Setting the Standard - e-commerce logistics

by From the Top on 2012-02-11 04:10:44

E-commerce has rapidly become one of the favourite shopping channels for UK consumers with the IMRG Capgemini e-Retail Sales Index reporting that in the UK £5.2 billion was spent online during the month of April 2011 representing a year-on-year 19% increase.  A greater number of UK consumers are spending online and they are also reported to be spending more, with the average order value having reached £174.

In a bid to gain and maintain a competitive advantage online retailers have recently been expanding the delivery options they offer clients, as the latest Snow Valley Online Retail Delivery Report highlights. The report found that 69% of e-retailers offer at least two delivery options (usually standard and next day delivery), up from 54% in 2005. The report also found that a quarter offer Saturday delivery, 17% specific choice of day,  12% the option to select the time of day the delivery takes place and one in ten (9%) offer same day delivery.

Anecdotal evidence from within the e-commerce logistic industry, however, indicates that special delivery options are far less popular and significant to consumers than online retailers presume. In order to put some facts behind this perceived truth, we commissioned research into UK consumers’ actual views regarding their preferred delivery options. A sample of 2000 UK consumers, representative by gender, region and age, was polled during June 2011 and revealed that, indeed, premium delivery services are much less popular than online retailers presume.

Certainly, when ordering items for themselves, the vast majority of UK consumers would choose standard delivery. More than four fifths of consumers (over 86%) would select standard delivery when ordering items for themselves, aside from when ordering electronic goods, for which 65% of consumers would choose standard delivery.

The survey also uncovered some interesting gender differences; women are generally more likely to select standard delivery and particularly so when purchasing non-electronic goods for themselves, with the proportion of female consumers selecting this method never falling below 89%, compared to 82% of men. Men (82%) are  less likely than women (91%) to select standard delivery option for games, DVDs and music and books -90% of men compared to 95% of women. Both sexes were equally likely to choose special delivery (9%) for items of clothing.



Electronic goods represent an exception. These are generally higher value, more fragile items and the choice of delivery method reflects this. When it comes to the purchase of electronic goods, in fact, preference for standard delivery drops to 65%. In particular, fully 18% of UK shoppers would choose next day delivery for electronic goods and 15% prefer to use a track & trace facility for these items. This compares with 4%-9% of consumers choosing track and trace and between 1 -3% choosing next day delivery for other types of goods.




A quarter of 23-35 year olds (26%) would choose special delivery for electronic goods but fewer, 21%, of 18-22 year olds prefer this method. For businesses targeting over 56s it is important to note that only 13% of UK consumers in this particular age bracket would request next day delivery for electronic goods, with fully 78% sticking to standard shipping.

When purchasing for others there is a greater sense of urgency, with more consumers selecting special delivery options. Nevertheless, although the proportion of consumers choosing next day delivery rises, it never reaches a third. 31% of consumers would choose special delivery when ordering a birthday present and 28% a Christmas gift.

Generally women were found to be a little more likely to choose standard delivery for gifts for others, although a couple of items stood out suggesting that, in the instance of buying toys, women plan better and are less likely to need next day delivery; fully 93% of women order toys by standard shipping compared to 88% of men. Male consumers, on the other hand, are more likely to plan for mother’s and father’s day, with 70% using standard delivery compared to 66% of women.

The survey identified that value of item ordered is the most significant factor in determining consumer choice of shipping. A value above £50 appears to significantly influence consumers to select special delivery.  In fact, 91% of consumers would select standard delivery for orders under £50, but only 58% would do so for orders above £50 and 35% for orders over £200.



In addition, for orders over £100, the survey revealed an increase in the selection of track & trace, which rises from 13% for orders under the £100 threshold, to 30% for orders above it. For items over this value, standard delivery finally becomes a minority option with only 40% of consumers selecting standard delivery for items worth between £100-£199, 23% selecting next day delivery and 30% choosing track and trace. For items over £200 track and trace becomes the most popular option (40%). Evidently, where a larger sum of money is involved, UK consumers prefer to either receive the item faster, or to be able to track the progress of their item, thus becoming immediately aware if something goes wrong.

Conclusion
Online retailers have been operating and devising their strategies under the false assumption that consumers require and prefer next day delivery. This assumption has led them to believe that offering a range of complex and expensive premium options will provide them with the competitive advantage they need to separate them from other e-retailers in their segment.

In fact, standard delivery is the preferred delivery option by far. Although exceptions to the norm do exist, in particular electronic purchases and gifts, they represent a minority.  Premium delivery options could prove a winning strategy for gift sellers and those specialising in electronic goods, but presuming that all consumers are drawn to premium delivery for every purchase is an expensive and misplaced assumption.

By understanding that premium shipping is linked to item value, e-commerce retailers can hone in to more tailored strategies to offer delivery options that suit their client base and their preferences. Only by partnering with an expert that is able to match items sold and customer profile with cost-effective shipping options can online retailers avoid hampering their business processes with complex and ineffective delivery options and provide customers with the service that they really need.

Paul Galpin, Managing Director, P2P Mailing Ltd