The United Nations predicted that by 2050, 70% of the world’s population would be living and working in urban areas[1]. Mega Cities with population of more than 10 million population are also expected to increase from the current 28 to 41 cities by 2030[2]. With this rapid rate of urbanisation and growth in ecommerce, cities around the world are faced with the strain on urban infrastructure and logistics. To build a successful ecommerce business, movement of goods within the cities become one of the most important challenges for retailers. Online businesses have to develop a comprehensive strategy to be better equipped to handle deliveries.
Completing the sale by delivering the goods
For ecommerce, the sale only completed when the product is delivered. Increasingly retailers have to also handle returns by customers, making logistics all the more important in ecommerce industry.
However, many customers actually leave your online shop without buying, they abandoned their shopping cart. According to Baymard Institute, a web research company in the UK, 67.45% of online shopping carts are abandoned. But why do shoppers leave without paying, especially after they have painstakingly searched through the products and dutifully added them to their carts. The products must have attracted them and are something they wanted to buy.
According to Statistia, the top reason is expected cost at checkout. More than half of shoppers (56%) explained that being presented with unexpected costs is the reason they leave without completing their purchase. Many have similar online shopping encounters. You find an item you want to buy and click Add to Cart. When you decide to checkout you’re presented with additional delivery fees and charges that weren’t clearly listed on the original product page.
Free delivery could be used as strategic lever to drive sales
Instead of shocking your customers with unexpected cost, why not surprise them with free delivery.
Product prices are rated as important more than any other factor in the search/browse experience — at 81%. Shipping costs come in a close second with 75% rating it important. Shoppers will go to varying degrees to secure free shipping, such as adding items to carts with the intention to keep them (52%). And 45% have abandoned a cart when they don’t qualify for free shipping[3].
The majority (57%) of shoppers say that the decision to pay for shipping is most often driven by the total cost of the order where they have a clear sense of what it’s worth. Alternatively, shoppers will pay for shipping when they absolutely must have a product, require expedited delivery or personal circumstances dictate.
A handful of retailers have chosen to offer free shipping year round. A selective approach can be offered instead to nudge, reward and retain customers. This may include sporadic usage throughout the year, extending free shipping to loyal shoppers and last-minute, site-wide usage to ensure sales forecasts are met.
Evaluating how best to address free shipping means looking at the competitive landscape and also budgeting this expense as part of the cost of doing business. Weighing business dynamics — from assortment to financials — should drive this decision. Evolving it throughout the year ensures achieving desired results.
77% of the respondents also cited having free delivery options the most important factors when checking out[3]. However, there is a cost to offer free delivery. The urban logistics industry will have to evolve to enhance the competitiveness of last mile fulfilment. This calls for a complete change in business model of urban logistics.
Offering free delivery at a low cost by leveraging on big data and resource sharing
There are many ways that we can improve the distribution networks and last mile fulfilment logistics resources that handle the delivery of goods within Singapore. One way is by better use of data and factoring in information such as order fulfilment, traffic conditions at delivery points, types of goods and vehicles. Thanks to GPS technology, proliferation of mobile devices and the connectivity within cities, these data can now be more easily collected. By making sense of the data, urban logistics can yield great efficiency gains.
A crowdsourced urban delivery model could also better handle cost pressures and shortage of drivers by sharing resources. Delivery assets distributed around the city could be dormant and activated on-demand to meet the uncertainty in delivery needs without the high cost.
Crowdsourcing urban logistics allows multiple parties in the supply chain to collaborate using infocomm technologies. Resources such as vehicles and drivers are shared and are coordinated by the central platform based on their availability to deliver. Crowdsourcing logistics could bring savings to the ecommerce industry and enhance its competitiveness, boosting ecommerce growth further.
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[1] Source: “World Urbanization Prospects, the 2007 Revision”, United Nations.
[2] Source: “World’s population increasingly urban with more than half living in urban areas” United Nations Report 10 July 2014
[3] Source: UPS Pulse of the Online Shopper 2015 survey
[2] Source: “World’s population increasingly urban with more than half living in urban areas” United Nations Report 10 July 2014
[3] Source: UPS Pulse of the Online Shopper 2015 survey
