Meeting changing consumer expectations in ecommerce

Patience isn’t a virtue when it comes to ecommerce. Customers are increasingly demanding of brands, expecting deliveries where they want them, when they want them. As the market has evolved, there have been various trials – delivery to car, delivery via drone – but one thing has remained a constant: the need for speed. 

According to McKinsey & Company, 90% of consumers see two or three-day delivery as a baseline, with 30% expecting same-day delivery. Quick commerce, or 1-hour delivery (typically only available in urban areas) is also increasingly a reality for many products, not just food takeaway. So how do ecommerce brands meet these rising expectations, and how do they make them work financially in a sector where margins are often razor-thin?

Consumers see the art of the possible

Fraser Smeaton, founder and CEO of global fancy dress specialist, MorphCostumes, sells through the company’s own ecommerce site but notes that, for fulfilment purposes particularly, partnering with third parties is a no-brainer when it comes to speed.

Smeaton points out that next-day delivery “made a massive difference to our business” because people who couldn’t get their costume delivered the day before Halloween would go offline and shop elsewhere. Speed is very much of the essence when it comes to including ecommerce as part of the omnichannel alongside brick-and-mortar offerings.

“Growing our share of the quick commerce market is a key focus for Co-op, whether via our own online platform or with strategic partners,” explains Chris Conway, Co-op ecommerce director. “More than 80% of the UK population now has access to Co-op groceries online.”

Co-op has rapidly expanded its online operations through its own online shop and partnerships with Deliveroo, where it is the most widely available supermarket on the app, as well as Just Eat, Uber Eats and Amazon. The company’s stated ambition is to take its share of the quick commerce market to more than 30% over the next four years.

But it’s not just about getting pretzels and fizzy pop at speed. “Time is money for our core customer base of tradespeople,” explains Sue Harries, digital proposition and data director at Screwfix. “Our purpose is to help customers get their jobs done quickly, affordably and right the first time.”

Harries reveals that this ‘need for speed’ is managed in three ways: through the store network, which sees 90% of the UK population within a 20-minute drive of an outlet; quick digital ordering from Screwfix.com; and then Sprint, the company’s 60-minute door-to-door (or site) delivery service. 

But Sprint is where the company is really winning. One customer used the service 487 times in 2023. Tradespeople value not having to leave the site to pick up supplies, with one citing that being able to stay in a hard-won parking space was worth it alone.

Keeping consistency

The hardest part of operating at speed is consistently meeting expectations, and the nature of ecommerce doesn’t make it easy. One of the biggest challenges for Smeaton is seasonality. In much the same way Black Friday causes extreme sales spikes for general ecommerce, Halloween has the same effect on MorphCostumes. Partnerships are the answer to this. 

“Everyone leverages someone else. There’s a great advantage in using third-party logistics warehouses because they have lots of other customers and they can deal with your volume for Halloween, and then serve other customers at Christmas.” 

Seasonality isn’t a problem for Screwfix, but catering to a huge range of needs can be. Although Screwfix stores act like “mini warehouses”, there is still a need for fulfilment across the wider ecommerce operation, as no single store can be expected to carry the full range at all times. 

But even when using a centralised warehouse that tackles the extended range, the hyper-local delivery approach still works. Harries notes, “We get that product into store by 12 o’clock the next day, and then we use our stores to deliver on the Sprint promise because its proximity reduces the time to get product into customers’ hands.”

Technology and automation

Technology is at the heart of making fulfilment and delivery run smoothly, but it’s as much about being prepared for purchases as it is about getting the last mile right. Smeaton reveals that forecasting technology powered by AI is crucial in stocking the correct volumes of the company’s 1,200 different costume designs. 

“We sell a little of a lot across 10 countries. You can’t forecast all of that as a human. You need to pull all the data into one place. Humans then run a finger down the list looking for stupid mistakes the algorithm hasn’t got right.”

Managing the cross-pollination between its ecommerce site, app and store network is a matter of pride for Screwfix’s Harries. “Ever since we launched as an omnichannel retailer, a single view of the customer, orders and stock has been part of our DNA. Cloud-based, API-led architecture allows us to deliver new functionality to customers quickly and efficiently, and it’s optimised for speed.”

However, Co-op’s automated approach to ‘quick commerce’ is having the last word about the last mile. In partnership with Starship Technologies, the company is using robots to deliver groceries. To make the process fully autonomous in Cambourne, Cambridgeshire, the town council recently installed wireless charging stations so the delivery robots can recharge themselves, rather than having to be fetched by van. It means the cost of autonomous delivery can be reduced in the long term. 

