There's a great shift currently happening in the retail space — shopping has moved from store to home. So many things can now be shopped for online, to the extent that it's easier to list what cannot be delivered to our doorstep.
We're beginning to enter the delivery-first generation of retail. With this shift come many last-mile delivery challenges for consumers, retailers, and carriers.
Here's the deal. Consumers aren't happy with online deliveries, delivery operations are more complex than ever for retailers, and carrier shipping costs are only going up. In this complex environment, delivery management turns into a game of chess that requires advanced logic behind each win. Are you ready for the new market?
Keep reading to find out:
- How the retail industry transformed over the years;
- What's the delivery-first era of retail and why it matters;
- What are the four challenges retailers are facing in the delivery-first era;
- How modern technology can solve the last-mile problem.
The transformation of retail over the years
Over the past hundred years or so, the retail market has gone through two major changes.
We're now experiencing the third shift, crucial for understanding where the retail market and scalable business models are heading in the long run.
The first generation of shopping — location-first
The twentieth century meant the booming growth of retail. Shopping was all about the physical location and in-person experience.
The concept of malls as we know them today — large retail complexes within community infrastructures — began to emerge in the 1950s.
Since then, malls had grown from mere shopping locations to communal hubs, where families and friends could socialize while enjoying the touch and feel of shelf displays.
Remember those iconic shopping and makeover montages from the '90s films? They'll always be in our hearts and forever on our screens because the concept of shopping has changed greatly since then.
Here's what happened next.
The second generation of shopping — price-first
With the growth of e-commerce sales, mirrored by the increasing use of the Internet, the appeal of physical shopping began to decline.
Companies like Amazon — a simple online bookseller back then — paved the way for the modern-day e-commerce experience as we know it.
Suddenly, you could make purchases at all hours of the day and get the goods delivered to your doorstep. If traditional brick-and-mortar bookstores could physically offer only a limited number of titles, Amazon's online supply showcased exponentially more products for any type of reader.
Online presence and centralized warehouses freed retailers from the limited capacity of traditional commerce. Consumers got access to goods and services without geographical ties, and e-commerce businesses went within reach of nearly anyone who had access to the web.
Online retailers made a big bet on the free shipping offer, and it paid off. New shopping behaviors began to emerge, online retail started to scale, and the demand for deliveries went up.
To bridge the gap between retailers and consumers, the ecosystem expanded to include consumer delivery services. Carrier companies pivoted from being exclusively supply chain operators to consumer-facing, last-mile delivery generalists.
The third generation of shopping — delivery-first
Fast forward to the end of the 2020s.
So many things can be delivered online.
Whether it's pizza pepperoni or ramen, a bag of groceries or over-the-counter meds, a new pair of jeans or the best-reviewed mattress — it's all a few clicks away, ready to be at someone's doorstep in a matter of days, hours, and even minutes.
That's the delivery-first era of retail.
Consumers are shopping based on the delivery experience that matches their expectations and fits their schedules amidst all the bustle.
They want online shopping and deliveries to be as easy and enjoyable as those splurging scenes from the '90s films.
Distributed micro fulfillment hubs are challenging centralized warehousing from the previous generations of retail. We see, for instance, consumers shopping in the so-called dark stores with very limited product availability, which they're willing to sacrifice for the sake of a better last-mile delivery experience.
Carrier services are here to grasp the market demand and shift towards ultra-fragmentation. Last-mile generalists are transforming into last-mile experts, who are able to disrupt and innovate the most expensive and time-consuming element of the delivery process.
Consumers are choosing from multiple delivery options — home delivery, pick-up points, parcel lockers, click and collect and so on — to create the best delivery context for the product which they already treat as theirs.
Free shipping — which isn't free for retailers — and a wide variety of product choices are slowly retreating to the background of the decision-making process. Convenience comes first, and today, it means much more than it did five years ago.
Four challenges retailers are facing in the delivery-first era
With the delivery first-era of retail come many last-mile delivery challenges for consumers, retailers, and carriers.
- Poor delivery experiences impact customer satisfaction;
- Consumers are overwhelmed by the delivery noise;
- Retailers are seeing increasing shipping costs;
- The delivery offer comes last at checkout.
