New Ordering Models, Flexible Delivery Models
Logistics: Delivery and Return
With a highly developed logistics infrastructure of 3,500 courier companies and 60 thousand logistics service providers, German 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: 53% of online beauty and personal care shoppers expect limitless free postal returns, according to a 2016 A.T. Kearney survey. 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.
New Delivery Models
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. In fact, 29% of respondents in a 2014 ibi research survey stated same-day delivery to be either important or very important to their online shopping experiences. As a result, an increasing number of online stores in Germany are now offering same-day delivery. Since November 2015, Amazon has offered Prime customers same-day delivery at no additional cost.
As a result, 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 ten cities in the Ruhr area. Media-Saturn also offers a same-day delivery service that can deliver within three hours and Cyberport GmbH offers a similar three-hour delivery service with their EILT! (“HURRY!”) service. 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. In fact, 16% of Germans report having used this method of pick-up; 31% of those that did not stated the lack of a click-and-collect option with their preferred retailer as the main reason. This signals a clear growth opportunity for online shops seeking a new competitive advantage in the e-commerce industry.
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. In fact, the EHI Retail Institute in Köln reported a growth in Click and Collect services in 2015, with almost one in five online shops offering this multi-channel service.
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. More than one third of all online retailers report a return rate of 20% or higher.
According to Euromonitor, Germany had a 13% average return rate in 2013. Some specific product groups however - such as fashion, textiles and shoes - do experience higher return rates. 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.