2021: Retail profits will be made from e-commerce
Research conducted by 7bridges and YouGov shows that consumers who have a preference for online shopping are high spenders. They spend nearly 169% more than their high-street counterparts.
This presents both a huge opportunity, and a distinct challenge for retail businesses in 2021.
The goal of reclaiming vital revenue lost in 2020, is at risk by many businesses through an inability to reach consumers who are shifting to online shopping. After depressed trading in the last 12 months, this poses a threat to brands’ survival that don’t fully exploit the online opportunity.
Dominant online shopping platforms like Amazon capitalise on the simple matter of choice - something that will be challenging for most other businesses to deliver at a comparable scale.
Interestingly, our research shows that consumers would spend more with other brands if they provided delivery and returns service on a par with Amazon. This is a clear warning signal to businesses trying to boost revenue through online sales but not paying due attention to logistics and fulfilment.
For smaller retailers without a ‘logistics Plan B’, disruption and costly workarounds are a given, potentially leading to a direct impact on brick-and-mortar operations. Retail Economics notes that as a result of lockdowns, the high-street is struggling: “With such unsustainable levels of footfall, retailers are reducing their reliance on costly stores. H&M is set to close 250 stores worldwide in 2021, while luxury label Aspinal of London is looking to shutter all its UK stores to move the brand online.”
This goes for delivery as first preference, storefronts as fulfilment hubs, personalising and automating the online support experience and utilising Artificial Intelligence (AI) and Machine Learning (ML) to blend online and in-store shopping.
With massive-scale and high-speed industry transformations like these, all pointing towards making the experience brilliant for consumers, online is where money will be made.
What consumers expect when shopping online
Shoppers expect high standards when it comes to ordering goods online. These benchmarks have been set by the dominant platforms, and consumers want other brands to offer a similar service. Consequently, the retailer’s job is to meet and exceed the benchmark experiences set by the big players (like Amazon).
Top five: Consumers’ must-haves and can’t-stands
Research from 7bridges and YouGov shows the most important drivers of consumer spend online:
The five things most likely to reduce consumer spend with their retail brands are:
How to offer an exceptional online experience in 2021
Now that we know what consumers want and don’t want when shopping online (and that if they don’t get their preferred experience from you, they’ll get it from Amazon), here are some ways you can offer an exceptional online shopping experience in 2021 and beyond:
1 - Offer a great selection of products
Consider whether dropshipping could help you rapidly expand your range and test new products.
If a potential supplier is equipped to ship from their manufacturing site, it can supply your customers directly. This can enable you to save on the cost of shipping, handling and duties, while rapidly expanding the selection of items available from your business.
Know how to work around range restrictions imposed by Brexit. The pressure is on for retailers securing and stocking normal product ranges, as was the case with Marks and Spencer in January temporarily cutting hundreds of items in its Northern Ireland stores due to Brexit red tape.
Visual search and recognition technologies such as those implemented by ASOS, and ‘visually similar’ product recommendations like that of Zalando, are now an option for smaller and agile retailers, not just the big brands.
Customer support is another area where AI can immediately prove its worth; chatbots can offer an experience that lives up to expectations, improving customer experience without adding extra strain to support staff.
And of course, providing exceptional delivery and returns options can make or break a customer relationship. We’ll talk more about this later.
As touched on by Retail Dive: “While consumers may think of packaging in terms of a product they hold in their hands, it has a much longer life cycle that is deeply rooted in its supply chain. This includes the boxes that transport items which end up in homes."
Defining the change
It’s up to retailers and manufacturers to make the conscious change with packaging. Big brands with big eco goals like Procter & Gamble and Nestlé are leading the charge in offering consumers eco-friendly choices. Amazon is streamlining the packaging process with Artificial Intelligence and Machine Learning. Smaller retailers can take cues from where the leading brands focus attention.
Building brand loyalty through a greener supply chain
The accelerating shift to online shopping emphasises the importance of attracting and building brand loyalty in the younger demographic. Retailers offering greener purchase options are likely to generate more revenue and brand loyalty from these consumers.
Younger generations demand eco
Ensure that your product arrives in a sturdy, premium, eco-friendly package. Our research showed that Gen Z and young millennials most value environmentally-friendly options, and it affects their purchase decisions:
- 58% of 25-34-year-olds look for green and carbon-neutral delivery options
- 62% say minimal and eco-friendly packaging influences their choice of retailer
Reduce the environmental footprint of every order you send
How can you reduce waste, and replace non-recyclable materials with eco-friendly ones? Many businesses specialise in these changes and can support you in transitioning to a greener offering.
