Consumers want it "their way" … and they want it NOW
Sometimes it's hard to remember what retailing was like BA (Before Amazon). When retailing only meant stores, consumers literally had instant gratification. They found "it" on the shelf, made the purchase and walked with their product. With the advent of ecommerce, consumers had choices … literally choices of millions of products and choices of what to pay. Stores still had an advantage of having it on the shelf right now. But, what if you could order online and have it today, or in the next hour! Amazon has just announced pilots for one hour delivery in London. The future of retail is now about the logistical prowess to deliver the goods to the consumer's door in the same time (or less) than it takes to visit a store!
Why this is important: Traditional retailers had a strategic advantage of instant fulfillment from the shelf. The power of the shelf is under siege when online can deliver your goods within hours. Logistics is a new strategic differentiator.
Omnichannel is the new normal … have it your way anytime everywhere
The future of retail starts with the changing nature of the consumer. Through their smartphones, they don't have to limit their shopping to the days or hours that stores are open. Omnichannel consumers today are quite comfortable shopping and purchasing anytime and everywhere. They don't recognize retail channels … they just "shop" where they choose.
Consumers have discovered the power of choice online. Instead of being limited to thousands of products that can be contained in retail store, they are now able to shop millions of products online and compare prices across retailers for the same product.
The main obstacle for online has historically been logistics. Consumers have typically had to wait days or even weeks for their purchase Bricks and mortar stores had a competitive advantage of instant gratification from buying from the stock on the shelf. That store advantage is going to be severely challenged with the advent of new logistic paradigms.
Amazon continues to be the master of disruption through logistics
There are many successful online retailers, including Alibaba, which is much larger than Amazon. Yet, Amazon continues to be the "Master of Disruption". A primary reason is that they are so focused on the consumer. Amazon is obsessed with its Prime members and how to best serve this highly profitable segment.
There are 3 critical Amazon disruptions evolving right now and all involve logistics:
- How to deliver groceries and consumables to consumers weekly
- How to deliver cost effectively on Sundays, evening using USPS for delivery
- How to deliver purchases in large cities like London within 1 hour!
Amazon is quite literally on a mission to use logistics to remove the competitive advantage of purchasing from the shelf in store. If you can have great choice, selection from millions of items, with the option of delivery to your door in less time than it takes to go to the store, why would you not use Amazon?
Worldwide revolution in the "last kilometer" logistics
Oh, by the way, Amazon in the US is not the only innovator using logistics to create a compelling value proposition for consumers. In many major cities in India and China, you can get most any product, or even gourmet restaurant meals delivered to your door within hours. This is a paradigm shift, especially in major cities clogged with traffic.
In India and China there are literally thousands of bikes and scooters that have become the "uber-like" on call logistical system. The interesting phenomenon in this logistical scenario, the local delivery bikes can just as easily deliver from stores as from online distribution points. However, if stores use these rapid delivery options, there is a corresponding impact of reducing consumer physical trips to visit the store. The long term strategic question for stores will be the importance of footfalls in store, which in turn create an opportunity to engage consumers beyond products at a price.
John Lewis is a litmus test for what consumers will pay for BOPIS
John Lewis is a UK retailer that has been very successful and focused on omnichannel strategies. One of the pillars of that strategy has been BOPIS, Buy Online Pickup In Store. Up to this point in time, BOPIS has been free for John Lewis customers.
However, John Lewis just started charging £2 for orders less than £30. Some retailers and consumers see this as controversial. But, how is this any different than Amazon charging for delivery on small orders if you are not a Prime member? John Lewis, Best Buy and many other store based retailers must find a way to engage consumers through a "clicks and bricks" strategy.
But nothing in life, or in retail is free … especially logistics. Retailers have a logistical cost of delivering a single item to store or home, which is different than Amazon's ability to bundle logistical costs on multiple items, or put that cost back on the backs of sellers.
It is the consumer who will decide the value equation, NOT the retailer
Every retailer, online and offline, will have to continue to evaluate what consumers will pay for the convenience of delivery to home, versus click and collect at store, versus purchase from the shelf. Consumers today have a myriad of choices. Consumers will evaluate their options, and determine their value of tradeoffs for them:
- Instant gratification from purchase off the store shelf
- Convenience of delivery to home
- Value of home delivery versus click and collect at store
- Speed of delivery versus delivery costs
- Value of home delivery with install and setup services
What a consumer chooses as the best option for them will be highly situational. It will depend upon the product, size and complexity. It will depend upon how time strapped the consumer is that week. It will depend on how much the consumer desired instant gratification and the ability to touch and see the product before purchase. But, the bottom line in the new normal is that consumers are now factoring these choices into their decisions of where they will purchase.
What this means to retailers – A critical success factor will be logistics
The power of omnichannel is like letting the "genie out of the bottle". Once released it's impossible to go back. Through omnichannel, consumers have been empowered to shop any time and everywhere. They have the choice of when and where they shop, and purchase.
The next frontier is the power of choice on when, where and how to take delivery of the purchase. Again, it is the consumer that will decide where, and how much they are willing to pay for the convenience of delivery versus the value of experiencing products in store.
In this new era of retail, logistics and the power to offer consumer choice will be a critical success factor of both retailer differentiation and survival. Each retailer will need to evaluate their capacity and costs in terms of BOPIS, or delivery to home, or some value membership option like "Prime," which bundles choice options.
Future retail success no longer about just the product and price. Consumers are already factoring delivery choice into the value equation of where they shop, and where they purchase.
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Sources:
- Images: Stuart Miles; Freedigitalphotos.net
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