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Opinion

Delivering customer choice

Opinion WritersBy Opinion WritersAugust 13, 20136 Mins Read
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In a carrier market that can be clearly differentiated by the quality of service on offer, Neil Jackson, chief executive, Triangle Management Services, calls on retailers to use growing insight into what constitutes the total cost of delivery, from late to lost goods, returns to complaints handling, and pay for a service that will truly reflect customer expectation.

eCommerce has fundamentally changed the way the express carrier market operates globally. But in a UK market that has over capacity, with upwards of 15 national providers and hundreds of smaller local operators, it is becoming clear that the current operating models and pricing are not sustainable. Indeed, as delivery and fulfilment strategy becomes the new multi-channel retail battle ground, with consumers being offered an increasing array of delivery options, the market is again seeing a fundamental transformation – one that will call into question the continued emphasis on commodity pricing.

Just a decade ago, 28 days delivery was standard practice for the catalogue and mail order companies that dominated the home shopping marketplace. Now, in a bid to meet escalating consumer demands, UK retailers are embarking upon same day delivery in London and in other developments multiples such as Argos are using their stores as mini depots to improve the speed of delivery. Customers expect a wide range of choices and pricing, including defined time slots. They are also responding well to the shift towards the Click & Collect in store model or the Collect Plus approach, where goods are delivered to a local hub, such as newsagent, for consumer collection rather than direct to the home as many consumers are rarely there to receive their goods.

Indeed, with the news from the US that Amazon is considering opening up its own stores, as well as creating strong relationships with existing bricks and mortar retailers, rather than rely solely on the e-tail model, the era of true multi-channel retailing has arrived.

Value versus commodity

What impact will this new retail emphasis on extending consumer choice and improving the consumer experience have on the express carriers? It is clear that not all carriers are the same. As the 2013 ‘UK Domestic B2C Express Parcels Distribution Survey’ undertaken by Triangle, has revealed, retailers report significant differences in the quality of service delivered. The figures reveal significant disparity between the delivery experience provided by the UK carrier market. Based on 475 interviews, the results for 2013 confirm that over all six rated factors (overall level of service, customer service, competitive price, quality of transport service, provision of information and image) Interlink Express received the highest overall score (4.6 out of 5), while at the other end Yodel received the lowest score (3.7 out of 5).

It should be no surprise, therefore, that when respondents were asked (May 2013) if they would recommend their main or primary carrier to other businesses, the resultant Loyalty Indices ranged from 77 to a negative result of -10.

This disparity in carrier performance cannot be ignored. With retailers focusing heavily on improving both consumer choice and quality of experience, the implications of poor performance are significant. Rather than buying on price alone, are retailers proactively factoring in the cost of damaged goods, delayed delivery, insurance claims and returns handling? How many are considering the financial and brand implications of customer complaints? The cost of delivery goes far beyond the unit price charged by the carrier.

Paying for service

Certainly there is some sign of retailers considering delivery performance. Although fewer than 10% of retailers were prepared to pay more for an improved delivery success rate in 2010, by 2012 that figure had risen to 27%. In Amazon’s Marketplace customer satisfaction survey the first question is whether or not the item arrived on time. Although this only deals with one aspect, timeliness, rather than the whole delivery experience, a late or bad experience that affects the customer rating will impact the seller’s overall rating, and hence position in search.

Delivery has an impact on retail performance. With vast choice both online and in store, and an increasingly savvy consumer base using a raft of online reviews and ratings services to assess the quality of service on offer, retailers have to consider the complete, end to end experience. An innovative website, fantastic product and great offer will be completely undermined by late delivery or shoddy service that has caused product damage. With low levels of loyalty, the consumer’s response to a bad delivery experience will be to simply shop elsewhere.

Of course, carriers increasingly recognise the importance of improving the quality of service; from embedding staff within the retailer’s customer service team, to providing a dedicated complaints handling service that minimises the retailer’s exposure to brand damage while raising the carrier’s brand awareness. Indeed, there is potential for retailers to further increase the consumer choice online to include choice of carrier, with consumers able to pay a premium for those carriers they prefer extending the consumer’s overall control over the complete purchasing experience.

For the carrier, this model provides a new way of achieving differentiation beyond pricing and a real chance to achieve brand recognition in the consumer marketplace. For those carriers that can demonstrate good quality of service, the result will be not only an increase in consumer/retailer uptake but, critically, a chance to offer a premium priced service.

Conclusion

In a market where some carriers are struggling to break even, there is growing push back against retailers to accept higher delivery prices. But, if this is to work, the carriers have to offer better value. The impact of late delivery, lost or damaged goods, falls primarily on the retailer, not carrier; the onus is therefore on the retailer to look at the whole cost in terms of brand damage, complaints handling, returns and resending goods.

Is it worth paying more for a premium service delivery to minimise breakages, ensure customer satisfaction and improve brand value? As the Triangle research reveals, the carriers are offering very variable quality of service; in a market where retailer differentiation increasingly includes the range and quality of delivery options, failing to understand the true cost of carrier service could be an expensive mistake.

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