Poor delivery experiences impact customer satisfaction
When shopping online, consumers are paying for convenience, which largely includes the delivery experience they expect. No matter the expectations though, they can rarely admit e-commerce deliveries fit their locations, schedules, and seasonal life patterns.
85% of online consumers in Europe say that a poor delivery experience would prevent them from a repeat purchase with the same online retailer again. They're tired 0f surprise shipping costs and the lack of delivery estimates.
95% of consumers go elsewhere if an online store doesn’t offer their desired delivery option. It doesn't play well for your shopping cart abandonment rates and customer acquisition costs.
Consumers are overwhelmed by the delivery noise
Consumers also tend to await multiple deliveries within the same week. The more they order online, the more delivery experiences they're involved in, and the more likely they are to be hit by the delivery anxiety that comes with it.
They struggle with the delivery noise — the overwhelming cognitive stress consumers feel from being involved in numerous deliveries — which comes against the promise of convenience.
Increasing shipping costs for retailers
Retail businesses operate in unique markets, multiple locations, and sales channels. They cooperate with loads of delivery services and ever-increasing last-mile costs, which are said to make up 53% of all shipping expenses. At the same time, online sales volumes are dropping post-pandemic, and deliveries are getting more and more expensive.
Delivery contracts are set by carriers at a fixed rate for the whole year in advance — price per parcel — depending on the retailer's order volume assumed for the duration of the contract. In reality, retailer's order volumes and carrier's capacity fluctuate, so the retailers are likely to be paying more than actually needed.
Carrier pricing will only be going up from here. First, delivery companies need to stay afloat with the fixed costs of business operations — fuel, labor, fleet management — which make up an increasingly high share due to inflation and rising energy costs.
Second, they have little visibility in the order booking process, which results in poor route planning, lower first-attempt delivery success rates, and revenue loss.
In this climate, retailers may want to lower the cost pressure of logistics and even start profiting from deliveries, which hasn't been the case for years.
The delivery offer comes last at checkout
As things stand today, e-commerce focuses on the sale of products per se rather than the delivery experience that consumers equally expect.
Most retailers display the delivery options at checkout, almost at the end of the consumer journey. Such a way of doing business doesn't recognize the fact that many consumers shop based on the delivery experience.
"Consumers shop based on the delivery experience. They want to know who offers the most convenient, cheapest and fastest delivery option before checkout."
Piotr Zaleski, CEO and Co-Founder of Ingrid
Bringing the delivery services forward — alongside quality, selection, sustainability, and price of the products — is the first step in building the right delivery strategy to increase customer satisfaction, boost your sales, and finally make deliveries profitable.
It's also about creating an ideal delivery experience across all stages of the shopping journey, where one touchpoint seamlessly integrates into the next — from product discovery to returns.
Now, what's the solution to all of this, you may be asking?
Retail needs a scalable delivery technology to solve the last-mile problem
— Imagine the retail ecosystem as a social graph, a network that maps out all stakeholders and shows how they're related to each other, Piotr Zaleski suggests. Let's call it a delivery graph. It's a diagram that shows the relations between consumers, retailers, and carriers.
It's a set of network nodes that are connected by lines, be it the whole retail space or an individual’s delivery situation in the context of everyday life. Those delivery nods — consumers, retailers, and carrier services — aren't fully connected, not just yet.
For the market to succeed in the delivery-first generation of retail, there's a need for scalable delivery technology to orchestrate the connection between each node, simplify online shopping for consumers, and help retailers make a profit on deliveries.
Here's one way to do it.
Simplified delivery experience for consumers
Consumers want a joyful shopping experience and an effortless delivery journey. If they love your goods and the delivery offer that comes with those, your checkout conversion rates, average order value (AOV), and customer loyalty are guaranteed to go up.
There are plenty of factors that come into play when shopping online, yet failed expectations around the delivery options — lack of flexibility, free shipping, delivery promise — are the most likely to affect purchase decisions.
Implement a delivery-first checkout flow
All of your clients are unique; online purchases and delivery expectations are contextual. Customer preferences change seasonally — during summer vacations and end-of-the-year holidays — and daily. It all depends on the locations, life schedules, family status, and parallel shopping experiences.
