The Permacrisis’ Impact on Ecommerce Logistics

We so often in these articles focus on the business of attracting customers to our ecommerce platforms and servicing them in the moment-to-moment interactions which are directly tied to the purchase process.

However, one area of the ecommerce process which is becoming increasingly challenging is the business of actually getting purchased products from our stores or fulfilment centres to the customer’s address. Logistics are become significantly more complex as customer expectations grow and the number of packages being dispatched also increase.

This would seem an opportune time therefore to step back and take in the seller to buyer logistics to process as it stands right now and try and see how we can better secure this crucial element of the ecommerce retail experience for the future.

Zero Wait

When McKinsey put forward its theory of the five zeros which are dominating retail customer expectations in the contemporary landscape, it identified zero wait for delivery as one of the quintet.

"Two-day delivery is the new five-day, and instant will soon take its place in many markets,” said McKinsey in its report. "Amazon led the way in raising expectations by cutting average delivery times from eight days in the early 2000s to two days and even same day in some locations. More than 90% of consumers now see two- or three-day delivery as the baseline. Thirty percent expect same-day delivery, and they’re more likely to be willing to pay for it, especially if they’re younger, urban, and generally more time constrained.”

The Overton window of delivery expectations have undoubtably shifted, and customers now expect their products to be dispatched faster and more efficiently than ever before. This is especially relevant in the UK where we have seen significant disruption to mail services because of industrial action and are likely to experience further strikes in the future.

While we would never begrudge workers fighting for better pay and conditions, ecommerce brands need to find alternatives to meet customer expectations during these periods of unrest which is only going to add further pressure to already hard-pressed courier companies.

"Falling short on delivery times has consequences,” continues McKinsey. "When online customers discover during checkout that they may need to wait longer for delivery, about 46% abandon their shopping carts. Many [retailers] are now trying to figure out whether two-day or faster deliveries are realistic, how much each customer segment cares about speed, and how to partner with other companies to create new delivery models to meet rising expectations.”

Energy Crisis

We must also consider how the Russian invasion of Ukraine and the lifting of the UK energy price cap is having serious repercussions for those courier businesses and their ability to remain competitive in an increasingly tight margin environment.

Fuel prices are astronomically high right now which is raising the rates couriers must charge to remain profitable.

"It’s not only households that are facing steep rises in costs,” said Head of Consumer Research at ParcelHero, David Jinks. "Transport, logistics and warehousing companies have also faced significant increases in the cost of energy and materials, and many are being forced to pass these on to their own customers. In all, 37.3% of transport, distribution and warehousing companies reported they were increasing their rates in April [2022]. That’s because 56% of companies in this sector faced significant rises in costs during March.”

The UKs Office of National Statistics reports that nearly half (46%) of trading businesses reported an increase in the price of goods or services bought in October 2022 compared with September 2022, which demonstrates the extent to which these price increases are being passed onto the customers.

"Some retailers are responding to the challenge by offering more options,” continues McKinsey. "Walmart, for example, has continuously evolved its delivery offering. It acquired Jet.com in 2016 to offer a broader assortment online and grow e-commerce capabilities. Since then, the company’s delivery model has grown to include free two-day shipping with a purchase of $35 or more or with membership in Walmart+. In the new Walmart InHome program, delivery associates bring groceries into consumers’ homes and put them directly into cabinets and refrigerators.”

Adding more value to the delivery proposition, such as Walmart’s service where it unpacks and puts the shopping away for customers is a terrific way to make shoppers more comfortable with paying a little extra for delivery or incentivising subscribing to a premium service which includes expanded delivery options.

Final Thoughts

The last mile of delivery logistics is going to continue to offer significant challenges to the ecommerce business as prices continue to rise. Until inflation can be better controlled, and the energy crisis abated, retailers are going to need to add value and expanded options to ensure customers are kept happy.

Logistics are sure to be part of the conversation at eTail UK 2023, being held in April, at the QEII Conference Centre, London, UK.

Download the agenda today for more information and insights.