The strategies, tactics and technology of home delivery are evolving quickly and constantly. It’s tough to keep up with the innovation that is happening in home delivery and also sort out the reality from the hype in the press. As Chris Cunnane described in his report Descartes Evolution – Logistics in Motion, we conducted a survey of a number of our customers to get a broader sense of what was actually happening and how retailers are thinking. Besides some of the salient points Chris made, I thought I would share more of the findings to help retailers and logistics services providers better gauge how they should move forward with home delivery.
To give a little context, let me describe the participants. They come from all over the world, would mostly be considered to be nation-wide, leaders in the markets they serve and deliver a wide array of products – food, alcoholic beverages, home furnishings, DIY and electronics. They execute 100,000s to 1,000,000s of home deliveries every year and use a combination of private and dedicated fleets to do it by sourcing deliveries from DCs and stores. We did not cover parcel-based home deliveries as part of this benchmark.
Below are some of the key findings:
- Home Delivery is part of the retailer’s omni-channel strategy. All of the survey respondents cited that they were using advanced home-delivery technology as part of the online, in store, mobile, etc. selling strategy. Rather than thinking that home delivery is confined to non-store sales, retailers are trying to use it as broadly as possible to better serve consumers.
- Delivery speed was more driven by business model, strategy and competition as opposed to product sold. There was an even split between those retailers offering next-day and same-day service. This split did not change among retailers, even where they were selling similar products that were competitively varied and different product sizes. Instead, many respondents are focused on consumer choice as opposed to immediacy. Clearly, there are products like a dishwasher that you want now when the one you have is broken. However, you don’t want that dishwasher now when it is part of an overall remodeling of your kitchen to have it take up a lot of space in your garage for weeks.
- Consumer and supply chain metrics are used to measure delivery performance. It was good to see that retailers were combining “complete and on-time” with “experience-oriented” metrics like “Net Promoter Score”. Some retailers even tracked revenue performance (e.g. average order size and sell through) to more accurately represent the value of home delivery. These retailers have definitely moved past “get it done”.
- Tighter time windows did not necessarily mean a significant drop in home delivery performance for best-in-class retailers. “All day” delivery window performance for top performers was 99%+. However, top performing retailers offering 2 and 4 hour windows were only 1 – 2 percentage points behind. To get this kind of performance these retailers were using a combination of windows (e.g. 2 hour, 4 hour and all day) and using the all day window to help minimize the impact of the tighter windows.
- Time window options provide an opportunity for premium pricing. Approximately 1/4 of the respondents offer premium pricing and use the multiple time window strategy mentioned in #4 as part of that strategy. Almost 20% of the consumers selected premium windows for those retailers. Given the home delivery volume of the retailers that participated in the study, it is fair to say that they are generating millions in incremental revenue.
- There is still opportunity to do more. There are still areas where retailers have not yet embarked to offer more value and get more revenue. The first is customer stratification. Not all customers or orders are created equal so why not offer home delivery options that way too? For instance, your “type A” customers get more delivery options than your “type C” customer. The second is the use of dynamic pricing. Some times of the day or days are more valuable than others. In addition, the cost to deliver can vary greatly based upon the customer’s location, order and all of the other deliveries that need to be made. Uber with its surge pricing has already done some of this, why not retailers?
As Chris mentioned in his report, the benchmark study showed that more advanced retailers are not just focused on doing a good job at home delivery, they are using it to transform their consumer’s experience and make more money. The findings above point to the home delivery opportunities that exist and potential value to be gained for retailers. To get there, retailers need to make sure they have an expanded view of home delivery and the right technology to enable that vision.
As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director Operations & Technology for Kraft Foods.