Prime Considerations

Challenging consumer preference for speed over convenience, critical for Amazon Prime Now success, says Crimson & Co. If Amazon’s new one-hour delivery service is to be successful, it will depend on a number of factors notably product availability, as well as the demand for speed over the inflated delivery costs being more prevalent to the consumer. However, if it proves popular, it will put pressure on competitors to reassess their existing delivery strategies.

Jon Gibson, Head of Logistics at global supply chain consultancy, Crimson & Co believes the key to the service, will be the retailers ability to balance additional delivery costs alongside speed of service. Critical to this will be the need to forge new relationships with unconventional partners, which can ultimately deliver the products to the consumer faster, more conveniently and at an affordable price.

Following success in the US, Amazon has recently announced that it would be launching Amazon Prime Now, a one-hour delivery service for UK Prime subscribers in designated London postcodes. If successful, further rollout will follow across the country. The launch is expected to raise the stakes amongst other online retailers keen to grab market share from bricks and mortar competitors.

Gibson states that in order to compete with the new service retailers will be forced to rethink current delivery strategies.

Over the last year the growth in click & collect services has seen many consumers favour convenience over speed, however, with some retailers looking to add additional costs to this service, this could swing preference from consumers, back in favour of speed:

“Historically, delivery strategies have always been a challenge for retailers. The proliferation of tablets and smartphone devices puts the emphasis very much on speed of service giving consumers instant visibility over a far wider range. Visibility of the range has driven a desire for quick access. Reacting quickly and efficiently has always been difficult for retailers, either because they are often serving the online market from retail outlets, which puts pressures on stock, or the massive peaks in online demand surges that have recently been driven by events such as Black Friday being too great for traditional transport methods to cover.

“The emergence last year of click & collect changed that, with greater emphasis on convenience for the consumer. Click & collect is a fairly new battleground for UK retailers, with huge rewards for those, which get it right. Recently, we saw Marks and Spencer enter the fray, with customers increasingly keen to embrace the convenience of being able to order goods online and pick them up in store or elsewhere.

“They can choose a destination point close to their home or work and collect their item at their leisure, often a lot quicker than if they had arranged a home delivery. This is both more convenient and cost effective for the retailer, as it leads to consolidation of delivery and fewer occasions when a delivery cannot be completed because the intended recipient is not available. Amazon’s launch of a new one-hour delivery service, however, could flip that trend.”

Gibson continues: “For a consumer, the opportunity to buy a product online and have it in your hands within an hour is hugely appealing. The biggest barriers for uptake of this service, however, will be the associated costs.

“Recently, we saw John Lewis announce that it would start charging a £2 fee for click & collect purchases costing less than £30, after finding that its current free model was unsustainable – those retailers looking to compete with Amazon’s new service are likely to experience similar challenges. Although economically sensible, introducing the charge of course increases the pressure on the retailer to ensure their delivery promises are met accurately, at the first time of asking.

“Key will be addressing relationships with existing suppliers as well as forming new ones with unconventional partners. Local transport businesses such as taxi firms, and even fast food delivery services could all potentially be used to maximise speed of service for the consumer at a price, which is competitive against other retailers. The pressure will very much be on the retailer to ensure this is carried out effectively – those that don’t are at risk of being left behind by their more progressive competitors.”

About Crimson & Co:

Crimson & Co is a global supply chain consultancy that thinks differently. It stands shoulder to shoulder with clients as it develops outstanding supply chains, using deep operational experience and broad-based business skills to challenge, guide and implement. Its strength is its consulting team, which it nurtures with care, and it has an approach and culture that its clients believe is unique.

The company was founded in 2003 as a breakaway from one of the major consultancies and its scope spans supply chain strategy, planning, procurement, manufacturing, logistics and customer channels. It operates on all continents, with offices in London, Atlanta, Mumbai, Melbourne, São Paulo and Singapore, and typical clients are blue-chip organisations such as Sony, Diageo, Carlsberg, BAT, GSK, Tesco and Merck.

For more information, please see: www.crimsonandco.com