Growth of e-retailing hinges on the last mile, consultant says
When looking at potential growth for online retailing, most analysts look at the number of consumers who are online, what online merchandising they respond to and what marketing it takes to make them repeat buyers. Chicago-based consultant Lauren Freedman has one word for them: Fulfillment. “How do we grow this business if people aren’t home to receive their purchases when they are delivered?” says Freedman, president of The E-Tailing Group Inc. “Not everyone can receive their deliveries at work.”
Freedman, who teaches an e-commerce class at Roosevelt University, last week had her students place online orders as a way for them to test how e-commerce systems work. Several of the 12 students in the class told her their choices of where to shop were based on delivery options offered by the retailer. Most are not home during the day, so some chose based on what they thought would present the easiest method to retrieve packages where delivery failed.
Freedman notes that online retailers today have their end of the fulfillment process under control. Most make realistic promises of when they will ship and then meet those promises. Further, she notes, retailers’ control of their shipping functions has reached a sophisticated enough level that they can offer lower priced shipping for longer delivery. In fact, average delivery grew to 4.4 days in Q4 2002 from 3.8 in Q4 2001 and Freedman attributes that not to deterioration of retailers’ ability to ship in a timely manner, but to consumers choosing the lower-cost shipping option. “From the merchant’s perspective, fulfillment is pretty good,” she says. “The real challenge is on the delivery end.”
There is no clear solution in sight, Freedman says. It’s unlikely that any of the delivery companies will create local sites where customers can pick up packages at convenient times. And even though 44% of all packages in Q4 were shipped via mail, the U.S. Postal Service’s financial constraints make it unlikely that innovations will be coming from the post office, she says. The balance of Q4 deliveries came via UPS, 37%, Federal Express, 15%, and other, 4%.
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