In our recent logistics survey, it is becoming clear that retailers? number one pressure is reducing cost. No surprise here ? as everyone rushes to do their last minute Christmas shopping, it?s easy to look around for the best deal. The increase in online shopping has forced bi box retailers to cut prices and push promotions much more aggressively to lure people into their stores.
However, the increase of e-commerce is viewed as both a threat and opportunity to retailers. According to an article in the Wall Street Journal, retailers in the US have started to offer compelling physical stores as well as online portals that allow customers to shop from phones or computers, and pick up the merchandise in stores as well as their home. Some even predict that Internet-only companies will need to establish a more physical presence or they will have service problems. Retailer experts say the shift if done right, can give store chains a competitive edge over online-only rivals, allowing them to ship longer during the holidays and save costs, and to enable same-day delivery. But filling orders from both stores and DC?s adds new layers of complexity, as pack and ship operations can disrupt in-store shoppers. Shipping from stores is also three to five times more costly. But the strategy can also help to optimize inventory. For example, it might e more profitable to ship from a store farther away from a customer if it has slower-selling inventory. The strategy can increase the amount of inventory the company can offer online, improve working capital, and increase profit.
One of the big trends occurring with major LSP?s in the retail ecommerce sector is the race to lock in consumers with door-to-door and even door-to-office customized deliveries that make them more concierge than delivery service. A Wall Street journal article notes that UPS is pushing a service called My Choice that sends multiple digital alerts and updates about when to expect pending deliveries. For a premium fee, customers can instruct the UPS driver mid-route where to put the package, or to re-route it to a different location. The service was introduced a year ago but UPS only began marketing it in September. Meanwhile FedEx is emphasizing to consumers that they offer Saturday delivery (unlike UPS) and also offers deliveries in the evening or ?by appointment? same day across the city or across the US, all for varying fees. It also offers alerts, package tracking, and free re-routing of packages. Both companies are responding to the fact that residential parcel deliveries are growing faster than deliveries to businesses, growing at a compounded growth rate of 7% since 2000, compared to business volume that declined at a CGR of 1.8% in the US. But to ensure profitability, companies need to deliver as many packages to as many homes in each neighborhood they visit, as residential deliveries are more labor intensive than higher volume business deliveries. In addition, a survey conducted by UPS revealed that package delivery plays a pivotal role in online shopping behavior. Online shoppers indicated that free or discounted shipping was weighed almost equally with the price of the item they were buying in their purchase decision, and 54% said they decided not to purchase because delivery would take more than five days. About 43% expect delivery in two to three days. This effort to reduce ?cart abandonment? for online ecommerce sites is driving UPS and FedEx to offer shoppers more control over arrival times and delivery locations. But this is proving to be very difficult. For all their logistical savvy, large LSP?s are having difficulty in streamlining the residential delivery business to meet customer expectations.
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