Should retailers lower expectations around last-mile delivery?
According to the inaugural Retail TouchPoints’ “Last Mile Benchmark Report,” the biggest last-mile challenges for retailers are expectations for fast and free delivery.
The top-three challenges were:
- Expectations on delivery times, cited by 49 percent;
- Rising shipping costs, 47 percent;
- Expectations of free/low-cost shipping, 44 percent.
The study, sponsored by Oracle and Convey, surveyed 146 retail executives.
The authors advised retailers to rethink whether every order needs to be delivered within 12, 24 or 48 hours. The reported stated, “If consumers are confident that their order will arrive when the retailer has said it will, they might be more willing to wait a few days.”
However, Amazon Prime continues to raise the bar on fast and free delivery, the report found. According to the 2018 AlixPartners Home-Delivery Shopping Survey, the maximum number of days people are willing to wait for an item to be delivered in exchange for free shipping has decreased, from 5.5 days in 2012 to 4.1 in 2018. The same survey found that only 19 percent of Prime members would wait a week in exchange for free shipping versus 31 percent of non-Prime members.
A December 2017 survey by L2 also revealed that 77 percent of brands are offering free shipping.
Not surprisingly, consumers’ expectations have also elevated around accurate deliveries, hassle-free returns and enhanced visibility into both delivery and returns, according to the Retail Touchpoints report.
Retailers in the study said they were addressing some of the challenges through efforts to seek out the most optimal transportation routes and trying new business models for shipping and returns.
But only a minority of retailers were found to be using technologies such as transportation management solutions or route optimization systems. Few are using last-minute data to determine efficient delivery routes or offer incentives to consumers to fit more items in a box.
The report concluded: “[Retailers] need to gather insights about price sensitivity and elasticity in the last mile, so that they can begin recouping at least some of their costs without alienating customers. They should invest in back-end systems that allow them to make firm delivery date promises, and to proactively prevent missteps that can damage the customer relationship.”
DISCUSSION QUESTIONS: How close do retailers have to be to matching Amazon’s benchmarks for fast and free delivery? Should retailers focus on innovation or reworking their processes to address last-mile challenges? Or should retailers instead try to lower consumer expectations?