Power Retail talks to some of the industry’s main shipping and order fulfilment experts, to find out how retailers can implement the fast and efficient delivery services that online customers are craving.
The ICONIC recently held a mini one-hour delivery trial at Mercedes-Benz fashion week, which has sparked the question, just how practical is it for retailers to provide one-hour shipping on a large scale?
We posed this question to the experts, and their answers were insightful, to say the least.
George Plummer, the CEO at StarShipIT
“One-hour delivery is inevitable. If I can order a meal, have it prepared and delivered to my door within 40 minutes why not the same for some shoes I want to wear tonight? Very quickly consumers will be expecting this type of service,” Plummer says.
Will it take off? According to Plummer, it could, but viable alternatives could be just as well received by consumers.
“It could be a variation of one-hour, perhaps deadline driven versus the actual time it takes to deliver it. For example, you might place an order in the afternoon and need it delivered to work before 5pm. Therefore, the service could be one to four hours depending on when the order was placed and the time to process it.”
From a logistical perspective, Plummer says retailers will need to really understand their customers’ shopping habits, and will always need to keep stock on-hand.
“They will need to use their stores, warehouses or 3PLs and pre-stock them with goods that are forecast to sell over the immediate future. This modelling will be done based not only on historical data but also events. For example, consider a Taylor Swift concert and the effect this could have on consumer behaviour the afternoon before.
“If they can get their products close to the demand, they will be more likely to offer one-hour delivery,” he says.
Although, regardless of whether or not a retailer has the ability to provide one-hour delivery services, Plummer believes it’s more important for retailers to give their consumers choice.
“Ultimately, the consumer wants choice at the checkout, and the ability to pay for a faster delivery service. Even if not one-hour, [provide] a standard and express option, as well as delivery windows, alternate pickup choices, and a great return process.
“These all help engage the consumer and brings them back for more,” Plummer says.
Marshall Hughes From Passel
According to Hughes, there is a demand for fast delivery services, but only in certain situations.
“Customer demand and expectations vary depending on circumstances and the need for the purchase. A customer who is prepared to wait two days for a delivery on a Tuesday may not be as patient at 4 o’clock on Saturday afternoon if they have nothing to wear or have forgotten mum’s birthday,” Hughes says.
There’s also merit in shifting the conversation away from one-hour delivery services and towards “on-demand” delivery.
“There are people with limited mobility who are unable to make a spontaneous purchasing decision because they have to rely on family, friends, carers or government services to assist them with an urgent retail purchase. On-demand delivery democratises impulse purchasing.
“Not to mention parents at home with young children. Taking a toddler to a shopping centre can be a traumatic experience,” he says.
However, the trouble with providing either one-hour or on-demand delivery is that there are a number of obstacles that need to be overcome before these types of services can be realistic, especially on a wide-scale.
“The challenge for delivery providers is matching a fixed income expectation of drivers with sporadic and unpredictable demand. This is not difficult in central business districts but becomes more challenging the further they push into the suburbs.
“Retailers need to quickly transition to a true omnichannel offering so a customer in south-eastern Melbourne or anywhere not within an hour’s drive of a DC can have access to locally stored goods; be they in satellite DCs or stores.”
While Hughes believes consumers are willing to pay for the convenience of fast delivery, he’s also confident that a good suite of options will be just as beneficial for both retailers and their customers.
“A good suite of options, including five days, next day and twilight in addition to on-demand, means customers can choose which service to use.
“An agnostic parcel locker network could even add further options to all consumers, regardless of the carrier the retailer decides to partner with,” Hughes says.
Although, Hughes does warn that with Amazon showing signs of directing more traffic to its Australian site, the conversation we’re currently having about fast shipping will change very quickly.
“The whole discussion about ‘should we offer on-demand delivery?’ will rapidly become ‘why didn’t we offer on-demand delivery when we had the chance?’”
Steven Visic, the Director at Smart Send Pty Ltd
Visic believes the demand for one-hour delivery will likely increase over time, but that cost is and will continue to be, one of the major factors that needs to be considered if this type of delivery service were to become commonplace.
“The cost for merchants providing one-hour delivery versus same day delivery, for example, needs to be factored in carefully to see if [one-hour] delivery is worth the cost,” he says.
