I met up with Andrew Hill, commercial director at Electio, a delivery management platform (for more information, visit: www.electiodelivers.com).Before Electio, Hill worked for Yodel and CollectPlus, developing delivery services for large retailers. Hill’s claim to fame is being instrumental in the development and launch of the first Pick-Up Drop-Off (PUDO) network in the UK, a service that has transformed the etail delivery industry. I wanted to learn from him what retailers must think about when it comes to getting the delivery right.
Ensuring an on-brand experience end to end
Consumers are not as patient as they used to be. Alongside the increase in ecommerce spend, shoppers are becoming much more demanding of when and how they want their products delivered.
To thrive in the ever-competitive world of ecommerce, retailers must delight their customers at every stage of the journey – including delivery and beyond. Loyalty is hard won but easily lost and consumers judge brands on their whole experience, not just up to the point when they press the ‘buy’ button.
Delivery innovation
Fundamental to delighting customers is delivery. One of the biggest contributors to basket abandonment, delivery is key to converting sales. There has been some incredible innovation here recently – from a meteoric rise in click & collect, to nominated and same-day delivery and peer-to-peer offerings, essentially tapping into the sharing economy zeitgeist.
But whilst these options have helped the industry take huge strides in meeting customer expectations, they have to work to keep customers coming back. A buyer who has paid more for nominated day delivery is less likely to buy from you again if that product does not arrive on time.
Having relationships with multiple carriers means retailers can select the best carrier, depending on the criteria of the delivery. Matching the right service to the right carrier improves first time delivery success rates. Retailers with a delivery management strategy also have an advantage when it comes to offering more ambitious delivery options.
Trusting others to deliver
Retailers have had reason for concern over carrier performance in the past. Pictures of parcels flung over hedges or on the roof are quick to do the rounds on social media. Inconsistency in reporting is also a frustration. Whilst some carriers will tell you where a parcel is every step of the way, others won’t. It’s incredibly hard to standardise communications with customers without an accurate data feed from each carrier.
Capacity has also been a huge factor – with numerous carriers unable to scale up for the peaks that occur across the retail calendar. Rolling out alternative delivery options can lighten some of those loads. Click & collect can help tackle capacity issues, for example, whilst also being extremely convenient for customers. Pick-up points popping up in local stores, petrol stations or even car boots are also innovative ways of relieving the pressure on carriers whilst ticking the convenience box.
Too much choice?
We all want options, but too much choice can be confusing. Research we conducted around Black Friday 2015 revealed that delivery preferences vary considerably between different types of customers. Younger shoppers, in the 18–25 age group, for example, are prepared to wait longer for a delivery, if the price is right. For other buyers, the convenience of the delivery is valued as highly as the speed.
With a wealth of data at their fingertips, ecommerce companies should analyse their customers’ behavioural patterns to tailor their delivery options. It is not the quantity of options available, it is knowing they are the right ones and being confident that they work.
Delivery is not the end
The final piece of the jigsaw, when it comes to delighting customers, is to help them return what they do not want. Many retailers make the mistake of thinking that the journey is over when the product arrives with the customer. This attitude will not wash with modern consumers.
In reality, you cannot be sure you have reached the end until one month after shipping as, under the new Consumer Rights Act, consumers can return their items to you in that timeframe.
Retailers need as many returns options as they do choices around delivery to make it as easy as possible for people to buy. More enlightened retailers see returns as a vital part of the sales process. A lack of options can put customers off making a purchase, so an investment in it in the short term will pay dividends over time.
The customer knows best
Consumer demands will continue to grow, so retailers must keep innovating. But you need to understand what that choice means – the age-old adage of ‘know your customer’. From same day, nominated day, peer to peer, click & collect and standard 3–5 day deliveries – spend time understanding which options will work best for your customers. Then make sure your processes are watertight and you have the capacity to scale up or down, whatever the demand. Getting these right = delivery delight.
