UPS, Omni-Channel Fulfillment, and the Perils of Market Research

It used to be the marketing department did market research, and then it was the job of product development to create products that tapped into the profitable market niches that marketing identified. But market research can also tell a company what kind of supply chain it needs to develop.

One case in point, many retailers are trying to develop an omni-channel strategy. There is some good market research on what customers want. This research has implications for the types of logistical capabilities that retailers will need to develop to support their strategies. UPS, for example, recently published a white paper called “UPS Pulse of the Online Shopper: A Customer Experience Study.” The research shows that:

  • Return services matter – 80 percent of customers are likely to make a purchase if they can return an item for free either in person or online; 62 percent want to purchase online and make in-store returns.

  • Many customers value free shipping – 75 percent have added items to their cart to qualify for free shipping. In fact, the leading reason online carts are abandoned is that shipping costs made the total purchase price more than expected. Finally, 38 percent choose ship to store to qualify for free shipping.

  • But online customers also want more flexibility in their shipping options – While 78 percent most often choose the most inexpensive shipping option, more than half expect to have speedier options; 49 percent want flexibility to choose the delivery date; 44 percent of those who abandoned a shopping cart did so because of a long wait for delivery. Only 44 percent are satisfied with their ability to choose a specified time of day for delivery.

  • An integrated omni-channel experience drives value – Only 55 percent of online shoppers are satisfied with their ability to pick up at a retail location that is convenient; 39 percent want the ability to shop online and return to store.

  • Execution matters – Of the 90 percent that have recommended an online retailer, 47 percent have recommended a retailer that got them the goods when expected; 43 percent of respondents who had negatively recommended a retailer did so because the delivery took longer than promised. 29 percent have recommended a retailer based upon their tracking services. 43 percent of respondents saying negative things about a particular retailer did so because products arriving damaged.

Of course, if you ask a customer if they want something, they are apt to say they do. What also matters is what fulfillment services and delivery attributes have the strongest correlation with overall online satisfaction. When UPS performed this statistical analysis, free shipping and the ease of making returns had a relatively low correlation to overall online satisfaction. Being able to track online and providing more shipping options were highly correlated to overall satisfaction.

But I think it also pays to read any market research report with a healthy dose of skepticism. The “Pulse of the Online Shopper” study, for example, says “most recent consumer surveys suggest that same-day delivery only appeals to a small niche of consumers, and the jury is still out” on how much they will pay.

I find this questionable. Some very large omni-channel retailers routinely make deliveries within 30 minutes. After all, Domino’s Pizza is an omni-channel retailer. Customers can order in person, by phone, or online and have “goods” delivered to the home, or they can pick up their meal at the store. This whole retail sector is premised on quick home deliveries. In short, the first retailer in a particular niche that develops this capability might find a much bigger market potential than is currently understood.

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