By now, it’s no secret that the COVID-19 virus and pandemic has changed the world in countless ways. Many would also agree that the effect has been felt within the supply chain world as much as any other industry. Customer expectations have changed and companies need to react to keep up.
According to a survey from ShipStation of 600 US online shoppers:
· 63% are less likely to shop in stores due to COVID
· 70% are less likely to shop in stores to avoid germs in general
· 2/3 expect free shipping due to slower shipping times
· 87% expect extended return windows due to potential shipping delays
“The most successful companies right now are those that have figured out how to re-imagine every touchpoint a consumer has with their brand, delivering an experience-based, emotional connection. These organizations are looking past traditional ways to attract and retain customers and designing compelling, personalized experiences – via advanced technologies – around products and services to better engage,” states Ross Freedman, co-founder and CEO of Rightpoint, in a post written for Forbes.com.
The Rise of E-Commerce… Sort of
According to data from statista.com, in Q1-2010, e-commerce sales were 4.2% of overall US retail sales. That number increased steadily over the following decade to 11.3% in Q4-2019, inching further to 11.4% in Q1-2020. And then came COVID. E-commerce as a percent of total retail “jumped” to a peak of 15.7% in Q2-2020 as the world shut down and quarantined. In successive quarters, e-commerce then actually dropped to 13.8%, 13.6%, 13.6%, and finally 13.3% in Q2-2021. “E-commerce sales will reach 14.4% of all US retail spending this year, and 19.2% by 2024. When excluding gas and auto sales (categories sold almost exclusively offline), e-commerce penetration jumps to 20.6%,” enVista CEO Jim Barnes notes in a post for Forbes.com.
And so, over the past decade, e-commerce has more than tripled. But with all of the headlines around supply chain challenges, lack of postal workers, parcel backup, etc., you might expect that number to be higher. Indeed, when I tell most people this number, they are shocked that it is so low. In other words, many people have the impression that COVID is driving people inside to order from home, creating the parcel and mail delivery issues. But in fact, as a percent to total retail, e-commerce still has a tremendous amount of unrealized growth potential. That is both the good news and the bad news.
Retailers Taking Notice
That reality of almost certain growth in e-commerce for the foreseeable future has many retailers concerned. They are concerned that the delivery infrastructure – as it is today – cannot deliver to the level that many Americans incorrectly think home delivery is at (meaning 80%+ of total retail sales) or expect it to become. If you were running a business and had to have confidence in e-commerce deliveries five to six times greater than today, would you be comfortable? Most are not, which leads them to investigate alternatives. One alternative is buy online, pick-up in store (BOPIS). This strategy allows the customer to shop and compare online, place the order through the retailer’s website, and – you guessed it – pick up the item at the store. This is a win/win scenario. The customer avoids paying the parcel shipping cost, can see the product before taking it home, and can return it instantly if not satisfied. Meanwhile, the retailer gets the customer in the store – a perpetual goal of retailers. Random thought: you can buy on Amazon and return your package at Kohl’s… I wonder who pays whom in this arrangement?
Nearly 44% of top 500 retailers with stores now offer curbside pickup, a COVID enhancement to BOPIS, which may have staying power if customers get trained to expect it. Most retailers offer BOPIS of some kind with varying customer adoption rates. “As last mile capacity tightens, BOPIS and curbside pick-up eliminate the last mile, which can significantly improve the customer satisfaction and brand experience. Last mile expense can be up to 53% of total shipping costs,” notes Barnes.
Circling back to the survey from ShipStation of 600 US online shoppers:
· 71% expect BOPIS permanently
· 57% have used BOPIS since the start of the pandemic
· 44% are less likely to shop with retailers that don’t offer BOPIS
· 69% have used curbside since the start of the pandemic
· 62% expect curbside pickup from now on
· 44% are less likely to shop with retailers that don’t offer curbside
In a related strategy, the retailer may ship inventory from the store to the customer’s home. This is often referred to as buy online, ship from store (BOSS). In this strategy, the customer experience is theoretically unchanged. While the retailer doesn’t get the customer in the store, they do open up their store inventory for filling e-commerce orders. Many retailers view store inventory accuracy as the biggest challenge of this strategy. Following, the customer experience can be negatively affected by increased backorders and missed delivery dates.
But what is an e-commerce retailer to do if they don’t have brick and mortar stores? Some have been experimenting with renting space and installing delivery lockers. Customers will get a locker location and code in an email to open the locker. If you are wondering why they would do this instead of delivering to your home, consider yourself blessed to not live in an area where porch pirates roam. It may seem like you’re on camera everywhere you go, and yes, many people have the Ring doorbell, but capturing images of someone walking away from your front door with a package is much different than getting an overwhelmed police department to investigate and retrieve your $10 t-shirt. Porch pirate activity also tends to peak around holidays, when delivery promises are most important.
The world is changing. But the world has always been changing. You can choose to be uncomfortable with change, or you can choose to embrace the change and look for new opportunities. I prefer the latter. Yes, the customer experience is changing, but with e-commerce still sitting below 15% of total retail sales, all that is guaranteed is that a lot more change is coming. Embrace the change and prosper.
Matt Kulp is EVP, Managing Partner, St. Onge Company. For more information, visit www.stonge.com
This article originally ran in the January/February, 2022 issue of PARCEL.