There was a huge amount of media coverage last month about the UK retailer Argos and their Fast Track initiative which gives customers same-day home delivery on up to 20,000 products across the UK for a small fee. There are similar services offered by other retailers such as Amazon PrimeNOW and others. There’s no doubt that Argos Fast Track raises the stakes for UK retailers, but is there evidence that it’s what the consumer actually wants?
We constantly talk about the demands and expectations of the connected consumer and this would seem to be a smart move by Argos to leverage their broad physical store footprint to gain a competitive advantage. I don’t think that anyone would argue that consumers want things quicker, cheaper and more convenient but do they really want or need items same day?
Retailers need to differentiate their offerings and gain a competitive advantage – even if it is temporary in what is undoubtedly an era of declining brand loyalty. Kate Nightingale, a consumer psychologist talks about consumers' need for instant gratification which, when enabled by technology, makes us process information faster and lose the ability to wait which makes us value the things we buy less. Nightingale talks about the need for retailers to bridge the gap between online convenience and the physical shopping experience.
Andrew Starkey from IMRG, the trade body of the UK online retail industry, spoke of consumers' expectations for choice and the ability to specify when they want delivery – “you don’t necessarily need it next day but you do need to know when next day is”.
2015 will see 1 billion online orders delivered in the UK for the first time ever with 25% happening in just eight weeks which makes optimizing the supply chain fundamentally challenging. The CEO of a major carrier stated that in their business they only achieve 100% capacity six days a year. As well as these obvious challenges around increased cost and complexity in the physical supply chain there are also questions around how to analyze the customer shopping journey from the multiple channels of consumer engagement in one single view.
There are innovative new players entering the market and new technologies emerging. Amazon drones are being used by the German Post Office and DHL to deliver prescription medication so the vision which seemed far-fetched of a drone-enabled distribution network might become reality in specific scenarios. UberRUSH involves using Uber cars for deliveries using untapped capacity.
Is it the retailer rather than the consumer who is driving this move to same-day delivery? Consider the investment in internet connection speeds made by ISP’s for which there was little evidence of consumers pushing for this at the time. However, having set the expectation none of us would consider going back to dial up connections.
Whether it is being driven by the retailers or there is a genuine consumer demand is arguably irrelevant – the expectation has been set and it’s reasonable to assume that retailers will continue to compete on delivery lead times. Additionally there will be pressure to do this at no cost – consider online delivery which was not initially free but is now often a competitive necessity – in the US two-thirds of orders are delivered free.
It’s even more critical than ever that retailers are able to run efficient supply chains to both meet their promise to their customers around deliveries but to be able to do so at a cost which makes it sustainable. Managing data in this fast moving and dynamic environment and more importantly being able to see the associations across the myriad of sources is a critical component of this.
Exciting times for consumers with the expectation of ever decreasing delivery times – challenging times for retailers who will struggle to provide this enhanced service without diluting profitability.
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