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The importance of the retailer's last mile can't be understated. It's where companies and brands win or lose customers. Mastering the last mile is the key to building the customer relationship and ensuring long-term loyalty.
Defining the retail last mile
For retailers, last-mile services are the end-stage logistics involved in getting orders to customers, as well as accepting returned goods. For traditional bricks and mortar retailers, it’s simply not a core strength. These businesses were built around the idea that shoppers come in, find something, buy it, and take it home. It worked well enough for many decades.
Yet, just as Nordstrom forever changed our expectations for personalized in-store customer service, the internet gave us virtually unlimited product options with companies like Amazon and Zappos changing our expectations for delivering and returning those same products.
From two-day, overnight and same-day home deliveries to in-store, drive-through and curbside pickups, we have a plethora of options. The shopping genie has been let out of the bottle, and consumers are never going back to how things were.
That’s a problem for the many retailers who struggle with the last mile. If the road to getting that package into your consumers’ hands is not smooth, if it makes them wait too long, or if it has them chasing after you, you have already created a powerful negative experience — one that is likely to be remembered and shared.
This is a moment of truth: a pivotal brand touch point that is critical for both consumers and retailers.
The delivery squeeze
Delivery options have become so crucial to the customer experience that they are determining brand choices as never before. Think about overnight deliveries, once the pride of online retailers. Today, an overnight delivery option is a given. Any retailer that does not offer it stands to lose customers to those that do.
But there’s a cost. Between increasing competition and rising customer expectations, retailers are being forced to offer more for less. To stay competitive, to be profitable, and to match customers’ high expectations, retailers must adopt new strategies for success.
To affect significant, positive change, we suggest that companies embrace three key capabilities: visibility, flexibility and collaboration, and pair them with three key enablers: data, technology and partnerships.
Visibility and data
Companies need to have a seamless view of the location and details of everything they stock. Having different supply chains for store and online fulfillment prevents agility, hampers visibility and drives up cost. Omnichannel retailing is the only way to provide customers with a consistent experience and maximum choice.
The UK retailer John Lewis is able to maintain complete visibility to all inventory at any point in time by replenishing their shop floors directly from the distribution center, without the use of in-store stock rooms.
Having visibility is part of the strategy. Pairing it with a better use of data makes it actionable. Amazon is taking its next-day and same-day delivery even further, experimenting with predictive shopping. This involves anticipating shoppers’ future purchases based on past behavior. By holding relevant merchandise close to customers who are most likely to order them, goods are ready to deliver with very little notice.
Flexibility and technology
There is no one best way to get goods to the customer. In fact, what a customer prefers today may be different tomorrow. It’s important for companies to present flexible options that meet the customer’s schedule and preferences in the moment.
Having an infrastructure that supports plug-and-play technologies will enable companies to innovate, with agile responses to rapidly changing consumer demands.
Technology startups like Parcelhome offer smart mailbox, locker and pod solutions (with built-in sensors and internet connections), giving customers more remote control as well as real-time information about deliveries made to their homes.
Such technologies not only allow consumers to avoid the hassle of missed deliveries and prevent the mounting costs of return visits by the shippers, but they can also be used to ease returns. A recent study by the UK’s industry association for online retail found that 78 percent of respondents identified the quality of the returns service as an important factor when deciding where to shop.
Companies seeking to differentiate themselves must concentrate on improving the returns experience for customers as well as improving the process internally. Flexible policies and an empowered workforce are necessary components. To protect profitability, it is just as essential that returned items flow smoothly back into the system. Point solutions that address the customer pain and not the internal processes are only half-measures.
Collaboration and partnerships
To meet growing consumer demands for availability, convenience and choice — without incurring prohibitive costs — companies need to be open to collaborating with other key players when necessary. A number of innovative partnerships have emerged, including a unique DHL parcel delivery service partnership with Amazon and Audi to deliver packages to people’s cars.
On-demand, socially networked services, such as UberRUSH that deliver from companies like dry cleaners and florists and UberFOOD from restaurants, are made possible by the convergence of social, local and mobile technologies.
Further crowdsourcing of last-mile services, such as using customers to drop off packages for others in their neighborhood, are being tested in the U.S. and other global markets. According to IDC Worldwide Retail Predictions (2015), on-demand, socially networked delivery services will account for as much as 90 percent of same-day deliveries by 2018.
Making it work
With last-mile services, there is no one-size-fits-all solution that will balance customer expectation and cost optimization. This is particularly true given the many logistical and infrastructure-related company variables — as well as differences in geography, demography, labor laws, local preferences and demand for add-on services.
What is clear, however, is that retailers need to have a unified view of their business and customers, the ability to use their data effectively, the human and technical infrastructure to support change quickly, and the willingness to collaborate with new types of partners. Without this, retailers will find the last mile a continued challenge — growing more complex, slower, more expensive and difficult with every passing season.
Kees Jacobs is the global consumer products and retail consumer engagement lead for Capgemini. Sundip Naik is a vice president in Capgemini’s supply chain practice.
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