This is also echoed by Niklas Hedin, CEO at Centiro logistics software company (www.centiro.com). He notes that online delivery has become an area of considerable innovation over the last few years, with retailers and carriers taking part in a race to deliver products more quickly than ever before. For example, Shutl (https://shutl.com/uk/) has pioneered deliveries to customers within an hour, whilst Amazon has expanded its Prime same-day delivery service to new parts of the UK.
Give them an all-in-one solution
No customer would ever say having multiple delivery options is a bad thing, but retailers would be much better off giving them a single option that could be adapted, according to their individual requirements.
Research conducted last year by YouGov revealed that customers are increasingly seeking delivery convenience over just choice: 20 per cent of UK adults said for them it was most important to be able to change the delivery date or timeslot for an order after it has already been shipped. A further 7 per cent stated it was important that they were able to change the delivery destination after an order was placed. Such flexibility can ensure a positive customer experience, encourage loyalty and give you a bigger share of the marketing in the long run.
How to give customers what they want now the power has shifted
YouGov’s research also highlighted the fact that consumers are choosing retailers based on the delivery and returns experience they offer. Indeed, delivery flexibility could be a key differentiator for smaller retailers as they try to appeal to customers who want to make changes to their deliveries on the fly.
But why would this appeal to the modern shopper? Customers now prioritise convenience and expect items to be delivered at a time and place that works for them. There is no reason why delivery networks cannot work the other way around: if a customer waiting for an order needs to leave the house, they should also be able to collect from a store they are passing. Greater flexibility can create new efficiencies when it comes to reverse logistics. If customers are, for example, able to receive and return items at the same time, not only will it prove more convenient for the customer, but you can also halve the cost of transportation.
11.1 Deep dive: packaging
I met up with the team at Duo UK to learn how packaging and delivery is an intrinsic part of the online customer’s journey. The company manufacture and supply branded packaging to retailers like Tesco, JD Williams, JD Sports, etc. For more information about Duo UK, visit: www.duo-uk.co.uk.
In essence, businesses spend time developing their product offering, making significant investments in customer acquisition and retention, refining marketing messages and analysing the customer journey – but, according to a 2013 Retail Week report, goods not for resale (GNFR) account for 12–15 per cent of net sales and, despite postal packaging being an integral part of the customer experience, businesses are quick to try and reduce spend on packaging.
The four key elements of retail packaging design used to be: it must be seen, it must be engaging, it must communicate a message, and it must sell. However, the online shopping environment, unlike its retail store counterparts, is an extremely fertile atmosphere for customer anxiety, due to its inherent risks and dangers (e.g. privacy infringement, credit card fraud)1 particularly for a customer shopping with an online retailer for the first time and, through the browse-to-buy journey, the customer will develop pre-purchase expectations.
For online businesses to build brand equity and customer loyalty, packaging and delivery must not be viewed as just GNFR, but as an opportunity to improve business performance. The pre-purchase expectation compared to the post-purchase performance2 will have a significant influence on the customer’s intention to repurchase. That decision will be made based on the first moment of truth – the moment the parcel lands in the customer’s hands.
Rather than the packaging selection falling solely to procurement buyers, a multi-functional collaborative approach, which also includes representatives from CSR, logistics and warehouse and marketing, will ensure the final range performs functionally, in-budget, on brand and ethically. These are the brands that come full circle, from simply wanting the cheapest and most practical packaging products to understanding how considered packaging, whilst an initial investment, is cost-effective in the long term and will deliver a greater competitive advantage.
Overview
Packaging is a valuable marketing tool. Treating this particular GNFR spend as an investment can improve business performance and increase customer satisfaction, leading to loyalty and repeat sales. The packaging that protects a product in transit plays an important role in the customer’s journey and may be their first tangible experience of the online brand. Considering the purpose, design and branding of the postal packaging used has a significant influence on the customer’s first moment of truth.
Key findings
- Goods not for resale account for 12–15 per cent of net sales.
- In 2015, online weekly spending rose to £753.3 million, as ecommerce grew 12 per cent.
