Jonathan Palmer, Head of Retail at Savvy
It’s clear from retailer results out this month that like-for-like sales figures are an issue. But what they have also exposed is the key factor determining success in the 2014 High Street Christmas sales battle: logistics and fulfilment. This was a key theme to John Lewis’s Christmas Trading announcement on the 5 Jan. Andy Street put its 4.8% like for like sales growth in the 5 weeks to Dec 27th, in part down, to investments they have made in distribution and IT which have been fundamental to ensuring it has to date successfully navigated rapidly changing shoppers demands to shop online and click and collect.
This Christmas saw a record number of consumers shop online – with one in five non-food items purchased online in December (19.2% growth from last year) according to the BRC. This increase in volume is great, but it’s clear that the existing infrastructures of some key players in the market isn’t up to the task and their much vaunted omni-channel position. A rapid overhaul in operational support structures is needed to meet growing demand and shopper expectations.
Shoppers now have an insatiable desire for immediacy, fed in part by retailers such as Amazon with its Amazon Prime next day delivery service and Next with its “order by 10pm for next day delivery” service. Fulfilment is now one of the biggest challenges retailers face. Increased competition has driven down prices and the pressure to meet demand of online players has driven a parcel delivery sector to crisis point. Indeed, the failure of City Link on Christmas Day highlights how unsustainable this model is, based on existing infrastructures.
We only need to look back just over a month ago and remember the Black Friday promotion & commotions too. The event highlighted/exposed the vulnerability of the warehousing, operations and delivery systems of some of even the biggest UK retailers including M&S, Tesco and John Lewis, whose Click & Collect service experienced delays in the days following Black Friday this year. Frustratingly the Click & Collect queues in many retailers (including M&S) were longer than those at the checkout – not great for a service that talks of speed and convenience. Conscious that this is a service at the heart of their new retail proposition (as it drives customers into store and potentially purchase more) many key players, whose Click and Collect proposition failed their customers pre-Christmas, are now enticing them back with discounts and gift vouchers. Will this be enough to regain customers trust?
The last five yards of the customer journey is the most exposed at present, with most retailers leaving delivery to the hands of anonymous third parties that don’t always deliver a customer experience consistent with their retail brand. If I’m enchanted to buying a beautiful cashmere gift from the White Company, I don’t really want that gift late, chucked over my gate by a scruffy looking delivery driver in a beaten up van. Retailers must protect the brand and experience until it reaches the shoppers hands. I expect to see major changes in this area in 2015 with many retailers looking to take full control of the delivery fulfilment process, Amazon being one.
As retailers begin to plan for Christmas 2015, forecasting and demand planning must be a key focus to ensure that robust logistics support the needs of an ever more demanding shopper. Retailers must also factor in the cost of ensuring each delivery meets the shopper to ensure a sustainable service.
Fulfilling the expectations of a shopper who ultimately wants to choose where, when, by whom, the price they pay on delivery of their online products is no easy task, but it’s the future of retail and the industry must work harder and smarter together in order to deliver – pardon the pun! After all, it is clear that as we move into 2015, s