13 Mar CatchING Amazon?
When the conversation turns to e-commerce without a doubt, Amazon always gets mentioned. Jeff Bezos’s company has set the bar so high that it has created a new standard, the Amazon Effect, for the logistics and transportation industry. They have created a shipping paradigm shift not seen since the invention of the assembly line.
The investments Amazon has poured into its supply chain has positioned the company to provide the fastest shipping, for the highest number of products, at some of the lowest rates. That phenomenon has become broad-reaching and has permeated almost every sector of the industry, on and offline. With its heavy investing and mission to continuously improve its fulfillment, shipping and delivery operations online retailers are finding greater difficulty to keep up and process their orders as quickly.
The Amazon Strategy
When Amazon announced in 2018 that it would begin shipping to specific markets, the company revealed its latest strategy to become a one-stop-shop for online retail. Its shipping strategy is simple: they want to become an end-to-end service and will expand into alternative delivery options, such as package delivery lockers in grocery and drug stores.
That new strategy enhances Amazon Prime’s existing subscription services, estimated at over 100 million subscribers, which currently offers two-day delivery on thousands of products for a monthly or yearly fee. However, with Amazon and the US Postal Service’s partnership, some products are eligible for same-day delivery and in some instances, Sunday delivery is also available.
According to the Wall Street Journal, Amazon will be eliminating fees such as fuel surcharges for home deliveries, to attract consumers who are tired of paying higher shipping rates from UPS and FedEx. With the recent Global Reporting Initiative (GRI) announcing increases in fuel surcharges of around 7% affecting both carriers, this would be significant savings for some shippers. For retailers that are not loyal to either carrier Amazon’s lower fees are enticing, particularly after the recent rate hikes.
Furthermore, the company had either lowered or maintained its long-term storage fees for 2019 for its Amazon Sellers. They announced they would not be making any changes to their fulfillment fees making it more attractive for third-party sellers. With this move, Amazon is positioning itself to be a primary source in the shipping field by offering quicker delivery and cheaper shipping options for its Amazon Sellers.
To remain competitive in this ever-changing market, retailers will need to re-think their shipping strategies. The critical area for retailers is the last mile of a package’s delivery journey. Many of the larger online retailers have taken notice of this and are starting to model their businesses similar to Amazon’s, to stay competitive.
As Amazon’s shipping speeds get faster; other online retailers must conclude its customers will expect the same comparable shipping speeds. Along with that, exposure to no-hassle free shipping and open and straightforward returns are becoming increasingly of interest to consumers too.
Multichannel Opportunities: Gone are the days when consumers walked into a store and have limited choices and must accept what was on the shelf or go without. The savviness of today’s consumer, coupled with the ability to price shop and have access to a broader selection online, has forced retailers to reconsider and invest in multichannel capabilities.
In the beginning, most focus on adding one or two channels. It is a complex process but once it is in place then plan to add additional channels as you grow. Integrate systems and methods so customers can shop seamlessly from one channel to another.
Cut Costs: Staying competitive also requires cutting out operating cost inefficiencies. With the rising cost of shipping, profit margins need a retailer’s keen eye and shrewdness. recommends that retailers should address direct product costs, indirect costs of goods not for resale and labor costs. Retailers that focus on these three areas can reduce costs by 20-30 percent.
Determine Physical Space Needed: Now with more purchases getting made through digital channels, retailers may require less physical space in their stores. Individual storefronts may discover they only need half the selling space they once used. Retailers will find that right-sizing their store space may help them cut overhead expenses.
Use Data: Online sites generate massive amounts of data. That data can be used to customize the experience for the customer, which adds value to the purchasing process. When that information gets used aggressively, a retailer gains new insight. The data would show (1) how to improve processes and products, (2) create targeted marketing programs and (3) determine final pricing. It can also direct a retailer about how they could build customer loyalty and natural interaction.
The Need for Speed: In a recent study, 87 percent of online shoppers said that shipping speed was the critical factor in deciding to shop with a brand again. Almost half of those surveyed would pay more for same-day delivery to get an item quicker. Part of this change in consumers’ buying behavior is due to Amazon. Amazon’s Prime service is so appealing because it offers free two-day shipping. This offer has put significant pressure on other retailer giants to deliver faster. Walmart, Target, and Costco, to name a few, have all responded with similar delivery initiatives.
Customer Experience: The customer experience is now more vital than ever before. They can easily switch their loyalty with a click of a button. Furthermore, consumers will repeatedly buy from companies that meet their expectations. Every decision that a company makes today the customer’s experience is more crucial to consider when creating a connection with that buyer. Consumers are more apt to buy from companies they believe share their values.
Packaging: With fewer customers visiting retail stores, the shipping packaging itself has become an essential part of the loyalty equation. Part of the connection made with a customer is their excitement when that brand’s package finally arrived. The experience of tearing open that box is just as exciting. That is why one can never discount the impact that packaging has on the customer experience.
Consumers place a high correlation between an order’s packaging and the value that a retailer provides. Your packaging must relate to the brand and reinforce the image the customer pictures. And, not only the aesthetics of the package but the ability to track the item throughout the delivery process.
With Amazon forging ahead with new programs and innovations to offer its e-commerce customers, other online retailers making these investments will last longer in the market. Today’s buying experience has become more complex and personal for consumers and has come to expect faster delivery speeds.
For storefront retailers staying current and up-to-date, they will engage with customers more, fulfill more of their orders, and will readily accept their returns and in exchange will reap long-term consumer retention. The time has come for retailers facing the Amazon Effect to evaluate their business end-to-end and uncover what needs improved and the barriers they must knock down.