TRD Issue 34 - Insight: Navigating Logistics and Fulfillment Strategies in 2023

Hello subscribers,

In this issue, we focus on the critical yet often overlooked aspects of e-commerce: logistics and fulfillment.

Amazon Prime has set a benchmark, making rapid delivery an expected norm rather than a luxury. However, it's not just about speed; Shippo's 2023 report underscores that consumers value free shipping over fast delivery, emphasizing the need for flexible shipping options. Transparency has also become a non-negotiable, with brands like Zappos setting new industry standards through real-time order updates.

As we navigate this complex environment, the importance of multi-channel communication and strategic use of physical stores cannot be overstated. With increasing customer acquisition costs, brands also create additional touchpoints with their customers by sending delivery notifications with their mobile app. Moreover, the increasing shipping costs are compelling retailers to leverage in-store purchases and BOPIS options, particularly during the high-demand holiday season.

Happy reading!

The Retail Direct

About 91APP

Founded in 2013, 91APP is the premier OMO (online-merge-offline) SaaS company, providing one-stop omnichannel retail solutions in Taiwan, Hong Kong, and Malaysia. It offers advanced Commerce Solution and Marketing Solution that enable retail brands to penetrate the D2C (Direct-to-Consumer) e-commerce market and drive their operational benefits to their full potential. In 2021, 91APP became the first SaaS company to be listed in Taiwan and has been named one of Taiwan's "NEXT BIG" companies by Startup Island TAIWAN.

For more information about 91APP (TWO: 6741), visit www.91app.com .

Introduction

E-commerce has shifted from a mere sales channel to a competitive arena where brands and retailers seize opportunities or get sidelined.?

As someone in charge of making decisions in this field, you know the challenges and complexities involved.?

However, with supply chains becoming longer and customer demands increasing, the logistics and fulfillment aspects of your business model, which are often overlooked, could determine whether you succeed or just barely make it.

Keep in mind that customer expectations are influenced not only by the quality of the product but also by the experience that comes after they click the "buy" button.

The Amazon Effect on Customer Expectations

In a competitive landscape where Amazon has set the pace, ignoring the "Amazon Effect" is no longer an option.

In a recent interview at the All-In Summit, Shopify's founder and CEO, Tobi, stated that "Everyone should study Amazon" when asked about the competition and product partnerships of logistics with Amazon.

Perhaps no company has shaped customer expectations more profoundly than Amazon. Its Prime membership, launched in 2005, was the first of its kind.?

Customers paid a one-time fee of $79 and received unlimited two-day delivery on their orders. This was a great deal, considering Amazon typically charged $9.48 for two-day delivery, and customers could pay for their Prime membership by placing nine orders in a year.

Since then, Amazon Prime has set a new standard, leading most consumers to expect free shipping. A McKinsey report cites that more than 90% of US consumers expect two- to three-day delivery as the baseline, and 30% expect same-day delivery.

Free Shipping vs. Fast Shipping

The perception of "fast delivery" has evolved. While 96% of customers once equated fast delivery with same-day service, the pandemic altered consumer expectations. During COVID-19, 45% of consumers adapted to longer shipping times due to global supply chain disruptions.

However, as we arrive in 2023, it's more than just how fast a product gets delivered.

According to Shippo's 2023 State of Shipping Report , “75% of consumers prefer free shipping to fast shipping when given the choice.” Interestingly, this preference for cost-saving also extends to the return process; 45% of survey respondents emphasized the importance of free return shipping.

When looking into the scenarios where consumers are willing to pay for shipping, it appears speed isn’t the driving factor.?

According to a survey by Digital Commerce 360 and Bizrate Insights in 2022 , only 26% opt for paid shipping to receive their orders quicker than free shipping would allow. A mere 8% are willing to pay for same-day delivery, indicating limited consumer appetite for extreme speed.

This evolving dynamic underscores that while being fast is good, being cost-effective and transparent can be better, and retailers who balance these elements effectively will likely emerge as winners.

More Shipping Methods

The debate between offering free shipping or fast shipping can feel like a zero-sum game. But in today's fast-evolving e-commerce landscape, this binary perspective is an oversimplification and, quite frankly, a missed opportunity for brands.

Consumer needs are multifaceted; what is considered a "need-it-now" purchase for one may be worth the wait for another. For instance, the urgency for receiving a piece of furniture pales compared to daily necessities like groceries or personal care items. Therefore, pigeonholing your brand into offering just one or two shipping options can alienate a segment of your customer base.

The modern consumer demands flexibility, looking for shipping options that align with their urgency and willingness to pay. By presenting an array of delivery methods, from expedited to economical, you grant your customers the autonomy to select the one that best suits their requirements. In doing so, you enhance customer satisfaction and position your brand as accommodating and in tune with diverse consumer needs.

Being Transparent

Talking about transparency, providing accurate delivery information is becoming increasingly important. This accuracy depends on seamless communication between brands and their fulfillment centers, which diverse production methods and global supply chains can complicate.

Take Zappos Family of Companies , a pioneer in online shoe retail, as a case study. The brand listened closely to customer feedback, demanding real-time updates on order status. In response, Zappos enhanced its processes to provide such updates from receiving an order in the warehouse to its arrival at the customer's doorstep. This agile approach not only met consumer expectations but elevated the standard for transparency in the industry.

To achieve this level of operational efficiency, a brand’s marketing and warehouse teams must operate in sync. This collaboration involves anticipatory planning, such as forecasting sales to ensure sufficient stock or aligning shipping schedules to accommodate seasonal demand.

Multiple Channels for Delivery Updates

Amazon leads the way by offering a range of notification options that cater to individual preferences, including email, text, map-tracking features, and photo confirmations upon delivery. This multifaceted approach keeps customers informed and empowers them to manage their delivery expectations.

As acquiring new customers becomes more expensive, optimizing the post-purchase experience is crucial for retaining existing ones. Brands increasingly leverage various channels to provide timely and customizable delivery updates to nurture an ongoing relationship beyond transactional interactions.

One way to keep customers engaged is by offering delivery updates through a mobile app. The app can give customers timely updates on their shipping process and offers personalized product recommendations. This strategy helps build a stronger relationship between the brand and the consumer, using delivery updates to promote customer retention.

Balance Holiday Shopping Delivery with Physical Stores

One of the challenges facing e-commerce brands this year is the rising shipping cost, which has prompted a reevaluation of free shipping offers. Some retailers have increased the minimum purchase amount required to qualify for free shipping to mitigate this.

Instead of solely relying on online orders, many retailers are refocusing their strategies to drive in-store purchases, especially for last-minute holiday shoppers with store fulfillment. To do this, they are utilizing a combination of organic and paid marketing campaigns, specifically on social media platforms, to encourage physical store visits.

Buy-Online-Pickup-In-Store (BOPIS) is another way to reduce shipping costs and ensure customers receive their orders on time, particularly during the high-demand holiday season. This option also helps the brand and customers avoid paying higher fees for express delivery.

Conclusion

In summary, the e-commerce landscape is more dynamic than ever, and the key to success lies in a brand's ability to adapt and meet consumers where they are. As we gear up for the holiday season and beyond, a multi-faceted approach that balances speed, cost, and transparency will be the cornerstone of enduring success.