Thinking competitively

Thinking competitively

Mike Richmond, Doddle CCO, explains why Posts and carriers should see themselves as pushing e-commerce forward, not just riding the wave.

 “There’s a tendency towards passivity when parcel businesses (posts or carriers) talk about e-commerce. The market is active: “rapidly growing”, “surging” “providing opportunities”, or “driving increased profitability”. The implication is that logistics providers are riding a wave, propelled along by external market conditions. In fairness, that’s quite true – the growth of ecommerce is largely unaffected by any single parcel carrier or post. Yet, at the risk of stating the obvious, it literally would not be possible without the global network that they create.

The point is that there’s a recognition that e-commerce is probably the single most important focus area for most carriers and posts, but what hasn’t sunk in yet is the new reality of competition that this brings them into, and how they have the potential to move the industry forward.

Competition in an e-commerce-first world is about enabling e-commerce growth, not just maximising a share of the parcels it generates. Of course, the capability to move millions of parcels reliably and quickly is one of the most obvious and important enablers of e-commerce. From a competitive standpoint it also has the advantage of requiring significant infrastructure and capital to reach the necessary economies of scale, which provides security against new entrants. However, those factors alone do not mean that providers are guaranteed profitable growth.

New entrants in the technology space are already starting to peel off aspects of the parcel delivery and returns experience, taking ownership over customer journeys and building valuable businesses for themselves. That should give posts and carriers cause for concern. They’re being “unbundled”, in investor-speak, but it’s happening before many have even had the chance to put together the full bundle themselves. And, worryingly, some are downplaying these threats entirely, apparently in Blockbuster-mode. The video rental business infamously told analysts: ‘Netflix are not even on the radar in terms of competition’. It did not take long for them to be proven wrong.

Flywheel thinking

Amazon built a marketplace where sellers got access to one of the most-visited e-commerce websites in the world. Then they built the marketing tools for those merchants in order to get better visibility on the marketplace, to sell more products (paying a fee on every sale too.) Merchants pay Amazon for ads, which leads them to pay Amazon more sales fees. Enabling success for merchants compounds Amazon’s own success: they’re paid twice.

The same ‘flywheel’ approach should be true of any parcel business. They have built their networks and take their fee per parcel (think of this is as the basic sales fee on the marketplace), but they should now be looking to add new tools on top that both generate revenue in their own right and encourage new volume, instead of leaving this to others (think of these as the equivalent to Amazon’s marketplace advertising platform.)

This approach can give direction to posts and carriers who are in the process of digital transformation, because finding targets that satisfy the flywheel criteria help digital efforts to immediately create value for everyone – the end customer, the merchant, and the carrier themselves. Such solutions can earn their keep with revenue, but crucially also positively affect the wider business. Any solution that makes a customer more successful in ecommerce will mean more orders as they grow, which means more outbound parcel revenue. Making customers more successful also means better commercial relationships, and improved brand perceptions too.

Amazon is able to threaten disruption to incumbents in so many sectors because it recognised the principle of enabling success very early on. The majority of sales made on amazon.com are not sold by Amazon. It is a machine that enables ecommerce (and other aspects of businesses) for others. That’s why it’s a marketplace, an advertising platform, a web host, a cloud computing provider, and of course a provider of warehousing and delivery services.

It’s not just Amazon. Walmart has (or plans to have) more or less the same suite of services and products. Alibaba and JD Logistics in China are making the same move towards an “ecommerce-as-a-service” model. Erstwhile marketplaces and webstore providers are also jumping in, with eBay and Shopify adding fulfilment services to their propositions. Look also at the likes of Klarna and Afterpay. Buy-now-pay-later businesses are disrupting the buying experience in e-commerce globally, but they’re also investing in building data insights engines (Afterpay) and carrier management platforms (Klarna), because they see the need to  better enable e-commerce for their merchant paymasters.

These businesses are all realising the full remit of an e-commerce-oriented company can be much broader than their initial specialism, especially when they have so many existing customers to bring new services to. What we are not seeing is the reverse: carriers reaching up the chain to offer digital services to better support and enable the needs of their e-commerce merchants.

Where the logistics industry can play

This isn’t to say that parcel carriers and posts need to start building marketplaces and cloud computing teams. But if Amazon was able to scale its proposition from bookstore to global platform, then the businesses who already collectively underpin global e-commerce can certainly diversify their offerings too, and they have the advantage of sophisticated infrastructure and existing customers. Those factors can supercharge the introduction of new services and make them impactful very quickly.

