Logistics: Delivery and Return
With a highly developed logistics infrastructure of 3,500 courier companies and 60 thousand logistics service providers, Germany remains an ideal location for companies looking to provide online and multi-channel services. This concentrated network also makes services such as same-day delivery more calculable.
Parcel service providers are facing new challenges as a result of the e-commerce boom and accompanying developments. Increased B2C traffic has resulted in higher total shipping costs as deliveries become more decentralized with smaller quantities per stop. Another important factor affecting these rising shipping costs is the rate of returns experienced by many online shops. Germans are returns champions: According to the PWC ”Total Retail 2018“ study, 70% of online shoppers expect limitless free postal returns or the option to return to shop at any other place of convenience. Because of these increasing customer demands, innovative delivery methods could prove vital for online companies seeking to stay ahead of the competition, especially solutions that take sustainability and the environment into account. Businesses who provide innovative solutions to these emerging issues will find themselves with a distinct advantage in the German marketplace.
Same-day delivery options offer online retailers a distinct competitive advantage, especially those businesses who seek to capture the millennial and Generation Z markets, both of whom grew up in a digital world and expect a real-time online experience. However, the ibi research survey shows that more than half of respondents (53%) would only take advantage of this offer if no additional costs were incurred.
Amazon has offered Prime customers same-day delivery at no additional cost since November 2015. Other online retailers, including Zalando and Media-Saturn, have reacted in quick fashion. Zalando, in partnership with Tiramizoo, now offers same-day delivery to customers in Berlin as well as in the Rhineland, Ruhr area and Frankfurt am Main regions. Media-Saturn also offers a same-day delivery service that can deliver within three hours – 80% of the Federal Territory is already covered with their service offer. Since June 2018, the H&M fashion chain has also been testing the “Same Day Delivery Option” in Berlin. If the order is placed by 10 p.m., delivery takes place in the morning of the following day. H&M offers “Next Day Delivery” in more than twelve German cities from Berlin to Nuremberg and plans to expand it further in the future.
If the major online retailers are able to mainstream comprehensive same-day delivery of products, the last competitive advantage of the stationary retail sector, instant gratification, may soon be a thing of the past.
Click and Collect
Many stationary retailers offer customers the option to order online and pick up their products in-store. ‘’Click and Collect,” the do-it-yourself version of same-day delivery, is also becoming more popular among consumers. According to a study of the software manufacturer JDA and the market research institute YouGov, 28%of Germans report having used this method of pick-up in 2017.
German consumers like to research online and purchase offline (ROPO), with retailers using a multichannel strategy to increase the number of visitors to their stores. Established retailers with their own traditional sales networks used to be at a comparative disadvantage to pure internet players, but today they are gaining a competitive advantage with Click and Collect, underscoring the role of online retail as a significant driver for offline business. Despite an initial one-channel focus, more and more online merchants are becoming active in multi-distribution channels like Click and Collect. Some 39% of retailers already offer the service or plan to do so in the near future.
Return management represents a significant e-commerce challenge. Despite increasing e-commerce turnover, many online shops record low profits due to the high costs of returns. According to Bitkom, one in eight orders is returned – 20% more than two years ago. In the fashion sectors, up to 80% of goods are returned. According to an EHI Retail Institute study in 2018, the average return rate is rather moderate but problematic in some sectors. For more than half (57%) of the surveyed retailers, the return rate is 10% or lower. However, some specific product groups - such as fashion, textiles and shoes - do experience higher return rates of up to 80%. As a result, companies that are able to provide accurate product descriptions and visual representations will most likely experience a significant comparative advantage in the online market place due to reduced return costs. The introduction of new augmented reality technologies that use body scanners in order to create ‘’virtual changing rooms’’ also provides further potential for reducing return rates and obtaining a competitive advantage among online retailers.