Last week I attended Home Delivery World, one of three simultaneous conferences put on by Terrapinn. The other two, eTail and Click & Collect, focused on other, related topics that were pertinent to the Home Delivery attendees. The event has just completed its third year, and while it had caught my eye in previous years, this was my first time attending.
For the most part I found that the audience was made up of the right people – the right level of decision maker from the right part of the retail organization. Typical for such a young show, it could’ve used a lot more of those people – it was a little vendor-heavy. But the speakers and content were right on (full disclosure: I was a speaker, but I wasn’t necessarily counting myself!).
What did I learn? Primarily that the last mile continues to confound retailers. They know they have to be more aggressive in meeting consumer expectations, and they almost universally recognize that they have to get faster. Consumers may be willing to accept a slightly longer deliver time in return for “free”, but they will not stand for more than 24 hours to get an order out the door.
Home delivery is no exception. In fact, the capability, long a sleepy part of the furniture and appliances sector of retailing, is undergoing a renaissance. The reawakening is driven by three major factors:
Consumers don’t seem to distinguish between the companies that may be involved in delivering their goods – unless something goes wrong. So home delivery carries special risks, when the perception is that the retailer itself is the one whose brand is on the line. It’s an even bigger risk when the retailer is using a third party to manage that delivery.
The good news is, when things go right, the consumer is happy and you’ve enabled a purchase they might not have made otherwise, since you facilitated their receipt of the goods. The bad news is, Amazon and UPS and Fedex have all set an expectation for near-overnight if not same-day delivery. Yeah, it’s not fair. Parcel is not the same thing as home delivery, but consumers don’t care to understand the difference. If Amazon can deliver a book in two days, why can’t you deliver a couch that quickly?
This sense of rising expectations is pushing retailers to take a hard look at their fulfillment operations. Just like with eCommerce DC-to-consumer parcel shipments, home delivery needs to be faster and more precise, with tighter delivery windows and much shorter lead times.
Flexibility AND Efficiency.
I wish I could give appropriate credit for this concept, but I can’t remember the speaker. The message was simple: retailers historically have operated with a uni-directional product flow: from DC to store. In that environment, flexibility is an unnecessary expense. It is efficiency that is key.
In an omni-channel world, you don’t know where the next order will come from or what inventory will be needed to fulfill it. And if you don’t have the flexibility to slot in a new order that requires home delivery, maybe even as they’re loading the truck, then you’re going to lose out to someone who can – someone else who can meet consumer expectations. Consumers won’t give you credit for efficiency – they expect that, and they expect the low prices that come from a highly efficient operation. It is in flexibility that retailers can really find differentiation and opportunities for consumer delight.
The Best Things In Life Don’t Have To Be Free.
Retailers really aren’t used to thinking about services and the best way to provide them. They’re products companies. But services are the future. I define services as the offerings that surround products and enable consumers to either more easily own the products they want, or more easily enjoy the products they want.
Services can include installation or repair, or (say, for an outdoor equipment retailer) travel services that help their customers set up vacations that enable them to better enjoy the outdoor equipment they’ve purchased. For apparel, tailoring or wardrobing services. For furniture, room design services. For many, many retailers, home delivery is a service to be offered as well.
But services don’t all have to be free. Even for a fee, sometimes just offering the service at all is a differentiator. Taking away an old refrigerator when delivering a new one, for example. Fulfillment of any kind has endured something of a race to the bottom – free shipping for any order has only recently been beaten back by at least minimum order levels in order to qualify for free shipping.
Retailers need to be careful about what they give away and what they charge for. They don’t want to come off to consumers as nit-picking their way to a higher average order value (think baggage fees followed by food charges followed by premium seat charges by airlines). But at the same time, a little strategic thinking can find ways to offer differentiated service without having to give it away for free.
The Future Of Home Delivery.
These issues are really only in their infancy, even for a capability as relatively mature as home delivery. It was exciting to be able to deliver some of the results from RSR’s last survey on the topic. It’ll be even more interesting to see how things change when we refresh the topic this fall.