It’s fair to say that many carriers and posts are at least taking aim at delivering more value through digital solutions in future. UPS chief Carol Tome recently hinted in an interview with Fast Company at the digital, data-driven future they’re looking at, harnessing their knowledge of what shoppers are buying and where they’re buying from.

We know what’s being delivered to your home, every day, and by whom” says Tomé, who marvels at this “not from a Big Brother perspective—but from an information perspective.”

Using digital tools to offer more value to e-commerce merchants doesn’t require carriers to re-invent the wheel or go way outside of their expertise and core competencies. Often it just means making their existing services easier to access and a better experience to use, or adding insight through data and intelligence that makes it easier for retailers to understand their performance, or their customer.

A key target for enablement

One of the single biggest roadblocks for e-commerce merchants right now is returns. Consumers are returning something like one in five e-commerce orders (the National Retail Federation estimates US return rates at 18.1%) and the cost to manage those returns is significant. The process of managing the return is key to customer loyalty – 87% of US shoppers surveyed by YouGov on behalf of Doddle said that a positive returns experience encourages them to shop again.

However, 76% said in the same survey that retailers should do more to improve their returns experience, highlighting how far many retailers have still to go in this area.

But as many merchants are struggling to manage this influential area of customer experience, consumers are becoming used to the likes of ASOS and other top tier e-tailers, who have invested in digitising and upgrading their returns experience. The resulting mismatch of consumer expectations (think of the three quarters who said retailers should do more on returns) is exactly where carriers can help their merchants. By providing a returns solution that offers them the same flexible and customisable journey that customers are familiar with from the best online retailers, carriers catch them up to speed without the merchant needing to dedicate all of their limited IT resource to develop and implement a solution.

e-commerce returns will continue to be a fact of shopping online. Providing a high-quality customer journey and crucial returns insights for merchants will allow carriers to capture a wider share of this volume, as well as making their ecommerce merchants more successful as they can better understand and manage their returns. That in turn drives more outbound volume because merchants who spend less time and money on returns processing can invest more in growing their business. This embodies Amazon’s flywheel philosophy, where one product’s success in turn makes another more successful.

The ideal returns experience

In fashion one size does not fit all, but ironically, that’s exactly how most merchants deal with e-commerce returns. Each shopper and each product is treated more or less identically, regardless of behaviour or value. This cannot be optimal when some products are far more valuable and high-margin than others, and the same is true of customers!

Ultimately, returns will have to become personalised, with the customer’s options changing depending on the product they’re returning, their reason for doing so, and their own shopping behaviours. Those behaviours are hard for retailers to track, in the cases of fraudulent returners, but carriers could have a much better view on this if they were providing the returns experience. By tracking behaviour data from customers across retailers, carriers could more easily flag problematic behaviour before it happens and prevent fraudulent returns.

The ideal journey should allow a customer unhappy with their online purchase to easily make a return from the retailer website. First, they need to give the retailer the reason for their return. Capturing returns data digitally without making it part of the physical return processing allows retailers to swiftly analyse and take action to improve their returns process.

Customers should have multiple ways to get the item back to the retailer, depending on their needs: that could mean a paper returns label in the package, a QR code to scan at a drop-off location, or a printable label from the website. Then they need drop off locations or collection from home options – for drop-off locations, that means a mix of formats both manned and unmanned, with several options reasonably close to the consumer.

Once the return is collected or dropped off, the consumer needs to be kept up to date with the timeline to expect for their refund – this type of tracking is just as important in reverse as it is on the outbound journey. The majority of customer service contacts for online retailers are asking for information about parcels out for delivery, or about refunds yet to be processed. Neither is a sign of a good customer experience, and both cost retailers by tying up their customer service resource.

Only a handful of retailers are currently able to offer this grade of returns experience on their own. By offering a digital returns solution embedded into the retailer website, carriers can make this a reality for their merchants, enabling their ecommerce success, which in turn drives growth for the carrier. Optimising returns is an ideal launchpad for posts and carriers to diversify the ways they support e-commerce success and become even more valuable players in the e-commerce landscape.

About the author

Mike is responsible for Doddle’s engagement with postal organisations and parcel carriers, working with them to improve their out-of-home delivery propositions and helping them to increase consumer preference for out-of-home delivery methods. Mike joined Doddle in 2014 and has had roles in strategy, overseeing sales and marketing, and is now fully focused on the carrier market. To find out more email him at [email protected].

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