Innovative Delivery Solutions to Delight Online Shoppers With a Lower Last-Mile Delivery Cost

Chee Yew Wong1 &

Egil Moller Nielsen2

1Leeds University Business School; 2SmartCentres (Penguin Pick-Up & Penguin Fresh)

Online retailers are losing 67.45% of sales…(Shopify.com, 6 Aug 2013)

Decided To Buy

Find OutMore…

ProceedTo Buy

Abandon

Paid

OR

Meta Analysis…WHY Shoppers Abandon Purchase at Checkout

• 74.5% High Delivery/shipping charges• 58.4% Concerns regarding payment security • 50% Lead time on delivery• 49.3% Price too high • 39% Availability of the product (e.g. Out of Stock)

• Consumers – Went to comparison shop – 57%– Change their mind – 61%

Meta analysis…WHY Online Shoppers are Dissatisfied With Post-Order Experience

• Difficulty receiving their purchase– 19% Late – 13% Faulty/damaged– 12% Did not arrive– 11% Left outside home, no permission – – 4% Charged an unexpected cost

Meta Analysis…What do Online Shoppers Look For?

• Shipping costs– An important factor for 80% of shoppers

• Delivery alternatives– People choose home delivery but 74% want an alternative

• Faster Delivery – It’s the 4th most important factor when comparing retailers

• Free and Easy Returns – 58% satisfied with ease of making online returns/exchanges

Online shopping delivery performance frontier

Lead time

Location

Notification Time slots

Flexibility

Returns

Cost*

• > 2 days• Fastest delivery*

• Home only• Redelivery (fail)

• No notification• Dates (am/pm)

• Can’t change

• No returns label• Additional cost

• All delivery cost by shoppers

• > 2 days• Next/same day*

• Home & shop• Redelivery (fail)

• Notifications• Hours

• Can change*• Before date/time

• Returns labels• Additional cost

• Lower cost incentive

• Same/next/>2 day• No additional cost

• Home, shop, car• Pick-up (no cost)

• Notification• Reply/change

• Change anytime• No additional cost

• Return labels/pack• No additional cost

• No cost by shoppers

An Innovative Solution:Penguin Pick-Up

• FREE• Convenient• Secure• One-stop-Shopping (bricks meets clicks)

• Cost savings• Points of distribution• Adding to consumer loyalty• Retain foot traffic on-site• Omni-channel capabilities• Sustainable vs home delivery

• Retain foot traffic on-site• Valuable consumer insight• Player in the Omni-channel evolution• Leverage network of existing site locations

RetailerLandlordConsumer

Survey of Penguin Pick-Up Customers

• 55% buy products online monthly– than average shopper who buys online 5-6x a year

• 43% continue to shop in the retail stores right after their pick up

• 73% convenience is most important when arranging delivery

Penguin Pick-Up – Cost Savings for RetailersCurrent Retail Distribution Model

Penguin Pick-Up Model

Retailer Distribution Centre

Courier Distribution Centre

Regional / Local Courier Depots

CustomerHome

Local Delivery

Retailer Distribution Centre

CustomerHome

Customer collects package at their convenience Assumption: 50 parcels per skid

Per package cost breakdown = $10 per parcel + $3 residential surcharge =

$13 per parcel

Assumptions: $10 shipping cost is the Canada Post rate for a 13” x 12” x 4” parcel (non-food GTA to GTA 3 day service)

$3 residential surcharge is charged by UPS and FedEx

Per package cost breakdown = $1 per parcel (skid cost) + $2.50 pick-up fee =

$3.50 per parcel (cost savings of 73%)

Exponential Growth Since Inception

As a result, we have aggressive roll out plans!

Survey… What About Online Groceries?

• 69% buy fresh food more than once a week

15% do

50% would try it!

Penguin Fresh: Farm Fresh Quality Food, to the City

THANK YOUChee Yew Wong

Professor of Supply Chain ManagementLeeds University Business School

Email: c.y.wong@leeds.ac.uk

Egil Moller Nielsenenielsen@smartcentres.com

SVP of Ecommerce at SmartCentresHead of Penguin Pick-Up & Penguin Fresh

Appendix

Why shoppers abandon carts?

• 58% “High total cost due to shipping cost”4

• 69% “high shipping cost and not shown until checkout”1

• 56% “unexpected cost”2

• 70.8% “hidden charges”3

• 57% “not ready” or “just browsing”4

• 54.5% “technical problems”3

• 18% “no guarantee deliver date”4

• 16% “unsuitable delivery option”2

• 50% “order value not enough to get free shipping”4

ComScore UPS Pulse of the online shopper (2014)4

• 44% “satisfied with post-shipment flexibility”

• 43% “satisfied with the flexibility of changing delivery days or rerouting packaging”

• 58% “satisfied with ease of making online returns/exchanges

Appendix

What do Online Shoppers Prefer?

• 93% “take action” and 58% “added items to qualify for free shipping”4

• 83% “waited for an additional two days for free shipping”4

• 1 in 4 “location beyond home”4

• 50% “ship to store at some point”4

• 43% “satisfied with flexibility in changing delivery days or rerouting packages”4

• 4th “most important factor when comparing”4

• 50% “choose a slower transit time to qualify for free shipping”4

• 85% “will wait 5 days or more for delivery”4

• 60% “satisfied with the ability to find return policy”4

• 50% “satisfied with ease of return and the clarity of returns policy”4

• 82% “respond positively to the ability to return product to the store or ship it back using a free pre-paid label”4

• 58% “satisfied with the ease of making online returns/exchanges”4

Referenceshttp://www.esurveyspro.com/article-shopping-cart-abandonment-surveys.aspx

https://www.shopify.co.uk/blog/8484093-why-online-retailers-are-losing-67-45-of-sales-and-what-to-do-about-it

https://econsultancy.com/blog/7730-why-do-consumers-abandon-online-purchases

http://thenewlogistics.ups.com/retail/comscorestudy/documents/UPS_comScore_Whitepaper_2014.pdf

https://www.comscore.com/Insights/Press-Releases/2014/6/Study-Consumers-Demand-More-Flexibility-When-Shopping-Online

http://www.theguardian.com/money/2014/mar/07/half-online-shoppers-problems