✅ Smart technology can optimise packaging and pallet configuration - so you can reduce waste, ensuring every millimetre of space and every gram of weight is used effectively
✅ Carbon-neutral deliveries are possible with AI-driven routing and logistics provider selection. It’s not enough for an order to be collected in an electric vehicle if the last mile delivery is made using polluting vehicles on busy routes that waste fuel
✅ Optimised stock redistribution and ship-from-store tactics can help you hold stock closer to customers, making it possible to reduce the environmental impact and cost of delivery (as well as your business resilience). We’ll explore these use cases later on this page.
According to our research, a staggering 93% of consumers say the availability of free delivery will influence their choice of retailer. This goes a long way to explain why almost half of consumers say they have abandoned a shopping cart due to 'slow' shipping times. And retail prices for standard delivery are currently out of line with consumer expectations.
Lower your logistics costs and pass on savings to your customers
The price that retailers are charging consumers for standard delivery (3 - 5 business days) is significantly more than what consumers say is reasonable – £0.77.
Comparisons among well-known brands illustrate this*:
➡️ Whistles charges 2.5x the ‘reasonable price’ (but offers free delivery for orders over £100)
➡️ Boots charges 4.5x the ‘reasonable price’ but does offer free standard delivery on orders over £30
➡️ Sports Direct charges more than 6x the ‘reasonable price’ for standard delivery
Despite this price sensitivity, consumers say they are willing to pay nearly £2.40 for next day delivery in the UK on items under £50 and £2.70 for orders over £50. Retailers can actually profit from offering a next-day delivery option to customers - more about this in the next section.
Are you looking to update and improve your delivery options? 7bridges can help.
Lower your logistics costs and pass on savings to your customers
Finding cost-cutting areas in business is a challenging task, but logistics is an area that can offer significant cost savings, which you can then pass on to your customer.
Our respondents generally feel that delivery charges are too high, indicating that a ‘reasonable’ amount for next-day delivery would be about 75% of the average actual cost.
Businesses need to offer a range of delivery options: free, low-cost standard, and last-minute premium. Consumers indicated a willingness to pay more for guaranteed last-minute deliveries.
7bridges brings world-class logistics capabilities to global retailers, and helps them improve customer experience and reduce costs. Find out more.
Offer next-day delivery and recover 75% of the charges.
We found that it’s possible to make next-day deliveries in the UK at the cost of between £2.30 to £3.50 (depending on the weight and size of products shipped) if businesses optimise their logistics operations with smart technology and dynamic carrier selection.
And, since consumers are willing to spend almost £2.40 for next-day delivery on items under £50 and £2.70 for orders over £50, retailers can quickly recover 75% to 100+% of their shipping spend.
Developing a customer-centric logistics strategy and investing in a logistics solution that automates delivery and returns can work wonders for your brand's reputation, your bottom line, and enable you to meet the standards set by platform's like Amazon and ASOS.
With a clear and optimised logistics strategy, businesses you can offer multiple shipping and returns options while keeping costs low and margins high – even during challenging conditions such as COVID-19.
Automated carrier-switching and dispatch processing enable this, dynamically selecting the optimal logistics provider for each outbound shipment or its return, based on several factors, including cost.
Do you offer an optimal returns experience to customers?
➡️ Have your customers got easy-access to real-time delivery and returns tracking?
➡️ Is there a single point of contact (or do your customers need to copy and paste tracking codes into your courier’s website)?
➡️ Do you offer a simple, electronic and free returns process, with multiple options?
With the efficiencies that an optimised logistics system brings, it’s possible to offer a quality experience to the consumer – one that meets the standards set by the dominant platforms.
At 7bridges, our Return module can help you improve your retention rate by simplifying returns for customers.
✅ The module will produce all the necessary paperwork for label generation and cross-border returns.
✅ Returns can be processed without the need for customer service reps and instant refunds can be provided, if desired.
✅ The intelligent algorithm will determine the best carrier to ensure a speedy recovery of goods, minimising your inventory loss risk en route.
✅ It will even select the best destination to which goods should be returned, based on overall replenishment costs. As a result, your warehouses can afford to hold less stock.
Ready to improve your returns experiences? Talk to 7bridges.
