Keeping the customer proposition attractive yet affordable is one of the greatest challenges retail businesses are currently facing.
Unfortunately, many retailers are being drawn into a potentially damaging position where investments into complex logistics systems designed to compete through offering later cut-offs, diverse delivery options and same-day delivery, are creating fixed costs that could prove damaging if circumstances change.
At what point does extra capability become an unnecessary burden or an unacceptable risk?
Currently, return on investment warehouse technology is no longer driven by cost-per-order, but by a desire to fulfil consumer demands whatever way possible – this approach can place the business at the bleeding edge of ‘competitive advantage’.
It’s crucial that businesses consider the potential risks and balance the potential outcomes to find an optimum solution. There are wider questions for the sector as to who should pay for service enhancements and whether greater collaboration on delivery is the way forward.
One significant factor in this equation is the willingness of the consumer to pay extra for faster delivery. Results from PWC’s Global Consumer Insights Survey 2018 reveal that over 40% of online shoppers would pay for getting their packages within a one or two-hour window of their choosing. Some 23% of respondents said they were to pay a charge for next day delivery.
However, the big question is just how much would the consumer be willing to pay for these services?
Other surveys suggest that free delivery is a significant factor when consumers make an online purchase. Research conducted by Advantec in 2017 indicates that 49% of respondents rated free delivery as the most important consideration when buying online – significantly above fast-delivery at 14%.
So, to what extent could free delivery boost sales? Does the investment and risk involved fit with the business strategy?
Along with a huge rise in complexity around delivery options and fulfilment processes comes greater uncertainty and risk – factors that demand increased flexibility for a business to respond quickly to changing circumstances.
To achieve this flexibility, and to survive and thrive, modern retail businesses must now be agile. This agility must be built into the very fabric of the organisation, from the way orders are managed, inventory planned and labour resources allocated, to the design of order picking processes, warehouse layout and dispatch operations.
Agility is all about speed of reaction and the ability to change and respond quickly and effortlessly. For most retailers that not only means a physical change but, critically, a change in mindset too. To become more agile it is necessary to look carefully at the long-term business strategy, with great attention being paid to risk analysis around ‘what if?’ scenarios.
Of course, responsiveness and agility come at a cost and determining and understanding those costs is essential to the protection of margin and the competitive positioning of the business.
These critical factors, along with many others necessary for understanding the business case for investment, are explored in a new, free downloadable eBook “Why an agile and responsive supply chain is a must-have”.
Among the contributors is Tim Allinson, Global Supply Chain Director of fashion brand Jack Wills, who sees the advantages of using the store network to fulfil online orders too.