There is a certain novelty value in autonomous delivery, but most fulfilment is still most effective via planes, trains and automobiles. Brands just have to make sure that everyone involved is quite literally up to speed.

Although consumers have tightened their purse strings post-pandemic, ecommerce spending continues to grow. In fact, the global ecommerce market is expected to reach US$7.4tn by 2025. But while this presents new opportunities for ecommerce firms, it could also increase competition.

New sales platforms and channels are also shaking up the market, along with disruptors offering subscription models, more sustainable products or smarter uses of technology. In addition, consumers are increasingly buying products from firms based outside the borders of their home country or region. In other words, competition is no longer merely domestic or centred on established rivals.

Ecommerce firms can stand out by having a robust logistics process. Today, logistics is often the final touch point for many consumers. This means it plays a big role in the overall customer experience. “That doesn't mean that every firm needs to offer same-day deliveries, or that all product categories need to offer extremely fast ones,” says Nabil Malouli, senior vice president of global ecommerce at DHL. “But it is a competitive advantage: when you can offer a faster delivery, you will have a benefit as opposed to other companies.”

New opportunities

The ability to meet customers where they spend time online is another source of competitive advantage. The rise of social commerce, for instance, is something few retailers can afford to ignore. “Social commerce is really one of the biggest opportunities right now for companies to expand their sales,” says Malouli.

Cross-border ecommerce is another. “People are buying cross-border because of availability of products, because of price, and because certain brands are just not present in the country where they live,” Malouli explains.

Working with the right partners can maximise an ecommerce firm's ability to capitalise on these opportunities. "It's way more important than in domestic markets to be very careful about how you select and work with your partners. Why? Because shipping domestically is relatively simple, whereas shipping internationally is quite complex and costs more."

A partner such as DHL, for example, is well-placed to enable customers to overcome many of these challenges thanks to its logistics experience and extensive global reach. “Think about localisation of websites, think about currencies, think about the method of payment – all this requires specific technologies that either we develop ourselves, or that we work with best-in-class companies to offer to the clients we serve,” says Malouli.

Getting returns right

An increase in ecommerce demand goes hand-in-hand with an increase in returns, which customers expect to be a smooth, pain-free activity. Indeed, according to one study by Klarna, up to 84% of online shoppers would not return to a retailer if they had a poor returns experience.

“It's an area that you definitely need to look at to improve your margins, reduce your amount of returns, and still have a decent financial outcome and great customer experience,” says Leslie Rubio Olvera, global returns product development director at DHL Supply Chain.

Providing a range of return drop-off options, including in-store and parcel locker ones, can help ensure customer satisfaction. Instant refunds or instant credit options are another way of option. Ecommerce giants such as Amazon and Walmart will refund the purchase price of some products while simultaneously telling customers to keep them.

This may not be viable for smaller or mid-sized firms. But there are other levers they can pull to achieve the right balance between customer satisfaction and their own costs, such as offering the consumer a discounted price for a product instead of returning it.

A strong returns process also ensures that returned items can quickly be graded and restocked back into inventory. It's an area that's ripe for sustainability wins too: consolidated returns, for example, allow companies to have returns collected by their logistics provider and delivered in one combined shipment, reducing both costs and carbon emissions.

Sustainable ecommerce

With shoppers increasingly factoring sustainability into their purchase decisions, showing the carbon footprint of delivering a product or offering the option for a slower, greener delivery can also boost competitiveness. The latter option again has the added benefit of reducing costs for the retailer, as they do not need to ship the product as quickly.

However, when it comes to delivery, sustainable needn't automatically equal slow. “You can do fast deliveries with electric vehicles if you have a well-optimised network with good route optimisation, with a good level of delivery density and have optimised how full your trucks or delivery vans are,” says Malouli, who points out that DHL currently operates more than 29,200 electric vehicles (EVs) worldwide and is continuously adding to its electric fleet.

Everything from sustainable packaging and fillers to digital return labels can further boost sustainability and therefore customer satisfaction. AI and predictive analytics can also be used to anticipate what shoppers will buy – information that can then be used to minimise the amount of transportation needed and maximise overall fulfilment capabilities.

Indeed, the real-time data that such tools can provide increases the likelihood of having the right product in stock at the right time, improving customer satisfaction. “It's going to be extremely hard for a company to keep being competitive if they're not embracing these technologies,” says Malouli.

