3 delivery trends that are here to stay• 3 min read
Behind the splashy headlines about record-high online sales, data reveals some delivery trends that might actually harm retailers’ businesses. Read on to get the facts and see how sellers are looking to solve the problem.
How quickly has the world changed since COVID-19 hit? Just look at e-commerce. Within just three months, online business experienced the equivalent of 10 years’ worth of growth, according to a McKinsey report detailing the evolution of the market in the wake of the pandemic. Skyrocketing online orders have had a huge impact on the supply chain, as retailers are increasingly turning to faster delivery options to fulfill growing demand.
But for many, soaring online sales doesn’t always pay back: though retailers are fulfilling more and more orders, they aren’t able to translate volume into profits. Even more worryingly, retailers feel they lack options to improve the situation. Here’s what we’re seeing, and how you can get ahead:
1. Booming delivery volume.
Feeling you’re busier than ever when fulfilling online orders? You are not alone — retailers selling everything from groceries to clothing to electronics to furniture are seeing unprecedented growth of their digital sales. According to the US Department of Commerce, E-commerce saw a 39% jump in the first quarter of 2021 compared to the same period a year ago, now accounting for 13% of all retail sales ($225 billion). This drastic increase has also driven US package volume up to a record-high level.
There are clear indications that this digital shopping momentum will continue in the post-pandemic era, as consumers’ shopping habits have profoundly changed. Companies who are unable to adapt to online deliveries quickly — and fulfill delivery requests at scale — may fall behind.
2. Growth at the expense of profitability.
When it comes to tackling a high volume of online deliveries, many retailers think there are no options other than Instacart, or other gig-economy middlemen. However, retailers using these services are realizing that they are barely making a profit — if at all.
According to a 2021 survey of 206 grocery retailers conducted by e-commerce company Wynshop, 86% of them are not satisfied with their profits from online businesses. Notably, nearly 60% report either having negative margins or are making less than 10% gross margin per digital order. And 59% of retailers think that third-party partnerships with gig-economy marketplace platforms — ubiquitous in our post-COVID world — are unprofitable.
Broader industry data shows just how large the loss could be: delivering online orders led to a 70% decline in margin, which means that every $1 billion in online sales resulted in $14 million in lost profits, according to the Wynshop study.
3. A need to look beyond the gig-economy.
Gig economy apps that provide independent delivery services seem like a game-changer in fulfilling orders, as less dedicated labor, fleet, and advertising costs are required. Indeed, 66% of retailers believe they can’t scale without a gig service, even as they hand over a 10% commission fee on each order and question the profitability of the model. A WSJ article points out that more and more retailers are questioning those apps as they find they don’t make money by partnering with them.
In addition to lower profits, offloading operations means outsourcing control over customer experience and loyalty, in addition to reducing profits. In the Wynshop survey, 84% of retailers fear they will lose touch with their customer base when overly depending on third-party apps, while 81% are concerned that these platforms will become their future direct competitor.
That’s why stores — from those as big as Walmart, to medium-sized grocery chains, to mom-and-pop shops — are increasingly shifting away from outsourced platforms and starting to handle their delivery services in-house. At the recent GroceryShop conference, retailers were scrambling to scoop up new technologies that could help them take back control.
Though spinning up in-house delivery logistics from scratch might sound daunting, the benefits are robust. First and foremost, retailers can avoid fees that erode profits by managing their own services. With self-operated delivery processes, they gain better visibility into customer data. The more retailers know about consumers’ shopping behaviors, the kinds of products they are interested in, and the services they expect to have, the more they are able to nurture loyalty and stay ahead of the competition.
We understand that retailers cannot make this transition all by themselves, that’s why you need to choose partners that could offer the appropriate delivery technology that fits you. Visit our website or reach out to firstname.lastname@example.org to talk about a delivery strategy that ensures cost-efficient and sustainable services, and ultimately meets your revenue goals.