The decision to buy over the Internet is strongly influenced by the level of confidence that the customer has in the retailer’s ability to deliver goods of the expected quality on the agreed time and date. A multi-tiered delivery model combined with the introduction of a local collection point fulfilment option will encourage customers to e-shop rather than visit the local high street.
Internet shopping is changing the relationship between retailer and customer
The value of goods purchased by consumers over the Internet is generally forecast to increase from around $20 billion today to around $200 billion by 2002. The emerging model for the delivery of this volume of goods to customers is likely to omit the retailer from the supply chain altogether. For the retailer, this has the advantage that capital can be freed up from stock, but the disadvantage that third parties are responsible for product quality and the delivery service. Therefore the trust the customer must have in the Internet retailer in order to make the Internet purchase in the first place is dependent on the performance of others.
Whilst the retailer can insist on appropriate quality control checks being
in place at the manufacturer, ensuring a guaranteed delivery time is more problematic, particularly when the goods are too large to fit through
a letterbox.
How then can Internet retailers ensure that customers gain access to their goods in an effective, commercially viable and timely manner so that they prefer to e-shop rather than visit the high street?
The answer lies both in the structure of the emerging delivery model and in the development of a new approach to order fulfilment, complementing existing channels to market.
A delivery model for e-shopping
A successful delivery model for e-shopping will combine timely order fulfilment with an infrastructure that offers the lowest delivery cost (see diagram 1).
For many products this can be achieved through a multi-tiered distribution architecture based upon:
- local distribution organisations that deliver goods from local distribution centres to the customer on behalf of many retail organisations
- a network of local distribution and picking centres where goods are transferred between local and national distribution companies
- national and international distributors that ship goods from manufacturers or suppliers directly to the local distribution centres.
Though the national and international elements of this delivery model are well established with a number of dominant players there still remains significant opportunity for new entrants, such as Globalfulfillment.com, to capture and shape the local distribution market.
Though speed is important, successful order fulfilment is still dependent on the customer being at home at the time of delivery if the package does not fit through the letterbox. In the US a number of houses now have specialist delivery boxes for larger items, but for many types of housing this solution would not be universally suitable.
A new approach to order fulfilment
An alternative is to provide a local collection point from which customers can collect their purchases when it suits them - rather than having to commit to be at home to wait for delivery. The introduction of local collection points into the e-shopping delivery model removes a costly element – the delivery of an individual package to an individual home. The customer might still opt for a premium home delivery service when ordering, but could be given the option to select a lower cost collection point alternative that could be used for both delivery and returns.
Local collection points should be located to offer maximum convenience to the customer, ideally at points which the customer would visit anyway – say on the way home from work - with extended opening hours. Examples include railway station car parks in the commuter belt and petrol station forecourts.
What are the implications of this delivery model?
For this emerging delivery model to be successful, organisations involved must be prepared to share information and fully integrate their processes and systems to achieve cost-effective and timely delivery. Over time, this integration, combined with innovative use of data-mining and warehousing applications, will improve the understanding of sales trends and fluctuations in real-time demand. Consequently, some goods will be shipped to local distribution centres based on predicted demand, rather than specific orders. The advantage will be more rapid fulfilment.
Trusting their partners to deliver on their behalf, retailers in turn will be able to focus on managing the customer, brand development product procurement and sales. For retailers to build this trust, the delivery organisations and collection point providers interfacing with the end customer must not only deliver on time, but also develop a customer service ethos which reflects well on their retail partners.
Conclusion
The rapid change and dynamism of the e-shopping world provides those organisations willing to embrace the emerging delivery model with enormous opportunities to grow their businesses. The growing market also provides the opportunity for new dynamic, entrepreneurial entrants to stake a claim and challenge the existing players. They will succeed by combining the implementation of new technology and value creating business processes with a keen and focused customer service ethos.
The success of the emerging delivery model is dependent on the development of effective partnerships between retailers, suppliers, distributors and collection point providers. The quality of these partnerships will determine the level of trust that the customer has in the retailer’s
ability to deliver and that in turn will have a significant impact on their decision to e-shop.
