The need for home delivery across the globe surged manifolds. In the US alone, a demand surge that would have taken 10 years, happened in under 6 months.
Retailers, especially grocers, were caught completely off-guard to handle demands for home deliveries on such a massive scale.
With lockdowns, movement curfews and restricted hours, it became increasingly challenging to cater to surging demand overall, apart from just home deliveries.
At this point, third-party logistics service providers such as Doordash, Postmates, Instacart, UberEats were an immediate quick fix to the problem. Not only did they help retailers get their sales moving at a time when footfalls dropped massively in the stores, but also led to new trends such as setting up of dark stores and micro fulfilment centres. For the customers, they had multiple options to get their products delivered.
The extended periods for which this trend continued has led to considerable behavioral changes in customers and a majority of them would continue to rely on door deliveries.
However, for the retailers, this poses new challenges and questions.
- What is the cost of becoming increasingly dependent on third-party service providers?
- What is the impact on customer experience?
- What would happen to the personalized brand experience that customers expect from them?
- What are the new competitive threats that could potentially emerge out of these trends?
While the world is still trying to get its foot back after the Amazon wave completely shattered traditional approaches to managing customer experience and even more importantly, supply chain management, the pandemic gave this disruption additional momentum.
With our interaction with leading grocers and industry leaders, some of our findings are:
- There is a growing concern among retailers about the increasing dependence on third-party apps.
- There are price deviations and the customers end up paying more when they purchase through third-parties.
- There is a severe impact[downward] on customer experience when a third-party is involved.
- The biggest concern that would emerge in the future is loss of access to transactional data to the hands of third parties.
Before looking at the solution to this and what retailers need to do in this scenario, a slightly closer look at the above mentioned concerns is important.
Staying Closer To The Customer
Irrespective of technology or innovation, from historical times to present times, the loyalty of a customer to a retail brand, especially something as regular and inevitable as grocery, is trust. Customers buy food from places they trust and to nurture trust, brands need to build effective customer relationships. This is the fundamental premise behind tailoring customized, personalized loyalty programs.
However, while a middleman comes into the picture, there is definitely a loss of this one-to-one relationship between customers and the retailer. This will severely affect customer relationships and eventually trust. When the third-party is an aggregator of multiple retailers, customers can instantly switch to another grocer at the tap of a button. This loyalty switch, at a large scale caused by seemingly isolated lapses in customer experience, can distance the brand from the customers to an unimaginable extent.
Losing touch with the customers directly and not being able to gauge their pulse to build customer experience is the biggest challenge when third-parties are relied on, on a long-term basis.
Botched Up Prices
Invariably, there are additional costs for delivery when a third-party is involved.
But, when the per-item price is different from what is seen on shelves of a store and inside a 3rd-party app, it could mislead users that the store is expensive.
As retailers have little or no control over the prices a 3rd-party app shows on their apps, this could affect customer perception and showcase the retailer as slightly more expensive. This will eventually affect customer relationships and loyalties.
The Customer Experience Conundrum
Incidents such as missing items, theft when orders are left at the doorstep, the entire refund process and resolution of such issues, the effort that goes into customer support, especially when the scale of orders is massive, all of it takes a toll on customer experience and operational efficiency.
The biggest impact for retailers who are heavily dependent on 3rd-party tools is customer experience. In addition to pressures from Amazon rising the de facto standards of customer experience, the surge has further amplified it.
One of the keys to understanding consumer behaviour is closely monitoring how they interact with you and how the transaction pattern is. With the entire front-ending of the digital delivery process lying in the hands of a 3rd-party, this critical dataset lies with them.
This deprives retailers of the precious insights that would drive several business-critical decisions.
With all these concerns, what is the way forward? Is it feasible for retailers to completely do away with these avenues and set up their own delivery arm?
The Way Forward
As we have seen already, the behavioral changes are here to stay. It isn’t feasible or practical to keep all your delivery operations in-house at least in the short-term. It requires meticulous planning, onboarding of carriers, ramping up technology and a whole lot of other steps.
Hence, to embark on a revamp of digitalization of logistics is a key next step. However, the convenience factor that is brought in by 3rd-party service providers cannot be entirely done away with. Hence, an optimum, well-balanced, mixed model with some own fleet and onboarding 3rd-parties as carriers committed to customer service is a middleground to take.
What is your strategy to handle the sustaining growth in the need for home deliveries in 2021? Chat with us or let us know in the comments.