We're here to talk about the three main delivery trends which e-commerce logistics and supply chain need to be on the lookout for if it truly wants to embrace the drivers of long-term change and explore growth prospects the industry presents.
You might think otherwise, but e-commerce retailers can profit from deliveries despite the economic downturn by welcoming the disruption and continuing to evolve alongside customer expectations.
Convenience matters to people, and so does the effortless online shopping experience. Changing consumer demands brought about the emergence of new shopping behaviors — one of them being the q-commerce model, also known as 'quick commerce' and 'on-demand delivery'.
Quick commerce combines the benefits of traditional e-commerce with innovations in last-mile delivery and streamlines the conventional order fulfillment process with a doorstep delivery in a matter of minutes. Conventionally, q-commerce has been targeting restaurant takeouts, groceries, over-the-counter medicines, and household essentials — in other words, a limited choice of goods in smaller quantities.
Let's talk about scalability
Q-commerce companies have recently found themselves under fierce pressure that has to do with their business model. They've been playing a long game under the premise that if they win the market, they'll make a lot of money, where the volume of orders delivered within an hour is a key profitability measure of quick commerce.
Typically, a q-commerce company operates within a small delivery zone in a specific city district, say, within a 3km radius. At a certain point, couriers reach a peak capacity delivering food items during lunch and dinner time. What happens during off-peak hours? Not much.
On the macro scale of the current economic climate, risk-averse investors started asking for revenue much sooner than was expected half a year ago, at the beginning of 2022. So, there's one substantial challenge instant delivery companies face — getting more deliveries.
One solution would be to focus on the right locations with high order density. That, however, brings the model's scalability into question, especially amid the current state of play where multiple q-commerce businesses compete for the same users in the same small geographies.
Instead, q-commerce companies are looking into new ways of making money, and one of these ways is to deliver e-commerce orders as well.
Sure, but what's in it for e-commerce?
That's why, in the long run, the merger between the last-mile business model of quick commerce with the order volumes of traditional online shopping has already become the next big thing in e-commerce transformation.
How to implement the model?
The logistics behind it require q-commerce riders to pick up orders from stores and make a doorstep delivery within half an hour or so. The current challenge for the riders and q-commerce companies like foodora and Uber Eats is to be on top of the mind of the e-commerce consumer when they place the order.
E-commerce retailers, in turn, need to have an omnichannel solution that enables them to use physical storefronts as warehouses in the consumer's immediate reach. Online merchants get to achieve higher conversion rates, reduce the order turnaround time, cut down on the costs of logistics, give inventory a better use, narrow down the delivery zones based on the consumer's location and reach the highest number of people in the shortest time.
There has to be a shipping software solution to make it all happen.
Anders Ekman, Co-Founder and COO at Ingrid, elaborates:
— What we think is going to happen is that a lot of online merchants will try to reach out to q-commerce companies and propose their solution. Ingrid's bet is on providing that bridge. Shop assistants will have the resources to see the order along with the priority, pack it and prepare for delivery. Same for the q-commerce riders, who need to need to be at the right store at the right time and get the items delivered.
Successful quick commerce integration story — foodora
Foodora, the most used restaurant food delivery platform in the Nordics, has been offering rapid delivery of other categories of non-food items since the end of 2021, when it successfully partnered with Kronans Apotek, Sweden's third-largest pharmacy chain, to deliver over-the-counter items already at the end of 2021.
With Ingrid as a technology solution to connect the dots, foodora was able to move into the e-commerce checkout space and be listed as an instant delivery method alongside traditional carriers. E-commerce merchants that use Ingrid for deliveries and have a brick-and-mortar store in the customer's proximity are able to offer Foodora as an on-demand, sustainable delivery method.
Get on the q-commerce trend
According to Ekman, the trend will keep growing. It will take some adjustment in the market, but from a 3-year perspective, that's a delivery model which people expect, and it's here to stay.
2. Cost optimization
When running an e-commerce business, salaries and product manufacturing costs are known as big expenditures for any merchants, but delivery rates also fall under the same category. In the “new normal”, profiting from e-commerce deliveries suddenly sounds like a pretty good idea.
Anders Ekman continues:
— In the last six months, those have been increasingly more important for merchants to keep an eye on. Many of our clients have seen a huge uplift in their sales during COVID-19, though now the trend's coming to an end. It's an adjustment to normal levels, which requires e-commerce companies to focus more on revenue than growth.
