The power of the new shopper generation cannot be emphasized enough. Today’s consumers have become accustomed to getting what they want, when, where, and how they want it. This shows in their expectations for product choice, ultimate availability, flexible delivery and return services.
The constant battle for these new shoppers’ attention and loyalty urges retailers to rethink their overall service level. Failing to recognize and deliver on these needs could represent a death sentence for any future Omni-channel player.
What are the critical customer-facing levers retailers need to master and how can they secure the right balance between costs and customer experience?
Getting the product assortment right
Designing the right product offering is a constant balancing act between convenience, service level and cost. A few generic thoughts to aid the decision-making process:
Various channels – One offer
Retailers intending to offer greater convenience to their customers should deploy the same product range across all channels. This approach usually leverages cross-channel synergies by running hybrid distribution centers (DCs) that not only replenish stores but manage the online order fulfillment process.
The endless aisle
This concept balances cost and convenience by extending inventory beyond what is physically available in the store. It efficiently utilizes space by offering mid- and fast-moving products instore and making slow-moving inventory available exclusively online. However, to make the full range of products available to customers visiting a store, retailers should have a concept to replicate the online customer experience.
The differentiated offering
This approach is suitable for companies intending to execute different strategies by channel. Common examples are multi-brand retailers selling different brands online versus instore, and those targeting different customers by channel with a segmentation approach. Retailers may decide to outsource one or both channels based on their business strategy and in-house core competencies.
Getting the products into the shoppers’ hands
Delivery cost and service, which have a significant impact on customer experience and satisfaction, are directly impacted by the delivery methods and service levels. Three main delivery methods are worth considering:
This traditional way of delivering online purchases is convenient for shoppers but happens to be the most expensive form of delivery due to the limitation of consolidation by destination. Home delivery can be a good option for bulky goods as it can often be combined with installation services. However, missed deliveries can jeopardize the shopping experience and create additional costs for the retailer.
This lower-cost delivery option allows for greater flexibility as shoppers can pick up their purchases during store hours, rather than face the risk of a missed home delivery. Additionally, it allows them to ‘touch and feel’ the goods before purchasing while allowing retailers to upsell in-store or handle complaints and returns instantly. For the store collection to work seamlessly, a wide network of established locations along with an IT investment for enablement are required.
Delivery to pick-up points (automatic parcel lockers, service stations or convenience stores) can provide additional flexibility as customers can collect products outside of store opening hours. This method is limited to third-party service providers and is not broadly available yet. There is also a growing cross-seller collaboration model where one retailer offers another retailer a collection point in their stores.
How fast is fast enough?
The speed of delivery was shortened dramatically in the past couple of years, mainly triggered by e-commerce players such as Amazon, which fueled a trend towards next-day coverage and same-day deliveries. Fast service times can certainly be a key strategic differentiator. It remains to be seen whether retailers can match these fast service levels and redesign their supply chains to do so efficiently. In all cases, they need to find the right balance between agility and cost. The selected offering should consider customer expectations and industry norms in the specific retail sector and must be aligned with the retailer’s online channel strategic positioning.
Getting the products off the shopper’s hands
Unlike the traditional channel, consumers cannot see or feel the product before they shop online. This makes free and easy returns a key decision-making criteria for them. The lack of clear return policy will directly impact their readiness to buy. Whether retailers leverage their store network as drop-off locations for returned products to save transport costs, offer their consumers the option to send their unwanted items through parcel pick-up locations, or enable home collection through a parcel service provider, they will need a robust return handling process. Retailers will have to define the most efficient way to collect, check, and dispatch the returned goods. In most cases, the answer lies in the partnership with logistic service providers, which are expected to play a vital role in the overall value chain.
The digital transformation has reshaped the face of global trade. The power has shifted away from products and companies, to customers. This new generation of connected and networked shoppers is the new foundation of modern retailing: it is empowered to decide what products to buy, through which channels, and on which terms. Businesses that understand and best deliver against these new rules of the game will not only secure the loyalty of their customers, they will also create a sustainable competitive advantage for themselves.