The advice
1. GNFR – The hidden secret to a maximising profitability and long-term customer loyalty
For an ecommerce business, packaging to protect a product in transit from the warehouse to the delivery destination is an unavoidable spend, although this goods not for resale (GNFR) item has vast potential to maximise sales success and influence customer loyalty.
Converting this necessary spend into a business asset requires some clever planning and collaborative thinking. This starts at the end of the packing line, understanding the customer’s average basket size per order and trend of items purchased together. This data will help you to create a range of packaging products to optimise the performance of your outbound deliveries. Having the correct size packaging range will:
- improve presentation;
- reduce outbound delivery costs (if using volumetric weight delivery option);
- save time in the pick and pack operation.
Many start-ups order a large quantity of one size of postal packaging to achieve economies of scale and use this single packaging item to pack all outbound orders. As a result, some orders may have to be split into two packages – adding additional delivery costs – or the packaging item may need to be reduced in size by folding to fit around the product, creating excess packaging waste, additional wrapping costs, i.e. tape, and a drastically reduced aesthetic.
Although it is true that a business will achieve a cheaper price per postal packaging item by buying in vast quantities, the waste material when folding, the extra time packaging, the additional delivery charges and negative customer perception come at a much greater cost than the initial investment in a suitable packaging range for an online business.
According to a Retail Gazette report released in February 2015, online weekly spending rose to £753.3 million, as ecommerce grew 12 per cent (‘ONS Retail Sales’ report for January 2015), indicating that further growth can be expected. To manage growth and attract repeat sales, product ranges will, naturally, change and evolve and so may a packaging range. Audit the packing line at least every six months to review if the current packaging range is still performing at its optimum.
2. The moment of truth
In marketing circles, the first moment of truth is the exact moment at which a customer is confronted with a product in real life so, for an online sale, that is when the parcel is in their hands.
At this moment, everything about the parcel will affect the customer’s first moment of truth: the packaging design, the touch of the packaging, its durability and condition, the time of delivery and the packaging material used.
If the first moment of truth fails to deliver, customer satisfaction will drop and this will significantly affect post-purchase behaviour. A consumer buying online will form an expectation about the shopping experience on offer. Based on a brand’s ecommerce website and the purchase process, this creates a ‘perceived performance level’.
When the purchase is received, the customer’s satisfaction will arise from discrepancies between pre-purchase expectations and post-purchase performance and influence future engagement with the brand.
Making packaging design work harder
Brands devote hours and hours to developing their product offering, making significant investments in customer acquisition and retention, refining marketing messages and analysing the customer journey – but, according to a 2013 Retail Week report, GNFR account for 12–15 per cent of net sales and, despite postal packaging being an integral part of the customer experience, businesses are quick to try and reduce spend on packaging.
In many instances, packaging selection falls solely to procurement buyers. However, the role packaging plays and its catalytic properties to improve profitability and customer satisfaction are important, so deciding on the specification should not be decided in isolation. A multi-functional collaborative approach, which also includes representatives from CSR, logistics and warehouse and marketing, will ensure the final range performs functionally, in-budget, on brand and ethically.
Customer convenience is driving demand for a wider range of delivery options and pick-up locations, resulting in an increased exposure of postal packaging outside the home; in retail stores with click & collect facilities, convenience stores and workplaces, for example.
Design enhancements, such as carry handles, twin glue lines and engaging branding that captures the attention of passers-by, as well as the shopper, has transformed postal packaging from practical protection to a powerful marketing tool that can increase brand awareness.
Including marketing messages in a packaging design is a cost-neutral option to achieve a good ROI from GNFR. Social media icons, calls-to-action, contact information and key messages are all regularly used by the likes of JD Williams and Amazon to engage with the customer before they have even touched their purchase, whether that is to encourage engagement with social media channels or inspire them to share a picture of their new purchase.
From new product launches to seasonal trends reflected in the colour of the postal packaging, gone are the days of the standard grey mailing bag or brown boxes; postal packaging designs have, and should, become more elaborate to capitalise on the increased visibility these bags now get.
