Logistics: A New Competitive Advantage for eCommerce Brands
Online and in-store competition is rife. Brands are finding innovative ways to provide the best possible customer experience on their eCommerce websites, with the help of UX, chatbot support, experience personalization, and mobile.
But what if the differentiating factor was ultimately offline rather than online?
Nabil Malouli, VP Global eCommerce at DHL, gives us the keys to success for the future of eCommerce.
About Nabil Malouli
Nabil Malouli, who specializes in eCommerce and logistics, is an entrepreneur who’s passionate about innovation and new technologies,
Previously VP of Customer Solutions & Innovation at DHL, Malouli is now in charge of product development and worldwide eCommerce strategy for DHL Supply Chain,. In his current role as VP Global eCommerce, he’s supervised the development of innovative logistics projects for many Fortune 500 brands. As a board member of several up-and-coming start-ups, Malouli is no stranger to sharing his experience and expertise with fast-growing companies, in order to help them understand and develop their supply chains.
What eCommerce trends have emerged over the last few years?
Several big trends have emerged and have even gathered speed as a result of the Coronavirus. In some cases, we’ve advanced 3 to 5 years in just a few months!
The first big trend I’ve noticed is the increase in the number of distribution channels. This burst of growth is really significant for brands and businesses.
Right now, a brand can sell its products or its services on any medium. Until very recently, we had to depend on classic channels like marketplaces or D2C (Direct To Consumer). Now there are new arrivals like Facebook Shops and Whatsapp Business. Even US TV channels are launching shopping functions, such as NBCUniversal with their NBCUniversal Checkout. This feature allows viewers to scan a code that appears on their screen during an ad which will take them directly to an e-shop for the product in question.
Of course, features like these are not new in Asia; WeChat was already an eCommerce platform a few years ago, but the ability to almost seamlessly buy something anytime and anywhere is clearly becoming more and more popular.
Brands are selling wherever their customers are – whether they are watching TV or reading an article online – any activity can become “shoppable”. And there are still plenty of channels to tap into, in particular gaming, where millions of users may gather at the same time.
The second big trend I can see is the explosive growth of B2B transactions. Let’s look at a big coffee company, for example. These days it’s possible to sell outside of traditional models like wholesalers. A B2B coffee company can sell directly to restaurant and hotel chains or conference centers. The dependence on traditional networks for selling all kinds of products has been greatly reduced.
We’ve also seen the recent emergence of social commerce. The role of recommendation has grown enormously, whether by influencers, other buyers, or friends. More and more people are buying products without necessarily knowing the brand or verifying quality before buying.
Another trend, and one close to my heart, of course, is that it’s becoming clearer how logistics gives companies a competitive edge, which wasn’t the case previously. Every day, it’s becoming more and more obvious that eCommerce giants are investing considerably to improve their logistics.
Logistics are forgotten but remain a key aspect of the customer experience. Sixty-three percent of customers abandon their shopping carts due to unexpected delivery costs.
A successful delivery experience leaves customers satisfied, which in turn can lead to lifetime customer retention and loyalty.
The quicker the delivery, the greater the likelihood of conversion. The clearer the information about payment and delivery time, the more your customers will convert. Logistics is also crucial because it controls how much you spend and how competitive you are, which can help ensure your product is viable.
Lastly, I’ve noticed two final trends: personalization and sustainability. Personalization isn’t new, but it’s becoming more and more essential as the market continues to become saturated with offers.
Many major American D2C brands understand this well. They add a small, unique touch to their shipping packaging or personalized products and leverage customer data to encourage retention in the form of specific notes for each customer profile, for example.
To finish up, we can see that sustainability is playing an increasing role in brand strategies, particularly in Europe where it’s becoming a priority. At DHL, we receive a lot of questions from large Fortune 200 and Fortune 500 businesses asking us how to optimize packaging and returns and how to make a connection between the physical and digital worlds, as sustainably as possible.
What will be the long term effects of this change?
We’re seeing the growth of digital transformation accelerate by between 5 and 10 years. It’s already clear that a major change has happened online for supermarket chains. The crisis has obviously been a game-changer for this sector. It’s also affected every, or almost every, customer profile. We have seen people who did very little online shopping embrace eCommerce and people who were used to shopping online depend more heavily on it.
In the United States, online supermarket sales made up around 2 to 3% of the market share until the beginning of 2020. It is now estimated to be more like 20%. In retail, by comparison, it has taken 30 years to reach an online penetration level of between 15 and 17%!
For brands, this is a crucial change: when a customer buys online four times in a row, they become a loyal customer 70% of the time, which in itself brings plenty of revenue opportunities.
