E-tailers often live or die by their shippingprocesses. The “last mile” to consumers’ doorsteps isarguably the most critical phase of online commerce.For a long time, e-tailers faced one shipping hurdle after another — and often fell flat on their faces.
While many companies recently have mended egregiousdeficiencies in their shipping operations, room for improvement remains.
“Shipping is still among e-tailers’ top threeimperatives,” Meta Group senior program director Gene Alvarez told the E-Commerce Times. “We will still betalking about this issue years from now.”
Shipping Shapes Up
Many e-tailers endured a rocky first foray into the shippingarena, alienating customers and wasting resources.
But the sector as a whole now has coalesced around aset of best practices, and it has nearly expunged suchblemishes as the 1999holiday season from its collective reputation.
Online retailers have made strides in back-end systemintegration and returns processing, analysts agreed,and should continue to pursue brick-and-mortarpartnerships to improve their overall fulfillment processes.
Despite reaching an acceptable performance plateau, moste-tailers still treat shipping operations — along with site functionality and order-to-fulfillment system integration — as a top priority, Alvarez said.
“Shipping is extremely important, but not necessarilya challenge for us,” BarnesandNoble.com (Nasdaq: BNBN)spokesperson Carolyn Brown told the E-Commerce Times.
Back-End Integration
For its part, Austin, Texas-based Dell Computer (Nasdaq: DELL) has expended ample resources integrating its ordering and fulfillment systems in order to make timely deliveries to its 10,000 daily customers.
“Shipping is not a challenge for us as much as it isan opportunity,” Dell spokesperson Venancio Figueroatold the E-Commerce Times. “We have streamlined ourback end and carved costs out of the process, so wecan pass these savings on to customers.”
In Dell’s build-to-order system, demand signals fromcustomers automatically trigger responses frommanufacturing facilities and logistics partners.
“Our logistics people work with our sales andmarketing people to understand [each other’s] worlds,”Figueroa added.
Money Talks
Along with Dell, some analysts pointed out traditionalcatalog companies like Lands’ End and L.L. Bean aspurveyors of shipping best practices.
“Those companies who were selling through catalogsbefore using the Internet had the ‘bricks’ in placeand are now making money,” said Alvarez. “Many of thetraditional brick-and-mortar [multichannel retailers]have outclassed Amazon.com.”
Although Amazon (Nasdaq: AMZN) has received accolades for itsshipping efficiencies, Alvarez emphasized thecompany’s immaturity in terms of warehouse and ordermanagement systems.
“Earnings reports speak the loudest,” he added,referring to Amazon’s relatively late achievement ofprofitability.
Ship Shock
Although shipping procedures may be under control, e-tailersstill face a consumer constituency that cringes at thecost, risk and time associated with even the best delivery systems.
In fact, Alvarez estimated, shipping concerns rankamong online shoppers’ top five worries.
“Shipping determines what kind of products consumersbuy online,” Forrester Research analyst James Crawford told the E-Commerce Times. “If it costs too much toship or if they need it right away, customers simplywill not buy it online.”
Understandably, many e-tailers — including Amazon,BarnesandNoble.com and Buy.com — areexperimenting with free or discounted shippingpromotions to tackle this obstacle.
Strong Tradition
To meet consumer demand for more immediate fulfillmentof purchased goods, analysts advised e-tailers tocontinue to strike deals with brick-and-mortarcompanies, enabling customers to buy products online andpick them up in stores.
“Fulfillment execution still cannot beat a consumergoing to the store and getting a product,” Alvarez said.
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In my company’s experience, the primary cause of the “last mile” problem is the fact that very few people are home during the day and don’t like having stuff left unattended outside their door. Therefore, I believe the solution must be similar to what Postal authorities did many years ago: Deploy bigger/smarter mailbox-type devices outside of everybody’s homes, and open them with a standardized access-control system that tracks who delivered what and when.
Since consumers aren’t charged to walk into conventional stores, quickest implementation would logically occur if they weren’t charged for their delivery box either. Companies financing their deployment could earn revenue from two sources: (a) sales [or delivery fees if deployed by FedEx, UPS, the USPS, etc.] which never would have been made without them; and (b) small but ongoing fees that are levied each and every time some other company accesses their box. For coincidentally, that’s how revenue is made with conventional stores: (a) stores enable sales, and (b) margins are made on most all products sold through them.