US core retail sales grew 0.5% in May after an upwardly revised 0.3% rise in April1. Building materials and garden equipment sales were up 0.1%, while online and mail-order purchases lifted 1.4%. Sales at clothing stores were unchanged and those at furniture stores edged up 0.1%. Sales at electronics and appliance stores rose 1.1% 2. Continuing growth in retail sales is a good indicator that trade worries have not yet made a full impact3.
Amazon claims to deliver everything from A to Z, and it's safe to say this often includes shipments of new headaches to its competitors. The latest reverberations for the retail industry came with the surprise news early in 2019 of the firm's move to free one-day shipping for Prime members from the current two-day norm. Competitors scrambled to follow in Amazon's lead. Most notable was Walmart, which announced that its own next-day shipping program – to be test-launched in a handful of cities – would not even require an annual membership fee. Target also appeared poised to become similarly competitive in its shipping offerings.
But here's a question to pause and ponder: Is a battle over reduced shipping time even necessary?
Granted, faster shipping translates to a higher perceived value for the customer. But another thing becoming decidedly important to consumers is sustainability and social responsibility. The implications of transportation and other shipping logistics on carbon emissions are substantial – some estimates say home deliveries add millions of metric tons of carbon to the atmosphere every year. There are also safety concerns for warehouse workers. Labor unions have questioned whether Amazon's fulfillment centers can safely accommodate faster deliveries given that they manage 200-300 orders per hour over 12-hour shifts with two-day shipping.
Then there is the tremendous burden of added expenses. Amazon has spent more than two decades and an estimated $150 billion globally to build out its capabilities. It is improbable for many other retailers to be able to invest at the same level.
Instead of blindly matching Amazon, you may be better placed ascertaining what your customers actually want and expect from you around service and experience and creating strategies to deliver on those expectations. Retailers must mine data insights to understand what's being purchased in each specific store location as well as what customers expect from shipping options. This year's AlixPartners Home Delivery Shopping Survey found that US customers were willing to wait up to 4.3 days to receive an item if it got shipped for free.
Once you know consumer expectations, determine the most cost-effective way to meet and exceed them. Here are some suggestions to get started:
Make store pickups work for you and them
Our Home Delivery Survey found that more than 60% of US shoppers have taken advantage of an in-store pickup program, and 1 in 2 are expecting to increase how often they use these options. Clearly, leveraging the store for online pickups is a great way to get customers into the store. But also understand why consumers are interested in these pickups. While they may often choose this option because of an urgent product need, our survey suggests there can be other reasons. For instance, consumers might prefer to receive access to all items in their order in one go or prize incentives such as discounts or store credits. As an example, Kohl's offers coupons to all Amazon customers dropping off their returns in 1,150 of the retailer's locations, hoping to coax at least some of them into browsing the inventory and buying something in person.
Remove offline-online barriers
Create a seamless experience for customers by providing store associates with the ability to look at store and online inventory in one fell swoop. About 76% of consumers said retailers that utilize more mobile technology provide a faster shopping experience, according to the SOTI Connected Retailer Survey. The best way to harness stores is through real-time inventory management system, which means having a precise view of what's available in the store and when, including for returns. Target's Drive Up service allows online consumers to order items from a local location, pull up to the store's parking lot about an hour or two later, and then have an employee deliver merchandise directly to their car within two minutes. It's a service that couldn't have been made possible without an advanced inventory tracking system.
The pressures of maintaining an ecommerce edge have become harder but trying to jump into battle on every single front can turn out to be counterproductive and, with something like ultra-fast shipping, potentially an expensive mistake. Listen before you act: Consumers today have strong opinions and won't shy away from conveying exactly what they need or expect from you.