This sudden increase will probably continue, even if there is a slight decline in this boom when things return to normal. As a result of these developments, issues relating to parking, city deliveries, and urban management of retail spaces will start to emerge and will have a huge impact on every level.
What do you think the keys to eCommerce success will be over the next few years?
In eCommerce, there are three stages that can help a brand to succeed: getting a customer to checkout, ensuring they convert, and building customer loyalty.
To steer the customer to checkout, it’s essential to understand who they are and which channels they use, and not the other way round. There is no point in being on every channel if you want to be visible – only the ones used by your target audience are important.
Next comes the essential, and most complex, part: logistics and payment. To be able to ensure you’re operationally efficient, it is crucial to develop internal logistics expertise to limit possible points of friction as much as possible and to ensure customer satisfaction is high.
Regardless of whether the brand has to process 10 or 100,000 orders, the customer expects delivery lead times and service to be just as efficient. These expectations get higher with every purchase, particularly with loyal customers, who must be retained at any cost.
In fact, retention is one of the cornerstones of eCommerce success. Customer retention requires perfecting the customer experience. That might include how transparent your return policies are, shipment tracking, as well as post-purchase upsell.
On this front, brands often do very little. And yet, there are so many things they could be doing: for example, including discounts in their packaging.
On average, a consumer keeps the box their item was delivered in for up to 24 hours, and yet, it’s advertising space that is rarely or never used. It has enormous promotional potential!
Successfully linking up these three cornerstones is essential.
What role will logistics play in the future of eCommerce?
Logistics will most certainly play an increasingly important role in the success of eCommerce. If we look at Amazon, for example, many of their ads have a tagline of “Fast and free shipping”.
The message in this company’s tagline says a lot about the role of logistics at Amazon. Before mentioning anything else, the brand uses delivery as a selling feature.
Why? Because the delivery experience is key. How many stories have we heard about a bad customer experience just because of poor delivery?
A damaged box or a quick delivery: every customer experience is distinguished by logistics because everything else, like site navigation, is taken for granted.
Amazon understood this early on. Even today, we are still impressed by their ability to deliver on the same day!
Some businesses are not at this point; they still depend on traditional sales networks and because eCommerce only represents 10% of their total sales, they think it doesn’t justify further investment.
It’s also worth bearing in mind that eCommerce logistics are still very complex. Everything is much simpler with a store: containers of products are sent to warehouses and delivery plans are set up store by store, according to their needs.
Ecommerce is different. Products are received into a stock area, every batch must be opened and an inventory kept, and companies must be able to dispatch products individually. Stock levels need to be maintained, with orders varying in number from one day to the next, and delivery times must be met.
There is an obvious difference between delivering to a store and delivering to individuals. Managing returns is also more complex. In fashion retail, returns can account for up to 40% of all sales. They must all be processed, checked, and added back into the inventory, all in record time.
Source: Corporate Finance Institute
I strongly recommend that businesses make logistics one of their top priorities, given the issues at stake. If you aren’t fortunate enough to have in-house expertise, it is essential to have experts at hand who are capable of working on these issues.
Just like digital marketing, eCommerce logistics require very specific skills that must be embraced, either externally or in-house.
At the end of the day, the logistics aspect of a customer’s shopping experience will be what they remember more than anything else. This is what will significantly increase conversion and retention.
Some businesses have already taken this on board, emphasizing their delivery terms in their marketing campaigns and making it a sales feature. This is certainly the case with Amazon and more and more eCommerce businesses are following suit, such as Inditex, which recently announced it is investing 3 billion euros, of which 1 billion will go towards eCommerce and a technology platform designed to connect online and in-store activity.
What are some recent eCommerce initiatives that have caught your eye?
There have been several striking initiatives. First of all, Nike announced last June that it wanted to boost its digital sales and reorganize its business to focus more on online and D2C. The brand completely revised its eCommerce objectives and consequently saw revenue increase from 30% to 50%! Their products are not hugely promoted online, but still, to see such a major brand prioritize eCommerce in its overall business strategy feels like a major turning point.
In the same vein, Microsoft decided to close all of its stores worldwide to concentrate on online sales, and to have only “Experience Centers” that will not sell products, but instead offer workshops and in-person support. These are very big decisions, doubtless made more quickly because of the crisis, which are making permanent changes to the landscape.
Last of all, a significant initiative: Amazon buying out Zoox, the autonomous car service. With this acquisition, it’s clear Amazon aims to become independent in terms of logistics, and especially deliveries!