Booking a flight to satisfy all my requirements is easily achieved using an online platform. Numerous customisable filters, sliders, and checkboxes, mean I can select my carrier, times, departure airport, and optional extras with ease. In contrast, ordering a product online (a new desk chair for example), is a very different experience, particularly when it comes to delivery options.
Although customer demands for multi-channel fulfilment and customisable delivery options are more nuanced, they still lack flexibility and choice in comparison to many other industries.
On demand vs. cost to serve
Providing delivery choice and flexibility in retail has long been a must. Retailers are yet to fundamentally restructure their supply chain to achieve this is in a profitable way. Increasing the number of delivery options carries with it the potential for additional cost; either covered by the retailer or handed on to the customer. Regardless, there needs to be an understanding of the processes, volumes, vehicle types needed (smaller, larger) and frequency etc. This is so that when orders are placed alongside each other, at scale, all customer promises can be achieved. So many factors to consider, with associated trade-offs, that cost to serve analysis is essential.
The rise of delivery platforms in retail fulfilment?
Delivery platforms are becoming more and more prevalent in the modern economy. Companies such as Shutl are integrating their one-day delivery platform with the ecommerce software of retailers such as River Island and Hotel Chocolat. These companies are keen to provide their consumer base with greater choice and flexibility at a reasonable price. Companies are keen to do this as a method of ‘saving the sale.’ Providing a delivery alternative to suit the customer can reduce the abandonment rate at checkout.
Furthermore, if fulfilment is currently seen as a cost centre, retailers may improve margins by implicitly passing on some of these costs to a fulfilment provider. Platforms could inherently improve the balance sheet, especially for those with inherent costly fulfilment operations.
We live in a world where the largest road transport company (Uber) owns no cars, the largest accommodation company (Airbnb) owns no property, and the world’s most valuable retailer (Alibaba) carries no inventory. Operating a platform between the consumer and a service offering is a method of utilising capacity, already in use to satisfy customer needs without additional heavy investment in assets. Platforms allow companies to create entire ecosystems that do much of the work to grow the company and bring together supplier and provider.
Traditional retailers may well modify their current 3rd party logistics strategies by offering a front-end gateway to a multitude of delivery partners. This could improve their ability to provide flexible delivery options with little assumed risk on their behalf. Rather than simply outsourcing delivery to a provider, retailers would provide an aggregator solution, similar to that of Skycanner or Booking.com, that will put the customer in control over their own fulfilment and cost.
A world where customers control their own fulfilment?
Customers could soon find themselves in a privileged position of being able to select the method, supplier, and cost of their fulfilment. By commoditising the ‘final mile’ retailers are handing ultimate control to the consumer to select their own fulfilment options to satisfy their requirements alongside balancing it with cost. Sounds good, but what’s the impact on retailers?
Are retailers ready?
Multi-channel fulfilment is more than just delivery to the customer. There are a large number of supporting capabilities needed by a retailer to offer the customer control of their fulfilment; but that comes with a number of prerequisites and conscious decisions:
- Inventory visibility across all channels – this must be possible in close to real-time, including inventory moving between different locations for fulfilment options to be calculated and presented to the customer.
- Relationship between retailer and fulfilment partners - how to manage dispatch from fulfilment locations without predictability of 3rd party collection SLAs, in a full-scale operation. This could easily snarl up dispatch and leave the customer disappointed and responsible for chasing ‘who’ to blame for delayed or non-confirmed dispatch of their order.
- Clear visibility of inventory and parcel status across platforms - without which tracking is not possible – an IT solution that works across all entities would be required. Does tracking matter? If the customer takes responsibility at point of dispatch, does the retailer need to track the order at all?
- Balanced flexibility of logistics vs. cost - ability to forecast fulfilment throughout is challenged when customers are put in control. It drastically increases complexity and number of providers. Can this be viable in a full scale fulfilment operation?
- Ability to spread volumes across providers – this is a great benefit, although how to control this if the customer is in control rather than fulfilment provider or retailer. Who would and how would ‘they’ know to ‘turn off’ a particular fulfilment provider option if volumes got too high?
- Service responsibility – once fulfilment is effectively outsourced, and customers are put in control, the customer also assumes responsibility for their chosen delivery option. Who do they ‘chase’ when things go wrong? To what extent will the retailer be responsible anymore? Will it be acceptable for a reputable brand to push the customer to the fulfilment provider – technically yes, but is this true customer service?
Who will be the big winners of the rise in platforms?
Balancing increasing supply chain complexity with the positive uplift of ‘saving the sale’ and reducing the effect of fulfilment as a ‘cost centre’ is a tricky proposition. Retailers will need to know their consumers reactivity to changes in price and fulfilment options and how this will affect their sales. Retailers and fulfilment providers will need to work together to provide some control and predictability in the overall operation. Without testing and thorough planning, additional customer propositions are hard to prove or dismiss. Retailers wish to add these options for their customers but in doing so inject complexity into their operations. Such an investment cannot be made on guess work alone.
We are already starting to see this kind of approach to fulfilment albeit on a much smaller scale. The restaurant industry and some retailers are utilising a centralised and informal fleet to deliver to customers via UberEats, Shutl, and Deliveroo. By dynamically checking and augmenting their fulfilment capacity they will be able to offer a wider range of delivery times and options to meet consumer needs. Can the same practice be applied to retail at scale – something that is not yet clear…