The lack of seamless and transparent performance across all of the home delivery channels has left customers frustrated and has damaged retail brands. At the same time, home delivery growth is increasing retail costs and failure to address home delivery differently will continue to depress retail margins. Retailers need to expand their omnichannel retailing strategies beyond selling to include home delivery.
Changing customer expectations provides opportunities for retailers
With omnichannel retailing, delivery performance has become just as important as selling and can be a new way for retailers to sell more. In the customer’s mind, the definition of successfully sold has always included successfully delivered. Now, with online buying, the measurement of success has also needed to change for the retailer.
In the past, when customers purchased at a store, they were effectively the delivery agent. If goods were purchased for delivery, they shipped through a parcel carrier with delivery windows measured in days and no capability for same-day delivery, or through a local carrier with little sophistication or integration with the retailer.
Today, delivery performance has become strategically important to retailers as it has become integral to their brand identity. All of the energy and effort that goes into selling and building brand loyalty can be lost with one bad delivery. But equally damaging is a mismatch in selling service and delivery levels, which can mean stunted growth or completely missing a market. The challenge for many retailers is that they have multiple delivery channels and each delivery channel has its own strategies and capabilities. Failure to integrate delivery channels can result in missed service expectations for the customer and higher costs to the retailer.
Changing expectations in delivery performance can also be an opportunity to grow revenue. With the broad availability and transparent pricing that comes with online shopping, enhanced delivery execution can be the way to capture the customer. Increasingly, consumers are valuing their time as much as the price they pay and they want help making purchases work in their homes. There are numerous examples where retailers are increasing their “top line” by offering premium delivery and value-added services.
Delivery strategies built one room at a time
Retailers today have multichannel delivery strategies and capabilities that were created reactively and optimized by delivery channel. There are channels for large and small format goods, free and expedited services, delivery by 3rd-party services or in-house/dedicated fleets, and delivery from distribution centers or stores. The results are analogous to what happens when you build a house one room at a time. With a multichannel delivery approach, there is no leverage across the delivery network or visibility into delivery service performance. This is certainly not a customer-centric approach and it will not go unnoticed by the customer over time.
Retailers with multichannel delivery operations make the home delivery mode decision too early. Planning is done for each order regardless of other deliveries to that customer and other customers in that area. In addition, all delivery mode strategies have their limitations in terms of service and cost. For example, the decision to send all large format goods via a private or dedicated fleet to sparsely populated areas may result in either higher delivery costs or unacceptable lead times. Similarly, small format goods could be delivered via the “two-man operation” more economically and faster if other orders are already going to that customer or nearby.
Missed opportunity to engage the customer throughout the buying lifecycle
There are tremendous opportunities to increase revenue and brand loyalty, and even to reduce costs, by using supply chain capabilities and information to engage the customer throughout the entire buying cycle. Called the Customer Facing Supply Chain, this strategy helps retailers sell value-added services, make better decisions for executing home deliveries and keep the customer fully aware throughout the shopping experience. However, applying the customer facing supply chain strategy to home delivery operations made up of disparate channels will expose the customer to the inconsistencies between the channels. Additionally, the multichannel delivery information problem creates a technology nightmare to integrate the systems that support the disparate channels, and drives up operational costs in areas such as the call center as customers attempt understand where their goods are.
Omnichannel home delivery defined
An omnichannel home delivery strategy unifies all of the delivery channels to improve delivery consistency, create incremental revenue and differentiated service opportunities, and minimize delivery costs. It provides a framework to engage the customer throughout the shopping experience from booking a delivery appointment to surveying performance post-delivery. Omnichannel home delivery systems look across all of the delivery channels before making a delivery assignment to gain the greatest leverage from internal and external delivery resources and inventory locations for the lowest delivery costs and best customer responsiveness. In addition, these systems use information to engage the customer to increase satisfaction, provide more information about the customer’s delivery preferences and drive down operational costs in areas such as the call center.
An omnichannel home delivery platform works across all products and home delivery modes—large and small format goods, private and dedicated fleet, 3rd-party carriers and couriers, drop-ship, etc.—to provide optimal delivery service. It is truly customer-centric as it understands what orders already exist with customers or are in the vicinity, and it provides choices in the buying process that exceed customers’ expectations. It also provides operational visibility across all of the delivery modes to effectively balance their capacities, track delivery performance and manage customer preferences.
Getting to omnichannel home delivery
Achieving true omnichannel home delivery requires that retailers step away from their traditional silo-based and reactive home delivery strategies, processes and technologies. The new home delivery strategy needs to include its impact on the customer’s buying lifecycle, be part of every customer touch point (e.g., store, web, mobile, etc.), be consistent with the retailer’s brand and work across all of the home delivery channels available to the retailer. Customer orders must now be dynamically evaluated and presented to the customer for the best delivery option while simultaneously considering existing orders to be delivered, delivery channel options and costs available. Home delivery information must be managed through a common repository and made available to retail operations and customers in real time. In fact, this information should be used proactively with customers to keep them engaged and help end the dreadful “where’s my stuff” call that retailers constantly receive.
Technologically, retailers need to adopt a platform strategy for home delivery that consolidates all of their transportation options on a single solution. However, this solution needs to be able to address dynamic delivery appointment booking across multiple modes of transportation during the buying process. In addition, it must go beyond mode selection and look for ways to uniquely combine customer orders to lower costs and meet customer delivery commitments. Because home delivery is a “last mile operation”, the omnichannel home delivery platform must manage or track last-mile transportation across all modes of transportation in real time by leveraging GPS and mobile applications and information from multiple sources.
Home delivery is rapidly evolving and will be one of the key drivers that define retail success for the foreseeable future. To make it the competitive weapon it can be, retailers need to take the same omnichannel approach to home delivery that they are taking to selling. How is your company moving to omnichannel home delivery?
Source: Descartes Systems Group
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