The pieces start falling together when there's a technology framework to reduce the delivery noise throughout the entire shopping journey(s) and make online purchases as easy and joyful as old-fashioned shopping at the mall would be.
Bring the delivery offer to the front of the shopping journey — as early as your product page — make an accurate delivery promise, integrate with multiple carriers, and A/B test different delivery scenarios to find out what works best for you and your consumers.
Help your consumers reduce the delivery noise of online shopping
COVID-19 has changed consumer behavior for good. Some buyers may have gone back to physical stores, online order volumes have dropped, and yet consumers are spoiled by convenience. Here's where a personalized, anxiety-free delivery offer gives you a competitive edge, but that's not all.
— More and more consumers are now shopping goods in parallel across different retailers, Piotr Zaleski explains, which creates a need for coordinating the shopping experience across several orders, checkout processes, and delivery methods.
When shopping online with one retailer and then moving to another, the consumer expects both businesses to understand how these deliveries can adjust to their life patterns. Retailers have to collaborate with each other by combining their delivery options, order tracking, etc. — we expect this co-delivery component to gain strength already in the next few years, he says.
With end-to-end solutions like Ingrid Delivery Platform, online retailers can give shoppers the power to personalize delivery and returns and provide contextual convenience at all stages of the shopping journey — where one touchpoint seamlessly integrates into the next, all with the best delivery experience in mind.
Excellent delivery management for retailers
Excellent delivery orchestration for retailers requires complex technical structures and integrations to generate the best delivery options for each market, order, and consumer.
What's more, sooner or later most retailers will start looking for scalable international expansions and local deliveries globally.
All of it gets easier when there's the right technology at hand.
Easy delivery configuration in a multi-market environment
The advanced, no-code logic of Ingrid Delivery Platform enables retailers to navigate complex carrier operations in simple workflows without involving any technical resources.
Here's an example of how it works.
Hatstore — a premium shop and customization zone for headwear — faced the challenge of international scalability when all their customers could choose from were only two delivery methods. What's more, Hatstore's development team had to be involved in every change of delivery parameters, including the price tweaks.
Following a quick, straightforward implementation of Ingrid Delivery Checkout, Hatstore now offers more delivery options consumers can choose from in many different markets.
Those are presented in a smooth, easy-to-use interface with a more precise delivery date, which helps the brand reduce the number of customer service questions amid increased order volumes. Among other results, Hatstore has registered a 15% increase in the average total value (AOV) of every order placed.
The intelligent delivery logic of Ingrid Delivery Checkout gives Hatstore's commercial teams the flexibility to tweak the delivery methods and prices without engaging the company's technical resources.
Successful delivery strategy in a multichannel space
Today, retailers operate in an omnichannel environment and sell on multiple channels — physical shops, web, and social media — which need to be seamlessly connected into one shopping experience.
Ingrid solutions help retailers enable a multichannel perspective by turning their brick-and-mortar stores into micro-fulfillment hubs in smaller geographies, both for last-mile deliveries and as pickup points.
By fulfilling orders in-store, you can offer much cheaper, faster, and greener deliveries — especially if the ordered items are already on the shelf.
Some of the real-life examples of successfully executed delivery strategies include Nudie Jeans, a Gothenburg-based sustainable denim brand that ships to over 50 countries worldwide.
To start offering the best delivery options in each area and reduce carbon footprint at every step of the delivery journey, Nudie Jeans needed the right tech solution they could integrate with various systems they already had in place.
As a small-to-medium-sized enterprise with the main department of commerce in Northern Europe serving a global market, Nudie Jeans faced the challenge of providing fast, cost-efficient, and sustainable deliveries to consumers without setting up centralized warehouses in every market.
With Ingrid In-store solution, they were able to leverage their physical stores into local warehouses and fulfill web orders directly store-to-door.
Not only has it shortened the delivery time, but also contributed to lowering greenhouse emissions through more sustainable delivery options for every purchase made.
Join forward-thinking retailers in the delivery-first era
Ingrid Delivery Platform offers a full suite of products that help retailers and carriers create joyful delivery experiences for consumers — from no-code access to limitless delivery configuration to seamless warehouse and store operations.
Scale your business with a delivery platform that tailors to your needs. Book a demo to get started.