In the future, mainstream adoption of autonomous delivery models that can drop parcels at safe locations could unlock additional security, efficiency and speed benefits that may help ecommerce firms win more customers. It's all part of the continuing evolution of logistics – and with the right partner, firms can ensure they're well-placed to take advantage of these developments and maximise their competitiveness.

Today’s challenging economic environment means ecommerce firms are keen to cut costs. But companies need to go about this intelligently to avoid hurting customer satisfaction and profitability.

New technologies and smart strategic decisions can help firms to meet this challenge. AI, for instance, offers ecommerce firms a means of optimising their forecasting capabilities and enhancing their operational efficiency.

“AI can help with both demand forecasting – what orders are coming tomorrow, next week or next month – and supply forecasting, which allows them to see where products are throughout the global supply chain and anticipate interruptions,” says Suhaib Rangoonwala, director at Altman Solon, a global strategy consulting firm.

By crunching vast amounts of data on sales, customer habits and market trends, AI tools can predict what will sell, when and where it will sell, and for how much. “This helps ecommerce firms stock just the right amount of product, avoiding excess inventory that takes up space and costs money to store and manage,” Rangoonwala explains. “They can also avoid running out of popular items, which often results in lost sales.”  

Companies such as Amazon, Walmart and ASOS have pioneered the use of AI for dynamically adjusting inventories and pricing models, leading to improved margins. “Amazon’s AI-powered forecasting system, for example, has significantly streamlined their supply chain and inventory management processes, arguably setting a benchmark in the sector,” says Sonali Fenner, managing director for strategy and innovation at Slalom, a business and technology consultancy.

Ecommerce firms will also, of course, need to work closely with suppliers and logistics partners as they look to optimise inventory levels and reduce shipping costs. “A well-managed supply chain helps minimise costs and improve communication with customers, delivering their expectations for fast and reliable order fulfilment,” says Julian Skelly, managing partner for retail at digital transformation consultancy Publicis Sapient.

Optimising the warehouse

Intelligently deployed technologies can also transform warehouse operations for ecommerce firms. Robots, for example, can quickly and accurately fulfil orders.

“These robots pick and pack orders, move inventory and perform other tasks that would otherwise require human labour,” says Skelly. “By automating these time-consuming processes, businesses can reduce the time and resources needed to manage their warehouse operations. This can lead to significant cost savings and increased efficiency.”

Reconfiguring warehouse layouts and shelving can also help minimise travel times for both robot and human workers. Placing items that are frequently ordered together in the same location, for instance, can lead to faster fulfilment. 

“Slotting optimisation based on data analytics ensures strategic product placement, reducing picking time,” says Rohan Whitehead, data training specialist at the Institute of Analytics (IoA). “Implementing cross-docking strategies also minimises handling and storage costs while accelerating order fulfilment.”

AI, computer vision, robotics and smart sensors can even be used to create a fully automated quality assurance system. “Retailers can move beyond barcodes by creating an AI-enabled system that uses robotics and imaging to see what’s in the package and address any errors before shipping – leading to fewer returns, lower repeat shipping costs and happier customers,” says Rangoonwala.

Smarter workforce management

Efficient workforce management is another critical factor in reducing operational costs – and once again, strategic investment in the right technologies can deliver significant results.

“The best use of AI in workforce management is to ensure ecommerce firms have the right number of employees – and the right type of employees – on duty depending on consumer demand and operational capacity,” says Rangoonwala. “Retailers can know when to expect peaks and lulls in orders and activity by using AI capabilities to analyse, model and schedule resources [equipment and people] needed to meet demand.”

Indeed, this alignment of staff levels with demand has a two-fold benefit as it “helps reduce the risk of overstaffing and related labour costs as well as understaffing, which can result in decreased productivity and customer dissatisfaction,” says Skelly.

Less high-tech solutions such as accurately tracking employee hours, properly managing overtime and ensuring compliance with labour laws and regulations can also unlock significant cost-savings. “Having full cost visibility allows retailers to identify areas for improvement and implement cost-saving measures, including adjusting schedules, adapting shift patterns and introducing performance incentives," he adds.

While there are now many technologies and tools that can help ecommerce firms save money, striking the right balance between cost reduction and customer satisfaction will always be an ongoing process. 

“Ecommerce retailers should continuously monitor and analyse customer feedback, satisfaction metrics and market trends to identify areas for improvement,” says Skelly. “By actively seeking feedback and making necessary adjustments, they can make sure their cost reduction efforts align with customer expectations and preferences.”