E-commerce has been on an upward trajectory since the dawn of the internet and continues to change the shape of the retail industry. But what are the key challenges faced in riding this wave and what are the things retailers can do to gain competitive advantage in an increasingly tough marketplace? Here, our Commercial Director, Ben Balfour and Business and Client Development Director, Caroline Ellis explore…
What is driving the boom in e-commerce?
Caroline said: “To win brand advocates and secure consumer loyalty, retailers can no longer simply offer the product they want at the right price – shoppers are demanding an experience that offers convenience at every touchpoint. This means being faster, better and cheaper than the competition and this is where some pure play e-commerce retailers or traditional retailers that have embraced e-commerce have gained a competitive advantage. There’s a consumer-driven need for convenience at every stage of the retail experience and tech is enabling this. Whether it’s AI and Big Data offering tailored product suggestions like a personal shopper service or logistics solutions that deliver a product to a consumer quicker than the time it would have taken them to make a trip to the shops, e-commerce offers shoppers convenience that some traditional bricks and mortar simply can no longer compete with and a contributing factor in the struggle that the high street is currently facing.”
What are the biggest obstacles to overcome when it comes to e-commerce?
Ben said: “For retailers of any size, inventories and stock management can be a difficult to manage, balancing commercial and consumer demands. Visibility of stock in real-time is the biggest challenge for e-commerce. For retailers, managing stock across multiple distribution centres, warehouses, stores and on a returns journey globally, this requires careful planning. The need to ensure the right stock is in the right place at the right time is fundamental in protecting the bottom line. Returns add an additional layer of complexity. Free or very low cost returns are expected as standard by consumers, so e-commerce retailers must ensuring this process is as efficient as possible to maximise profitability. These all play into how a finance department reports, forecasts and plans so it’s crucial to manage as accurately as possible.”
How can retailers and logistics providers overcome this?
Ben said: “The current landscape demands that retailers and their logistics partners have the right technology to support an effective and sustainable supply chain . Bespoke technology will help against the retailer’s unique set of circumstances to streamline processes, speed up operations and maximise profits. Returns is a great example of where retailers can take advantage of the efficiencies that can be leveraged from innovation. The key remains around ensuring visibility of stock and managing routes back to market.
“Taking this a step further and e-tailers are now starting to benefit from the mass of data collected year-on-year through these processes. Technology can analyse the flow of goods both in and out of the business and identify the buying habits of a business’ consumers. This means that businesses are equipped with data and information to allow them to better plan for future seasons and trends.”
What technologies are driving operations when it comes to e-commerce?
Ben said: ”As a tech-enabled supply chain partner with our own proprietary technology for retailers, providing software as a service is a key enabler to lead from the front in the logistics sector. I think this demonstrates how far the industry has come.
“We’re also now seeing an increasing focus on the first mile of returns. In the reverse of the race on last mile delivery, technology is now being used to optimise this process from the moment a consumer releases a parcel back to a 3PL. In a traditional supply chain model, a parcel would complete a reverse journey before a decision on how it could be salvaged would be made. The onward journey from this point might see a product be returned to the same market, sent to a new market or to discount line amongst other options designed to maximise profitability if possible. Now this decision can be made earlier in the chain, removing touch points and getting it where it needs to be quicker. This is good news for the retailer and the consumer – the quicker the return, the quicker money is back in the consumer’s pocket, ready to re-spend. The retailer benefits from getting a truer picture of its stock and finances quicker allowing them to make better commercial decisions.”
Do you think that offering free shipping/delivery and returns is now a standard for consumers? And how sustainable is this for businesses in the long run?
Caroline said: ”Free shipping and returns have become a standard consumer expectation when shopping online. Paying for this service can even put consumers off purchasing from that retailer – so it’s crucial they get it right. But this service does have a cost, so if a consumer isn’t paying for it directly, then a retailer must recuperate this somewhere else within the sale. At what point this becomes unsustainable completely depends on the model of the e-commerce business.
“In some instances it’s more financially viable and sustainable for the customer to keep the product rather than incur additional costs to return.”
What environmental effect is e-commerce having and how can businesses remedy this?
Caroline said: “The best way to improve the sustainability for an e-commerce operation is to reduce the number of returns. Get to know your customer with the use of technology and introduce smart tools such as AR and virtual changing rooms. However if a return Is unavoidable they must look at how the supply chain can be optimised by reducing touch points, introducing shorter journeys, and offer the most efficient methods of delivery and returns.
“Many consumers are making more ethically and sustainability-driven purchases. E-commerce companies could consider their supply chain efficiencies as a positive PR move – whether that’s being able to boast shorter journeys or restoring stock with repairs and selling at a discounted cost to reduce wastage – which would appeal to a large number of customers and could enhance brand loyalty.“
© Logistics Manager 2019
This interview originally took place as part of a feature for Logistics Manager’s March 2019 edition. Click here to read the magazine and turn to page 14 for this full article.