The pandemic has impacted ecommerce in multiple ways. It has accelerated ecommerce growth by years and changed consumer buying behaviour—in many cases, permanently. It also constrained delivery capacity and, most importantly, impacted delivery performance.
In mid-January 2022, Descartes, in conjunction with SAPIO Research, conducted a study of 8,000 consumers in Europe and North America to understand their perception of online buying and home delivery. The study shows that, while consumers may be buying more, they’re not thrilled with today’s inconsistent delivery performance and a significant number are ready to punish poor performing retailers. While there are challenges to improving home delivery performance, retailers who accept the status quo of today’s service quality could experience top- and bottom-line performance hits as consumers turn to others who find ways to up their delivery game, as Chris Jones – EVP Industry and Services, Descartes Systems Group, explores.
Consumer Commitment
Consumers bought more online during the pandemic. Descartes’ study shows that the proportion of all purchases made online and delivered increased from 35% pre-pandemic to 46% in early 2022. This trend looks set to continue as respondents indicated they intend to increase their percentage of online purchase and home delivery to 48%, even as COVID-related restrictions ease.
Ecommerce has become more intuitive; consumers have broken through past hesitation to buy certain types of goods and older consumers have participated more heavily (see Figure 1). This is both a result of consumers becoming accustomed to the convenience (54%), ease of ordering online (46%) and the home delivery option (44%). What’s even more compelling is that 64% of those older than 55 stated they were now used to the convenience—and this age group has become a significant contributor to ecommerce growth.
While the increase in online buying and delivery is good news for online sellers, the bad news is that only 34% of respondents cited that delivery processes have improved. Given the very uneven delivery performance during the early stages of the pandemic, this shows that many retailers have not made any significant progress in this important part of the overall customer experience. “The last mile is the last word” for consumers—and what they remember.
Figure 1. Top Reasons for Increased Online Purchase and Home Delivery
Source: Descartes and SAPIO Research
Mixed Delivery Performance
If every retailer’s goal is to delight customers, it’s not happening in home delivery. Overall consumer satisfaction with delivery performance was mediocre, with white goods receiving the highest “extremely satisfied” rating (52%), closely followed by clothing and footwear (51%). At the bottom of the satisfaction ratings were medicines (40%) and furniture (33%).
What’s interesting about how consumers rated delivery service satisfaction is that the previously mentioned goods have common delivery methods (e.g., white glove and parcel), but a wide disparity in performance. This points to all delivery modes having issues; yet some segments of the market have better recognition of the importance of home delivery performance and, hence, results.
The elements of the delivery process that matter most to consumers are cost and security (74% quite/extremely important), which tied for the top response. Ease of ordering and booking the delivery and cost and ease of handling returns closely followed and were tied (69% quite/extremely important). Tracking delivery progress was also close (68% quite/extremely important).
These factors were also affected by a product’s purchase price, with respondents citing proof of delivery (30%), security (32%) and delivery tracking (27%) all as more important on balance for more expensive items. Cost of delivery (23%) was more important when buying cheaper items online. This indicates that high-value retail brands are more likely to prioritise better control of their delivery operations to ensure the overall quality of their customers’ delivery experience. For these retailers, the delivery experience also includes a high level of electronic engagement to reinforce their brand.
Satisfaction with specific delivery elements was slightly different. Receiving proof of delivery (POD) and ease of ordering and booking delivery were tied for elements of the delivery process with the most satisfaction (74% quite/extremely important). Tracking delivery progress was third (73% quite/extremely important). Environmental performance of the delivery was next (71% quite/extremely important). Cost and COVID safety of delivery followed and were tied (70% quite/extremely important). While retailers have made significant progress in electronically engaging customers, there is a lot of disparity in retailer capability. Consumer expectations are growing in this area so retailers who can improve electronic engagement stand a good chance of improving consumer perception of their brand and loyalty.
The most compelling evidence of the delivery performance challenges retailers are facing lies in consumer responses to the delivery problems they experienced over the last three months of 2021. Almost three-quarters (73%) of respondents indicated that they experienced a delivery problem in that timeframe (see Figure 2). The top three problems were all related to timeliness. Late was the top issue (26%), followed by a different time than expected and length of time to make delivery, which were tied (22%). Retailers need to not only assess their delivery performance, but also the expectations they set for customers in terms of delivery speed and precision. The widely held belief that speed is the most important factor to consumers is simply not true. Consumers place more value on retailers making a delivery performance promise and keeping it.
Figure 2: Consumer Delivery Experience the Last 3 Months of 2021
Source: Descartes and SAPIO Research
Consumer Fatigue
Consumers are fatigued and frustrated, and a fair number of them are taking action. For respondents who indicated they had a bad outcome from a delivery issue, their top response was losing trust in the delivery company (24%). Retailer-related negative effects were second, with the result being that consumers did not order from the retailer again (23%) and third, with lost trust in the retailer (21%).
Retailers were also impacted by delivery company reputation, with consumers citing they would avoid retailers that used a problem delivery company (18%). Moreover, the loss of future business and reputational damage can go well beyond the individual actions of respondents who told friends/family to avoid the retailer (16%). While it is a lower number, the potential for individuals to negatively influence many more people, especially through social media, makes the consequences of poor delivery more damaging. Since the cost of customer acquisition online is so high, a premium should be placed on consistent delivery performance to keep customers for life.
Environmental Concern & Opportunity
Home delivery environmental concern is also large, but equally an opportunity. Overall, 65% of respondents think twice about ordering online due to the environmental impact (see Figure 3). Environmental awareness is greatest in Europe where France (78%) and Germany (77%) are the most concerned while Canada (60%) and the U.S. (57%) are the least. Age also plays an important role with 18-24 year olds (85%) and 25-35 year olds (75%) having the most concern about the environment. The types of deliveries associated with the greatest environmental concern were grocery (24%) and restaurant food (20%).
The message for retailers is clear: consumers will favour retailers who show they are more environmentally friendly. Retailers need a comprehensive environmental plan for home delivery and they need to communicate it—and its results—to consumers.
Figure 3: Consumer Environmental Home Delivery Concern
Source: Descartes and SAPIO Research
For leading retailers, there are ways that consumers’ environmental concerns can translate into improved profits. Consumers have unique delivery personas that can help the environment and the bottom line. The key is to provide consumers with delivery options and understand that a relatively small percentage of consumers can make a significant difference. One third of consumers are interested (34% quite/very interested) in combining orders into a single delivery at the end of week, or combining orders for a single delivery when there are multiple deliveries in their area (33% quite/very interested). Offering this strategy can result in significantly lower delivery costs and a smaller carbon footprint. Equally, some consumers will pay more for a faster delivery (22% quite/very interested) or a more convenient delivery time (21% quite/very interested). Offering premium delivery services presents an opportunity that may result in many millions of dollars in incremental revenue.
Conclusion
Retailers and their delivery partners cannot afford to ignore, even underestimate, the importance of home delivery as a critical factor underpinning continued ecommerce success. They need to improve performance or risk losing customers to competitors who do. Rather than seeing this as another challenge for the business, retailers and logistics companies should use it as an opportunity to capture market share and more ecommerce business as consumers continue to increase their online purchases and deliveries. In fact, retailers have an even greater opportunity to garner favour with consumers and improve their financial performance if they are able to address the heightened concern for the environment with delivery options that result in a smaller carbon footprint and lower delivery costs at the same time.