Set a delivery pricing strategy
If you're not sure where to start, consider your associated shipping costs and combine multiple delivery rates and methods to find the best fit for your company. One frequent rate structure would be to set free delivery criteria for a certain shopping cart value, combined with a fixed delivery rate across all products if they are fairly similar in dimensions, or groups of products.
For many businesses, though, setting up a free shipping threshold can be challenging, especially without any data insights. If you’re using a delivery platform like Ingrid, you could easily A/B test your delivery offering. If not, there’s a workaround.
Based on your AOV, for example, you could charge a flat rate for orders under 50 EUR to get the delivery costs back and provide free delivery for orders over 50 EUR. If your typical order size is 30 EUR, this strategy may be advantageous. It encourages your consumers to swap delivery fees for additional items in their carts.
Re-think your net delivery costs
Many believed that the order volumes we’ve seen during COVID-19 are here to stay, and the carriers who depend on external capital have certainly promised their investors better forecasts than what they are currently delivering.
Tough times open avenues for growth, so why not use it and re-negotiate your delivery costs? For a carrier looking for investors, it is better to show growth than to become a little less unprofitable in the short term. In other words, they will agree to be paid less as long as they get higher volumes. If you can't reach an agreement, re-direct your orders elsewhere.
Don’t give away your tracking data for free
Anders Ekman wonders:
— Isn’t it a little strange that carriers, payment providers, and other business partners communicate directly with your customers post-purchase? After all, it is you who invested in converting the customer and should reasonably be in contact with them at all times.
Nevertheless, this 'channel of communication' is also used by your delivery partners—usually promoting their own services or even your competitor’s solutions. It shouldn’t be like that.
Tracking data is valuable and is already sold today between different actors in your tech stack. You should at least make sure that you also get paid in the end. Plus, it might be high time to reclaim the communication and offer branded order tracking instead.
Lyko, a Swedish beauty & hair care chain that has become the leading player in the Nordic segment in just a few years, announced in February 2022 that they're no longer using carriers who don't have CO2-neutral deliveries. Such a step eliminated Sweden's conventional carrier companies to the benefit Instabox, Budbee, Early Bird, and City Mail. Why?
Convenient over green, but not for long
Research shows that many consumers tend to prioritize the costs and convenience of delivery over anything else. Truth be told, they're not willing to pay extra for a carbon-neutral delivery just yet. There is good news, too. It might be that there are lots of different delivery options to choose from which are not always visible and well-explained.
Anders Ekman comments:
— We see one of the upcoming e-commerce logistics trends that makes sustainable deliveries a default, and the legislation should require so, together with growing investor pressure. When it happens, e-commerce merchants will have an easier time adjusting to it thanks to the legal mechanisms to rely on. Even so, it's better to get there early instead of waiting for consumers to demand the change — online retailers and companies like Ingrid should lead the way in making e-commerce sales more sustainable.
"We are the first e-retailer in Sweden to do so, and we hope that more will follow our example to speed up the transition to climate-neutral deliveries. It is possible thanks to the rapid development of several logistics players that has taken place in recent years."
How to implement it?
SaaS delivery platforms like Ingrid do what they can to support e-commerce merchants in this transition by sharing information about green alternatives there are.
With Ingrid, online retailers are able to integrate with carriers that offer carbon-neutral deliveries (DHL GoGreen, GLS ThinkGreen, or local carriers like Swedish Instabox), highlight and pre-select more sustainable delivery alternatives, and test which converts better.
"We connect with carriers who can share environmental data on their end, so essentially it comes down to the network effect of setting an industry standard of a minimal carbon footprint for every delivery."
Anders Ekman, Co-Founder and COO at Ingrid.
Reducing the environmental impact, meeting customer expectations, driving conscious consumerism — online retailers have the opportunity to do it all. It’s now up to them to shape the future of sustainable e-commerce and support consumers in making informed purchase decisions.
The future of the e-commerce supply chain
There's an urgent need and a fresh opportunity for e-commerce deliveries to become increasingly more sophisticated to ensure efficiency, better margins, and customer experience.
Last-mile deliveries make up the highest single cost of online order fulfillment. As consumer expectations and the volume of home deliveries continue to grow, e-commerce merchants need to take data-driven decisions and work on the right partnerships to succeed.