“Products with higher values or margins would be more beneficial with a one-hour delivery strategy.”
He also believes that low-cost items would require retailers to pass the full cost of delivery onto the shopper, whereas, a merchant could theoretically wear the expense of fast delivery on a high-margin item or bulk sales.
To offer one-hour delivery, Visic also believes retailers would need to have automated systems in place, as manual processing is just too time-consuming when every second counts.
“Timelines are very tight, so relying on human intervention to process one-hour orders, generally, won’t work. [However], there are apps and systems available that can auto-fill orders when time is of the essence.”
Should retailers start looking at implementing one-hour delivery services, Visic doesn’t think so.
“There are same day or next business day delivery options in the marketplace that are well priced, and realistically, most customers would be happy with a delivery within these timeframes,” he says.
Graham Jackson, the CEO of Fluent Commerce
“Appetite for a one-hour delivery service is highly dependent on cost and specific need. Consumers will weigh the balance, and many retailers will need to consider if it’s cost-effective to deliver to the customer in one-hour for say a $20 fee, or whether the customer would prefer to pick up their items in one-hour from a central location at no extra charge,” Jackson says.
As far as Jackson is concerned, the popularity of food delivery services has proven that fast delivery will become part of the retail mix in the future. However, for the time being, it might only take off in metropolitan Melbourne and Sydney.
“It won’t be long before we’ll see Uber Eats couriers delivering jeans, jackets, shoes etc. to meet customer demand to pay a small amount for delivery. However, to make this model financially viable there needs to be volume and for this reason, it’s likely to only take off in the Sydney and Melbourne CBD,” he says.
What are the biggest challenges retailers will need to face before making one-hour delivery a reality?
“Inventory visibility and availability. Retailers will need a system to manage digital optimisation and to provide real-time insights into available stock and in what location. The next consideration is whether retailers opt for temporary warehousing solutions or do they store outside the CBD.
“In London, there is an investment fund that is currently purchasing little garages, many derelict under bridges around the CBD to use as dark retail stores – places that can hold stock and delivery vans can pull up and load from quickly to move inventory cheaply and keep costs down for the customer.”
Outside of quick and efficient delivery, Jackson echoes the sentiment of a lot of industry professionals – click and collect is a great initiative that customers seem to love!
“An alternative is offering customers one-hour pick up at no charge through the convenience of click and collect. One hour pick up doesn’t cost the customer any additional money and if their items can be collected from a convenient location, many customers will choose that option over paying for delivery.”
Rob Hango-Zada, CEO at Shippit
According to Hango-Zada, there’s definitely interest in one-hour delivery services, but the biggest question is how substantial that demand is, and are customers likely to choose one-hour delivery at the checkout?
“Our data shows the percentage of priority bookings over the last year has only slightly increased. Conversely, standard bookings (two to four business days) have increased significantly during the same time period, meaning customers are opting to wait a bit longer for the more cost-effective option if they know when it will be delivered,” he says.
“When it comes to what customers are willing to pay for, we a see customers moving beyond the instant gratification route and more toward a preference of predictability and reliability.”
So, what does this mean for the future of delivery?
“One-hour delivery might seem like a really convenient option for customers, but when you dive deeper into it, it’s challenging for both the seller and end user. Customers like the convenience of being able to plan the delivery in advance, which is why they prefer being able to choose priority services alongside standard or express services,” he says.
The difficulty of executing deliveries this quickly is another factor retailers need to consider.
According to Hango-Zada, the average online order is picked and packed within 24-hours.
“Combine this with the fact the majority of online retail volume originates from outer-metro and regional warehouse locations, and this makes one-hour delivery near impossible.
“Unless there is a disruptive innovation in this space, the rise of this delivery method will have a major impact on traffic congestion and ultimately carbon emissions.”
Although, Hango-Zada does believe businesses are under pressure to meet increasing customer expectations, especially in the years to come as Amazon starts to really build its Australian presence.
“Building strong relationships with customers means being transparent about delivery costs and being able to track their deliveries from the point of dispatch right up to the moment it reaches their door.
“When it comes to standing out from the crowd, retailers need to make their deliveries faster, easier, more convenient, accurate and personalised. This isn’t always easy to achieve, but with [the right] service solutions, a lot of the grunt work is taken out.”