levels in all its stores.
“With that platform, we’ve been able to move things on. Some 18 months ago, we partnered with courier company CitySprint and its On The Dot service, which tracks spare capacity in its courier network to allow us to undertake an in-store stock-pick and to offer Wickes Hourly – a one-hour same-day or next-day delivery slot.”
Integration was straightforward, says Mills. On The Dot has an open API, which means that retailers can integrate CitySprint’s delivery technology directly into checkouts and EPOS. As it stands, 7,000 products are available through Wickes Hourly and the precise one-hour windows are available seven days a week from £9.95.
“Naturally there are product limitations,” says Mills. “On The Dot can delivery any product that weighs up to 25kg and is smaller than 1m x 1m x 1.2m. Orders can be made up of multiple items, with no limit on quantity – but the total order is restricted to 200kg and the dimensions limit so it can fit into a small van.”
Move the dial
Mills says that, with the 2016 soft-launch, and the proven capability of the service since, the challenge now is for Wickes to move the dial again.
“We know we can increase customer take-up of the service by promoting it harder with headline banners on the website, for example. There’s also an opportunity to integrate our back-end carrier management and stock management systems even more comprehensively, to unlock opportunities for others kinds of customer convenience offers beyond the current necessary volume restrictions of On The Dot – to include more bulky items, say.”
So Wickes is targeting November 2018 for the next extension to its customer delivery options.
“The idea is to shout about it once everything is in place. We want to market a suite of fulfilment options, and our systems are nearly ready for that to happen. Once a customer has placed an online order, our capacity and stock management systems can review where each items sits across our store estate and allocate an optimum store, with a range of options for any larger items that cannot be fulfilled through Wickes Hourly.”
What’s being joined up at the back end to make it all happen? The Wickes website runs on SAP Hybris and its in-house stock system is StockBox, while multi-carrier management is handled by Neopost’s Temando platform, specifically designed with tools to optimise shipping based on carrier, price, location, inventory and more. With CitySprint’s On the Dot also in the mix, it all promises to offer e-commerce customers – and more than half of orders are now via mobile – another step-change in the offer.
“Technology and systems are an ongoing challenge, of course. We have so much legacy so you have to layer things carefully. We have a five-year for our digital and in-store business offer, and it’s a great journey to be on.”
The developments Wickes is driving are mirrored in some respects elsewhere, though every retailer has its own journey to go on.
At Waitrose & Partners, the grocery business of John Lewis & Partners, the head of distribution, development and transport, Tim Chicken, says the grocer’s logistics could long term perhaps be best delivered through partnership.
“We have to live up to our promise to customers in delivery terms – like one-hour delivery slots, for example – and that means an agile distribution network and a transport management system that delivers seamless flow across channels,” Chicken says.
Unlike Wickes, though, Waitrose stores are heavily biased towards the South East in their spread, so Chicken admits the company may need outside help. “Does the last-mile delivery have to be Waitrose-branded vehicles? Might we see a shared infrastructure in time between multiple grocer partners? It’s something we are thinking about.”
The Argos way
Another approach to the question of fulfilment is taken by Argos, where a multi-channel strategy and integrated back-end delivers online and offline alignment in the company’s click-and-collect service, used by about three quarters of customers. Plus there’s a “Fast Track” version of the service that takes this even further, allowing customers to order and pick up from a store on the same day.
Customer convenience is at the heart of the Argos mindset, partly because research has shown how nearly a fifth of consumers would change their minds about a purchase if click-and-collect was not available. That means it’s a highly effective way of reducing basket . Click-and-collect customers also spend more than regular shoppers, the data shows.
The integration of the offer means Argos generates half of its sales online, but what’s distinctive is how three quarters of those online orders are collected in stores.
Even if most retailers have a way to travel with creating fully integrated fulfilment systems, arguably the next wave of innovation in fulfilment can already be glimpsed at the online grocer Ocado, which has been embracing technical and formats innovations as part of its strategy for growth.
In July this year, Ocado opened its fourth fulfilment centre, in Erith, North London, which raised the bar with eye-catching innovation as well as massive scale: it is mostly run on picking robots buzzing around a state-of-the-art automated warehouse.
The robotic system can pick many of the 50,000 items available on Ocado.com, using a computer vision system designed by the Ocado Technology robotics team to calculate the grasping points for a given item. The system uses a vacuum cup attached to the end of an articulated arm that is in turn connected to an air compressor. By creating a vacuum, the suction cup can lift an item and place it from storage crates into a delivery crate at the pick station.
Ocado is also in discussions with “multiple retailers in a variety of geographies” about the potential of its Ocado Solutions back-end systems and platform to support and drive efficiencies in other online businesses – and is already supporting the grocer Morrisons, for one, with its online offer.
“Give us a warehouse, you supply the data and power and cooling, and we will provide the cube and the swarm robotics,” says CTO Paul Clarke. “It’s a bit like a rental model. We will rent you those robots, but it’s your shed and we operate it for you.”
Five ways retailers can ship smarter
True back-end integration is needed to make some of this a reality, but the objectives should at least be clear:
Clearly display shipping costs: The cost of delivery can be a crucial factor in a customer's decision to purchase an item, so charges must be easy for users to find. One place to ensure delivery costs are displayed in on product pages. If it’s not showing, potential customers will be lost.
Provide next-day (or even same-day) delivery: Convenience is playing an ever-greater role in online purchasing, so fast, premium delivery options are a must.
Flexible delivery slots: Not many of us want to stay in the house all day waiting for a delivery, so a range of time slots should be provided. One- or two-hour time slots give the greatest convenience to customers, alongside the well-established am or pm delivery slot.
Free delivery: Offering free delivery is one of the most powerful weapons in any retailer’s arsenal. Consumers love free shipping, and the stats back it up.
Deliver on promises: Companies spend a lot of time and money on attracting users to the website and converting them into paying customers, so it's vital that the last step of the process is satisfactory. Deliver on time, and as promised, and customers are more likely to buy again and even recommend to friends and colleagues; get it wrong and the reverse will apply.