How Retail Can Manage the Growing Expectations of the Delivery Economy

In 2018, shipping costs was cited as the most common reason consumers abandoned their online retail purchases. Coming into 2020, the expectation of fast and transparent delivery of e-commerce purchases at a lower cost is only expected to grow.

But for many years now, for just about every category in retail, the distinction between channels, such as brick-and-mortar or e-commerce, has been vanishing. Retailers have moved away from separating their channels and instead are focusing on finding the best omni-channel approach, combining brick-and-mortar stores and e-commerce.

While some combination of in person and online shopping is the new norm, this approach can create inventory and fulfillment challenges that are further complicated by demands for faster and less expensive shipping.

For an omni-channel strategy to be effective, retailers need to know where their products are at any time. And this gets vastly more difficult to accomplish as sales channels expand. Without an accurate and reliable view of inventory levels, retailers risk their bottom-line due to overselling out-of-stock products and overstocking slow-moving items.

What started with companies like Amazon offering faster shipping, quickly grew through the popularity of delivery apps and services like Grubhub, Postmates and Instacart. These trends have led to the emergence of the Delivery Economy — the pervasive sentiment in which customers expect low-cost, fast and highly transparent delivery of goods. Delivery, which was once a peripheral element of purchases, has become a decisive factor, and retail companies need to adjust accordingly.

In 2019, project44 released a report uncovering how the Delivery Economy is moving delivery to the core of the customer experience. In fact, 74% of consumers stated that when a package isn’t delivered when expected, it hurts their impression of the company, impacting brand reputation for retailers.

The second report in this series, “Aligning the Supply Chain In The Age Of The Delivery Economy,” based on a blind survey of 300 supply chain professionals, demonstrates that the Delivery Economy is creating enormous pressure on the supply chain, which in turn, affects the success of retail companies.

No Part of the Supply Chain is Immune

Every stakeholder in the delivery process, from the supply chain to transportation and marketing, must shift their strategy and work seamlessly together to adapt to a changing delivery landscape. In fact, 73% of supply chain professionals said they’re experiencing pressure to improve and expand their delivery capabilities as a result of the Delivery Economy.

For retailers, delivery features like minute-by-minute and mile-by-mile tracking are at the forefront of consumer expectations, and consumers are holding the retailer responsible. Nearly half (49%) of consumers said if a package doesn’t come when expected, they hold the retailer or e-commerce site responsible.

Nearly 70% of consumers want the ability to track the progress of shipments, and the majority of marketers (82%) believe they offer this ability. However, 73% of supply chain professionals say they don’t have the capabilities to provide real-time tracking, which due to the Delivery Economy, is becoming the standard consumers expect.

Since more retailers are now responsible for ensuring on-time and transparent delivery, the majority (79%) of supply chain executives expressed a need for greater collaboration between the supply chain and marketing so they can better understand the evolving expectations and better serve their customers.

What Retailers Need to Address

Due to the Delivery Economy, 64% of B2C companies are feeling pressure to improve or expand upon delivery capabilities. In order for retailers to successfully deliver on the customer experience their patrons expect, it’s clear all portions of the supply chain must work together. If not, one snag in the supply chain can cause a snowball effect, potentially leading to a delay or missed delivery.

But this pressure isn’t felt evenly among the supply chain. Eight-two percent of supply chain managers reported feeling pressure to improve and expand their capabilities as a result of the Delivery Economy, a 25% higher rate than their executive counterparts.

A first step in ensuring collaboration within the supply chain is for executives to work more closely with the managers who face many of these issues every day. This disconnect between parties needs to be addressed to achieve the alignment necessary for retail companies to meet the growing needs of the Delivery Economy.

In addition to organizational challenges, legacy and manual systems and processes need to be updated in order for retailers to have access to the best information possible when tracking their deliveries. Right now, 79% report using a combination of suboptimal systems to do their jobs.

To keep up with the demands of the Delivery Economy, changes are in order for retailers. When delivery expectations aren’t met, brand reputations are on the line, with the majority (60%) of supply chain professionals believing their customers blame their company when products or goods are not delivered when expected.

Meeting customer expectations means better communication and collaboration, because every moving piece impacts a company’s ability to adapt to a rapidly changing landscape. Retailers can use the key role delivery plays in customer perception to build up their brand as a customer-centric company.

Learn more about why retailers can’t ignore the Delivery Economy.