Putting a multi-provider strategy in place can mitigate unexpected bumps in the road, as DPD faced.
Businesses are most vulnerable in situations like this, if they have a limited number of carrier contracts.
They can’t avoid the surcharges the carrier raises, and remain highly exposed to the risk of poor carrier performance caused by the stresses of the pandemic and Brexit combined with an unprecedented increase in online sales volumes.
DPD Road Service Suspension
In January 2021 as the UK Brexit transition ended, the logistics company was bogged down by manual paperwork and incomplete data, which led to a pause in road service. A situation like this will have been detrimental to the retailers unable to switch to an alternative shipping provider rapidly.
During the early months of the pandemic, logistics carriers raised surcharges without notice, and businesses were suddenly forced to absorb far higher costs when fulfilling orders. In many cases, these extra charges were enough to wipe out the margin on a sale, and unfortunately, most businesses were not in a position to avoid this price surge.
As the pandemic was reaching its first peak in April 2020, surcharges rose sharply for domestic and cross-border deliveries, and the rise differed across carriers. While DPD levied almost 18% in fuel surcharges for international deliveries, FedEx charged 9.5%. Additional parcel surcharges for shipments within Europe could be £2.25 per shipment for parcels with DPD, but £0.20 per kilo with UPS (while UPS added a greater freight surcharge of £0.61, but FedEx charged £0.18).
Businesses relying on a single logistics carrier or a small number of carriers were most exposed to charges like these, and unable to benefit from the considerable variance in charges raised by different carriers.
Companies can reduce costs, improve performance and offer resilience by moving to a multi-provider strategy.
Exposure to these surcharges can be minimised by expanding the portfolio of carriers used and adopting new technology to optimise carrier selection for each despatch. With easy to use, continuously-adaptive automated carrier-switching, a business can ensure that its shipments are always being routed via the carrier that offers the best value and performance balance.
This functionality is part of the 7bridges platform, and typically reduces logistics costs even in ordinary business conditions by 30% or more. In the rapidly-changing logistics landscape seen in the early months of the pandemic, businesses that could switch carriers instantly to avoid the highest surcharges experienced a considerable competitive advantage.
Considering implementing a multi-provider strategy? Talk to 7bridges.
7 - Repurpose high-street stores to improve online sales fulfilment and offset costs
Repurposing your physical storefront into virtual warehouses is a smart way to operate when consumers can’t walk through the door.
Many brands, such as Selfridges in London, are seeing the benefits of this temporary switch. Retail analyst Natalie Berg says: ‘The future of online is stores.’ In other words, retailers with existing stores can use them as a valuable asset in their online sales effort.
In the situations where footfall in stores is dramatically reduced, retailers can use stores as part of the infrastructure to fulfil online sales and offset the costs of keeping stores by developing their contribution to the online component of total sales.
According to research carried out by CACI, brands experience online sales 106% higher within the catchment of a bricks-and-mortar store.
Ways that retailers can use their stores to boost online revenue:
- By letting customers pick-up online purchases from the store.
Advantages: Customers save delivery charges and avoid time spent shopping in-store; stores may be able to satisfy higher sales volumes without higher staffing levels.
- By re-distributing stock away from warehouses and into stores.
Advantages: Stores become part of the resilience strategy as nodes in a distributed ‘virtual warehouse’ network; the cost and delay of setting up additional warehouses are avoided; if local lockdowns, staff sickness or carrier disruption put one or more nodes out of action, stock is still accessible from other nodes in the network.
- By shipping online orders from stores.
Advantages: Online orders can be fulfilled from any store that has stock and is linked into the sales fulfilment system; stores can continue to contribute strongly to revenue even when footfall is limited or even when the store is closed to walk-in customers; the high degree of automation and coordination provided by the fulfilment system makes it possible to operate with reduced staff and restricting safety measures. Also, it can mean the product is located closer to the customer, reducing cost, time and carbon footprint.
Ship-from-store Case Study
How we did it:
➡️ Balancing the availability of an item against predicted demand at each location, and forecasting transport and replenishment costs
➡️ Automatically flagging potential problems with an order before it’s sent to the store
➡️ Providing automated in-store 'one-click' fulfilment, covering everything from; order processing, to booking the optimal courier, to replenishing the item of stock
💰 8x ROI from the first month
📉 35% cost reduction at each site
📍5-10 new ship-from-store sites rolled out per week
Even the most experienced procurement professionals will struggle to compare unstructured data from logistics suppliers, without the help of advanced AI technology like the 7bridges Procure module.
