The ‘Last Mile’ Looms Large as Q4 approaches
As much as everyone loves Amazon, we must admit, they ruined it for other businesses in terms of raising customer expectations, particularly when it comes to the last mile.
Amazon Prime. Next day. Same day. Drones. Amazon does it all, and other shipping providers have had to meet those standards to stay competitive.
AxleHire, a last-mile delivery service, is ready for the fourth quarter, when shipping and delivery is top of mind for retailers and customers, especially as the holiday shopping season comes into view.
“Shipping has become a critical component of the customer experience, and consumers today are making purchase decisions based on shipping costs and delivery windows,” said Raj Ramanan, CEO of AxleHire. “Consumer expectations for shipping are higher than ever. Gone are four to five days or longer for delivery windows.”
According to research from Linnworks, one in four customers will only consider buying an item if it is shipping in two days or fewer. More than 60% of consumers prioritize brands offering next-day delivery, and there is a growing preference for same-day delivery.
As Juozas Kaziukènas, founder of Marketplace Pulse, wrote earlier this summer, “Amazon doesn’t sell goods. It sells goods that ship in one to two days and, for some shoppers, same day. The logistics are as much part of the product as the products themselves.”
Consumers also want shipping to be free: More than half of consumers will abandon an online shopping cart if presented with an extra shipping cost. Only Amazon Prime offers unlimited free shipping but at $14.99 per month, or $139 per year, many customers wait until they have enough items in their Amazon cart to qualify for free shipping (minimum $25).
Walmart+ is Amazon’s closest competitor in terms of subscription-delivery-streaming services. It charges $12.99 per month or $98 per year.
While 200 million people globally are Prime subscribers, about 18.5 million people in the U.S. are Walmart+ members.
Ramanan said delivery is crucial to securing brand loyalty. Three in five consumers are likely to remain loyal to retailers that offer transparency when it comes to delivery costs and timing. The lack thereof, got Amazon into hot water in June as the FTC claimed the online retailer tricked consumers into signing up for Prime and making it difficult to cancel the service.
Amazon’s statement in response to the FTC lawsuit read: “The truth is that customers love Prime, and by design we make it clear and simple for customers to both sign up for or cancel their Prime membership. As with all our products and services, we continually listen to customer feedback and look for ways to improve the customer experience, and we look forward to the facts becoming clear as this case plays out.”
The stakes are high in this retail delivery game and getting higher as back-to-school and the holiday season approach.
Ramanan said retailers should implement a multi-carrier strategy (as Amazon already does) to ensure they receive competitive pricing from carriers.
“Localized inventory, those micro hubs that push inventory out closer to the end delivery point, is imperative for success,” he said. “Because it shortens the last mile in the process, supporting speed and sustainability.”
His other recommendations to retailers are as follows:
- Use a system of dynamic control—operational flexibility to continually adapt to surges or dips in demand.
- Be completely transparent—100% visibility for the shipper of the end-to-end process with no black holes; 100% visibility for the consumer of where their package is and when it will arrive.
- Manage end-to-end precision—data and algorithms that drive daily optimization of capacity and routing.
- Make sure to have 24/7 availability—real-time response and recovery.
Ramanan pointed to findings that 84% of customers will walk away from a brand if they’ve had a bad delivery experience. Conversely, three in five consumers are likely to remain loyal to retailers who are open and honest about delivery costs and timing.
The last mile is crucial to retailers’ revenue in Q4. Are you ready?