Trends and forecasting
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The meteoric rise of digital combined with economic uncertainty has changed the path to purchase forever, creating a whole new raft of challenges for anyone selling through retail channels. We have addressed these challenges in a series of four blogs, entitled “The future of retail”. In this final post we look at how companies can make it easier for people to do business with them and, in particular, how they can develop fulfillment strategies that truly meet shoppers’ needs and expectations without eroding profit margins. The race is on to solve this retail conundrum and innovative solutions abound.
When we look at the reasons consumers buy online in our latest FutureBuy survey, the top reason at 57% is to “save money”. This is followed by the ease of the process at 43%, speed at 42% and having a better selection at 39%. It’s a different picture for buying in-store, where experiencing an item tops the bill at 55%, followed by getting items sooner at 41%, buying other things at the same time at 34%, and making returning an item hassle-free at 33%. What is interesting about this is that for buying in-store, fulfillment is a key factor: having a purchase immediately and being able to return it easily feature prominently.
Every retailer is working to make purchasing faster, easier and more seamless for shoppers, with many creating omnichannel touchpoints and in response to the rise of the smartphone, creating easy to use mobile payment platforms. Amazon Fresh has time saving tools on its website and mobile apps, enabling the shopper to save lists, see past purchases and find one-click recipes, all making the shopping process easier and faster.
Alibaba, the global e-commerce marketplace is trialing pay by selfie on its mobile payment platform AliPay. The ‘Smile to Pay’ app validates mobile payments by matching a photo taken by the user at the point of purchase to a stored profile photo, bypassing more time consuming authentication systems such as passwords and usernames.
Addressing the fulfillment factor is a key consideration for all retailers and in some categories, such as fashion and grocery, it’s one of the biggest costs. Handling returns is a key part of any successful strategy and is particularly pertinent to online fashion retail. With saving money right at the top of buyers’ reasons for purchasing online, how do you handle fulfillment in a way that meets the needs of shoppers but doesn’t eat into already squeezed profit margins?
Retailers are finding new ways to improve fulfillment. If we look at delivery, they are pushing couriers and postal service providers much harder to deliver to pre-allocated slots or to increase their working hours so they deliver when people are actually at home. The challenge with home delivery is that consumers still need to wait in for items and this is rarely convenient. There is a need to re-engineer old practices to fit the new era, looking afresh at the needs of the new shopper.
Latest innovations include delivering to secure lockers placed at convenient locations, such as train stations or grocery stores, as well as commercial premises when people are at work. For instance, in the UK, CollectPlus sends, collects and returns parcels using a network of 5,800 local stores across the country. Amazon uses this service to handle their returns in the UK. The CollectPlus service has been designed to be user-friendly with long opening hours, a large number of outlets and accessibility.
Many consumers cannot wait for new and more convenient methods of fulfillment to roll out, a welcome alternative to waiting in for deliveries, trips to sorting offices on Saturday mornings and queuing in postal offices in their lunch hours. Our Global Young Shopper survey suggests that the consumers of tomorrow have major reservations about the current fulfillment models for online purchasing and that this acts as a major deterrent to buying. 41% say they are unhappy about paying for delivery, so alternatives need to be tried, tested and rolled out to keep tomorrow’s online shoppers satisfied.
There is a tension between what the shopper wants; instant gratification without extra cost, and what is sustainable for businesses to deliver. Consumer goods companies in particular are not in a position to add cost to their business process. The answers are found in thinking about how to create sufficient convenience for people and potentially how to get shoppers themselves involved in the process. Click & Collect will continue to thrive and retailers will adapt, learning how to leave products in places and at times that connect to people’s lives.
Following in the footsteps of Airbnb and Uber, spare capacity and crowd-sourcing could be applied to fulfillment. DHL is currently experimenting with a crowd-sourced parcel delivery system in Stockholm, Sweden. Using an app called MyWays, people can deliver parcels to end consumers, who can specify a fee as well as a time and place for delivery.
As people go about their lives they often travel with space capacity; in their bags, or in their cars. This will offer retailers another option within a flexible and shopper friendly fulfillment strategy.
Online retailers can create beautiful, easy to use websites that are accessible from any device, showcasing an amazing array of products at competitive prices and with secure payment mechanisms. But without ease of purchase together with fast fulfillment and a hassle-free returns strategy in place, customers won’t be happy and they certainly won’t come back. The answer is to understand who your shoppers are and what they expect, and to build a purchase, delivery and returns strategy around their needs, budget and lifestyle.
For more information, please contact James Llewellyn at James.Llewellyn@gfk.com.
Trends and forecasting
4 MIN READ
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