The brands that come full circle, from simply wanting the cheapest and most practical packaging products to understanding how smart packaging, whilst an initial investment, is cost-effective in the long term, have a greater competitive advantage.
Recommendations
- Do not underestimate the importance of GNFR; it can build brand strength and profitability.
- Remember, the first moment of truth is in the customer’s hands.
- Apply a multi-functional collaborative approach to your packaging design, to include representatives from procurement, CSR, logistics and warehouse and marketing, to ensure the final range performs functionally, in-budget, on brand and ethically.
Claudio Lugli is a high-end Italian fashion brand that has gained a reputation for producing inspirational unique garments in strictly limited numbers. The brand is available in more than 250 physical stores across the UK and also sells online.
The company has been selling shirts in retail stores for more than 25 years and, in June 2014, it launched an online store. Selling online was new to the company and, in the first few months, it had less than 100 unique user visits per month. To emulate its success selling in stores, it knew it needed to a deliver the same luxury shopping experience online as customers receive instore.
Although new to selling online, it was imperative that the postal packaging Claudio Lugli chose reflected its core brand values. It realised very early on that, whilst you can buy cheaper mailing bags that do the same job in terms of practicalities (i.e. they get the product to the customer in a protective material), they do not deliver the same first impression.
The company believes that delivery presentation and packaging design has been a key component to the success of its online packaging sales – which now account for more than £30,000 of sales per month and more than 1,000 unique visits per month – but getting the right sized packaging range provided huge back-of-house benefits, such as increasing packing speeds and optimising delivery costs.
Even though Claudio Lugli has a low returns rate, it wanted to make this process as convenient as possible for the customer, should they need to return an item, so it added a second glue line to the mailing bag so that the same packaging can be used to return the item.
Any returns the company does receive always arrive in the outbound packaging, so it knows that its customers appreciate and use this additional feature as well as ensuring its goods are protected on the way back.
Enhancing customer satisfaction
For an online retailer, the customer journey does not stop when a product has been posted. It is the retailer’s responsibility to ensure that the customer receives the product in perfect condition, the product meets pre-determined expectations and is delivered on time.
Packaging acts as a communication tool between the brand and the consumer and has the ability to influence satisfaction levels. Its function is to complete the practical ‘protection’ duty as well as act as an enabler to satisfy a customer’s expectations of the brand.
Enhancements to the packaging specification to influence customer satisfaction levels could include:
- adding a twin glue line to double the uses of the packaging item and avoid the customer incurring additional costs to return their items; plus, it positions the brand as proactive at reducing waste;
- including a perforation on a mailing bag lip or between glue lines to make the package easy to open for the customer; it also preserves the packaging item so it can be re-used for returns;
- adding a handle to the postal packaging to enable the customer to carry their item with ease to their final destination;
- checking mailing bag opacity – remember, the package also includes your customer’s invoice, so ensure opacity above 97 per cent to protect their data. This is achieved through darker coloured single-layer polythene films or, if you want to print on white, go for a co-extruded film white layer on the outside and a dark colour layer on the inside.
According to DUO UK, there has been a sharp rise in demand for postal packaging that features additional glue lines and carry handles, providing a multi-purpose ability for delivery, transport and re-use. This style of packaging can be more expensive than a standard mailing bag, as more raw material and additional processes are required. However, a satisfied customer carrying their product home easily together with the ability to use this for a return and being happy with their shopping experience, could result in a long-term loyal customer, optimising the return of investment in the GNFR item.
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1 Hakan Celik, (2016) ‘Customer online shopping anxiety within the Unified Theory of Acceptance and Use Technology (UTAUT) framework’, Asia Pacific Journal of Marketing and Logistics, 28:2, 278–307.
2 Hu, M., Huang, F., Hou, H., Chen, Y. and Bulysheva L. ‘Customized logistics service and online shoppers’ satisfaction: an empirical study’, Internet Research, 26:2, 484–97.