With Shoptalk in the rearview mirror, the question of how to apply the lessons learned from the conference is always one that’s difficult to pin down. There was much discussion around technology and improving the customer experience, so we identified some initiatives we have seen in our work to enhance your customers’ ecommerce experience.
The initiatives not only follow what we heard at the conference but resonate with much of what we have observed with clients over the last couple of years. These guideposts can help you unearth opportunities to grow your ecommerce business through order fulfillment.
Identify then tackle the largest customer pain points related to your ecommerce service offerings
The mantra of “customer pain points” is often repeated with such frequency that it makes it easy to lose sight of the phrase’s significance. Add to the fact that you may influence a portion of these customer experiences – merchandising, marketing, fulfillment, etc. – and the biggest opportunity may lie outside your direct control. However, identifying the largest customer pain points – using concrete data points – allows you to set the best strategy for your business function while defining the challenges to other teams (as opposed to abstract customer anecdotes, which can be red herrings).
The easiest place to begin identifying customer pain points is through these four basic metrics: sales, market share, NPS (Net Promoter Score) and customer retention. Accurate market share, in particular, is one of the most helpful metrics to understand how your customer views your retail offering in relation to defined competitors when viewed on a year over year basis.
(Source: Benedict Evans)
As an example, we recently worked with a retailer that was experiencing moderate sales growth, average customer retention, strong NPS but declining market share. In this scenario, the declining share was most concerning given this particular segment’s rapid growth during the pandemic.
What was the root cause of the declining share? The company did not have fast enough ecommerce service offerings and fulfillment capacity to meet customer demand, so it was losing share to its competitors, which offered faster and more convenient delivery options.
Once there was an understanding of customer pain points, the retailer could then come up with hypotheses and run tests to solve the issue and – based on the data – craft a strategy across different functions within the organization to achieve rapid parity in the market. This only happened by looking at the broader metrics – how customers were voting with their wallets – and then pinpointing specifics to understand why customers were migrating to competitors.
Develop your network strategy to meet order growth and serve customers
Related to customer pain points, planning your fulfillment network is critical to projecting and meeting anticipated growth in ecommerce orders. With increased ecommerce penetration through every retail segment and current lead times – to build or remodel sites – at no less than 12 months (based on numerous sources), continuous evaluation of your fulfillment network is key to growth planning.
The strategy evaluation requires a strong understanding of future order growth through ecommerce service options (same-day, next-day, click-and-collect, etc.) and how to best fulfill those orders based on your fulfillment assets. In most cases, this leads to initiatives aimed at increased optimization of those sites (e.g., MFCs) or a build of new sites to meet forecasted demand.
(Source: The Navio Group)
As an example, Macy’s announcement of its new $584M facility in North Carolina is a result of network planning to meet anticipated ecommerce demand from customers. The retailer’s increased fulfillment capacity is a calculated gamble that anticipates customers will continue to order footwear and apparel predominantly via standard shipping (or two-day, regionally). This type of facility ships via parcel post to customers’ homes whereas an omnichannel fulfillment model, which relies more on stores to fulfill orders, has the advantage of faster delivery times for customers.
Test service offerings with new partners (pickup lockers, last-mile, etc.) to understand customer behavior and/or improve profitability
Maybe you have already done a thorough review of your customer pain points and have a strong plan in place to build out your fulfillment network to meet growth. What next?
Two places to start are either testing capabilities with new partners for novel service options or reducing your costs to serve your customers. On the service offering side, companies are exploring new service models for customers, from click and collect lockers that reduce wait times to thinking about post-purchase service models, such as Target’s launch of curbside returns.
On the cost improvement side, we heard several speakers at Shoptalk mention the big opportunity in last-mile as costs continue to rise across parcel carriers as well as last-mile providers, like DoorDash and Uber, with increased fuel prices and wages.
Companies, like Nuro and Gatik, are options to test automated last-mile delivery that can help reduce costs while providing faster service options to customers. This could also mean, though, exploring a shift to omnichannel fulfillment models – if you have not already done so – to enable faster delivery options as parcel carrier rates have reached the level of what a provider, like DoorDash or Uber, might charge for last-mile delivery from your store.
Walmart is testing autonomous last-mile delivery with partner, Gatik
The underlying thesis is that while these new models do add some cost and complexity, the added convenience draws customers by building long-term loyalty and retention. Data from our work – and echoed by folks, such as Target’s Chief Digital Officer, Cara Sylvester – show that omnichannel customers spend more with retailers.
Why? There are lots of reasons, but the simple fact is that if you continue to redefine convenience – and cut out unnecessary time for consumers in their shopping trip – they will start with you the next time they have a need. This leads to increased trips and expands the way you can serve your customers in the future.
In an age where customer acquisition costs are rising, and consumers are bombarded by media and ads, we suggest you step into their shoes and experience their pain points, then develop a network strategy that, ultimately, makes it easier for them to shop with you and keep coming back.