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Opinion

Differentiating delivery: how to win the e-commerce battle

Opinion WritersBy Opinion WritersJuly 18, 20165 Mins Read
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Above: graph showing the provider primarily responsible for managing each fulfillment step

Brody Buhler, global managing director of Accenture’s post and parcel business, explores the results of the company’s latest Differentiating Delivery survey

While safe, secure, timely delivery has always been a priority for e-tailers, delivery has never been as essential to the bottom line as it is today. This increasing importance means it now affects pre-purchase decisions just as much as it does repeat sales.

Two-thirds (66%) of consumers have chosen between e-tailers based on delivery options. Most alarming of all is the moment of decision, where dissatisfaction with delivery options causes 68% of instances where shopping carts are abandoned before orders are submitted. Selecting the right delivery partner has become a critical business decision for e-tailers.

These are the key findings in Accenture’s study Differentiating Delivery: How to Win the E-commerce Battle, a survey of more than 1,100 small and medium-sized businesses across 10 countries and five continents to determine trends in online retailing and the challenges and opportunities these present for postal organizations and shipping companies.

Continued projected growth of the e-commerce market underscores the importance of the research – the Worldwide Retail E-commerce Report projects a 12.4% growth by 2019. E-tailers were nearly unanimous in seeing online sales growth of at least 2%, with nearly half (46%) projecting double-digit annual online sales growth. A majority (86%) of e-tailers are planning investments to expand e-commerce activities over the next 12 months.

E-tailers are also turning to marketplaces such as Amazon to reach more customers and grow their revenues. Only 2% are not using an online marketplace; 81% generate more than 41% of their e-commerce revenue via an online marketplace. However, there is a downside to placing too much dependence on marketplaces as 51% of e-tailers that rely on marketplaces for more than 80% of their sales have seen them decline or remain stable.

Not only are marketplaces moving into the delivery space but major retailers are also sidestepping delivery providers in favor of their own services. Digital is dramatically blurring the boundaries between e-tailers, marketplaces and delivery providers. Adapting to these new threats as well as new opportunities is not only urgent but is also critical to future growth of parcel organizations. To remain competitive within a rapidly changing global e-commerce market, delivery companies and postal organizations should focus on five areas:

Happy customers – The majority of customers (79%) said that easy and affordable returns services together with full visibility tracking are the most important features to offer. New services of greatest interest to e-tailers include allowing customers to determine when they want their packages delivered (69%); delivery notification on the day of delivery (67%); and the ability to coordinate delivery directly with the provider, not the e-tailer (68%).

Parcel returns – Innovative returns services are now key differentiators for delivery organizations. Singapore Post (SingPost) has recognized this as a key part of its expansion into e-commerce services. Last year it purchased 30% of Hubbed, an Australian company that uses hundreds of newsagents as hubs for the collection of e-commerce returns. SingPost revenue surged by 20.1% in the first half of the group’s current financial year (2015 to 2016), much of this due to e-commerce growth which now accounts for 29% of total revenue.

Price intelligence – E-tailers are not only highly sensitive about angry customers, they are equally sensitive about the price of shipping packages. The top reason e-tailers stay with one provider is to consolidate volume to secure the best discount on price (73%). Post and parcel organizations should test volume discount levels to make sure they offer terms that promote e-tailer exclusivity or primary provider status and that the right digital tools, particularly analytics, can help determine smart pricing decisions.

Segmented features – Regardless of their size, e-tailers want the best price – yet the needs of smaller and larger e-tailers diverge in other areas. As companies grow bigger the complexity and diversity of services they require increases rapidly. Larger e-tailers are significantly more interested in services like warehousing and fulfillment. This suggests that while basic services are sufficient to capture smaller businesses, more robust features will be necessary to keep them as they grow. Properly segmenting customers to develop targeted products will be the key to win both the price and feature battle.

Cross-border easiness – One critical area that requires post and parcel organizations to customize their offerings is cross-border business-to-consumer (B2C) e-commerce. Globally, this market is set to grow to US$994bn by 2020. Growth of 78% has been forecast to come from new customers in emerging markets, particularly those in the Asia-Pacific region. These new cross-border shoppers have different needs and expectations, including predictable delivery dates and costs.

Bio:

Brody Buhler is the global managing director of Accenture’s post and parcel business. The Differentiating Delivery study is based on a survey of 1,124 businesses that number one to 500 employees and have global revenue from online sales of less than US$500m or greater than 20% of their total revenue.

All businesses surveyed sold goods that required physical delivery to customers. The online survey was completed for Accenture by McGuire Research in 10 countries: Australia, Brazil, Canada, China, France, Germany, Italy, Japan, the UK and the USA.

July 18, 2016

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