Our AI can read your current and historical supplier data, and identify all of the opportunities to save costs and improve performance.
Armed with these insights, you can re-negotiate existing contracts, identify new supplier opportunities and simulate their real impact.
The 7bridges Procure module:
- Enables you to recapture margin on orders by rapidly lowering logistics spend
- Improves customer experience by ensuring supplier SLA compliance
- Helps you expand your offering - by connecting you to suppliers that provide new delivery types, greener services or regional connections.
As noted in Logistics Management, the time is ripe for levelling up logistics with exciting innovations in AI and IoT; from the warehouse to the last mile delivery operations.
AI and wearables in the warehouse
In the warehouse, you can make significant efficiencies that will translate to financial savings. For example, data from smart wearable devices can be read by AI technologies, and used in tandem with current and historical order data to predict and plan staff resource allocation - according to real-time conditions.
This will allow you to:
- intelligently allocate staff
- optimise stock movement
- save time and increase productivity
- reduce wastage
- cut costs
Optimise picking and packing to reduce wastage
Technology can advise your staff on picking and packing each order, to save them time and reduce wastage associated with poorly configured orders.
Which size container should be used for each order? What packing materials are best suited to ensure safe transportation? And how should items be arranged in order to reduce excess packaging, weight and size?
AI simplifies the process and reduces time spent on the frustrating tasks of finding items and fitting them into the right containers.
Automate label and document creation
Manually creating paperwork like labels and cross-border documentation can be extremely confusing, time-consuming, and error-prone. Getting it wrong can result in customers receiving orders late, or not at all.
This can lead in customer churn and negative reviews. In 2021, it particularly important for businesses shipping goods between the UK and EU to get this right, and technology is a fantastic way to solve the issues associated with document creation.
Improve scheduling and dispatch
Smart technology can also give you advanced control and visibility over your dispatch processes and performance metrics (across multiple different sites and suppliers).
You can use it for courier scheduling and parcel pickup. When combined with a multi-carrier strategy, technology can allocate the best route and provider according prevailing transportation conditions, supplier performance and real-time shipping costs.
Use AI to optimise your logistics end-to-end
Think about how technology can optimise the logistics cycle as a whole. From selecting a warehouse or store to send stock from, choosing the way it's packed and by whom, selecting the route it travels and the carrier to take it to its destination.
With an AI system in place, this is all automatically and dynamically organised according to current conditions in your business and externally (e.g. carrier delays, Brexit transport hold-ups or weather events).
AI creates operational efficiencies, delivers significant cost savings, reduces packaging waste, improves sustainability and raises ‘On Time, In Full’ (OTIF) performance.
Spotlight: How Thread used intelligent logistics and distribution networks for new market entry
This fashion retailer wanted to enter a new market without extra costs. The 7bridges platform gave them instant access to a distribution network in the USA through our ecosystem of shipping providers.
This meant they could launch in a new region in just one month saving over 50% of the costs they would have otherwise paid.
➡️ October 2019: Thread began deliveries to US customers from its UK warehouses
➡️ December 2019: First US-based warehouse was added.
Deliveries to customers, returns and transatlantic traffic are all managed with the 7bridges platform, which automatically selects the best value/performance carrier for each shipment, together with consolidation, customs paperwork, tracking and notifications and performance audit.
Are you considering new markets? Plug into the 7bridges intelligent logistics platform for an instant-on distribution network that handles both outbound and returns traffic.
The path forward starts now
Looking towards the next few trading years, challenges indeed lie ahead. But by recognising that the changes happening now are just a fast-forwarded version of the future, and adopting strategies to suit, retailers can capitalise on current situations, and remain resilient for years to come.
Keeping consumer expectations top of mind and providing the online experiences and implementing resilient logistics systems that attract, convert and retain customers is a feat more manageable than you might think.
Talk to an expert
The world needs supply chains that can adapt quickly - that means they are integrated, data first, responsive and resilient.
7bridges gives you the ability to understand the impact of every decision you make - gathering all your data in one powerful platform so you have full control and a birds-eye view. Our AI lets you test out new ideas and adapt to real world disruptions; giving you more room to innovate.
Speak to one of our team to learn more 👉
7bridges is already trusted by fashion brands, medical technology providers and manufacturers. We've also been voted as one of the most exciting artificial intelligence startups in Europe in 2020 by Business Insider.