Coles Online has launched a new Click&Collect smart locker service at Melbourne Airport. This comes after a recent market insights report revealed online shopping is growing at a rapid rate (up 8.3 per cent between August 2018 and August 2019) with Coles Online seeing revenue growth of 30 per cent in FY19 as more Australians choose the service.
With online shopping growing at exponential rates, it is inevitable that online shoppers will want to return some purchases, and until recently, returns have been treated by both shoppers and retailers as a hassle. But in 2019, returns policies can be make or break for retailers who are facing a dilemma – how to respond to increasingly demanding consumer expectations without killing their profits in the process.
Power Retail has examined the issue in its latest Spotlight Series monthly report titled ‘Returns – The Profit Killer?’.
The report distils over 5,650 interviews with online shoppers and Australian online retailers, to provide insights and strategies for retailers to balance the art of attracting shoppers while remaining profitable.
Managing director of Power Retail Grant Arnott said: “In this competitive climate, retailers are attempting to both limit and encourage returns. The issue is that the benchmarks are being set, often by large international retailers, who can afford to take a short-term hit when strategising for the long-term, big-picture view. But what consumers view as the ‘new normal’ isn’t actually maintainable for many. Yet at the same time, returns are a massive marketing opportunity.
“There is no single solution to minimising returns, though online retailers such as Hunting for George demonstrate the type of multifaceted approach that is required. From educational videos to providing samples for larger purchases and offering a live chat service, they have engaged with their target audience and designed services that address their specific needs.”
Key findings from the Returns Report include:
- 91% of online shoppers consider a retailer’s returns policy when making a purchase online.
- On average, Australian online retailers have a return rate of 9%. This varies dramatically depending on the category, with some online fashion retailers experiencing a return rate of 40%.
- When it comes to the biggest hassle in returning an item, finding an opportunity to lodge the return (33%) and getting around to it (20%) are interrelated and significant issues, with some prepared to pay for a courier pick-up service.
- 41% of Australian consumers would choose free returns over a range of other desirable options, including next day delivery.
- Females (56%) were much more likely to return their last online purchase because it didn’t fit, or they didn’t like the colour compared to males (34%).
- High quality product images, information and customer reviews all help reduce returns, and Amazon Australia is currently setting customer expectations in all of these areas.
Following an analysis of this issue within the industry, Mr Arnott provides his top four predictions of returns for the next five years.
- The report found that 24% of online shoppers aged under 25 consider returning an item compared to only 12% of those aged over 65. With this in mind, young consumers will continue to hold retailers to ransom, as they’ll only shop with retailers who offer generous returns policies.
- Retailer profit margins will continue to be eroded as growing numbers of ‘serial returners’ take advantage of generous return policies at a significant expense to the retailer. 74% of Australian online shoppers expect free returns on all items, meaning the retailer must bear the cost of the delivery to the customer and the delivery of the returned items.
- Offering free returns and longer return periods in pursuit of a sugar hit in sales and customer satisfaction is a short-term strategy that is unsustainable in the Australian market with the high cost of reverse logistics.
- The genie is out of the bottle when it comes to returns, and hundreds of retailers chasing fickle consumers who love returns policies that allow them to ‘try before you buy’ are going to find themselves in a world of hurt in the next few years. Like discounting, it becomes a race to self-destruction.
For the first time ever, Australia Post delivered more than 40 million parcels during December, making it the biggest-ever month for parcel volumes for the organisation.
The growing popularity of online shopping and online sales events, as well as strong Christmas Eve and Boxing Day sales, contributed to an 11.7 percent increase from the previous December.
Australia Post chief operating officer Bob Black said it was all hands on deck over the Christmas period with more than 3,000 extra staff employed across the network to handle the huge volumes.
“We made more than 40 million parcel deliveries in December, and our hardworking posties delivered more than 40 per cent of these, as well as more than 210 million letters,” Mr Black said.
“Our busiest day was Monday 17 December, when we delivered a record three million parcels across the country – by far the biggest day in our history.
“What we didn’t expect was to have a lot of shoppers race to the finish line to post their festive parcels, with our people delivering a whopping 2.7 million items on Christmas Eve – our next busiest day of the month and equal second busiest day in history.”
Mr Black said Australians were embracing online shopping like never before, with Australia Post revealing last year that online purchases had grown by almost 20 per cent in 12 months.
“Our research found that people were buying up to 19.2 per cent more items online. By 2020, we expect one in 10 items will be bought online.
“Online shopping is building momentum as a channel of choice, where customers can make the most of online deals and choose customisable delivery options with Australia Post. This means online shoppers can buy the brands they love no matter where they live,” said Mr Black.
According to a recent survey by SOTI, 61% of Australian consumers rate the speed of online delivery as the most important factor when buying online.
“Immediacy is an increasingly crucial aspect of the shopping experience. Consumers want their purchases straight away and expect retailers and e-commerce businesses to provide better delivery options,” Michael Dyson, Managing Director Australia & New Zealand, SOTI said.
While fast delivery was the top priority for most consumers, free returns (49 per cent), click and collect (33 per cent) and being able to specify a delivery time (30 per cent), were also among the most important aspects of online delivery for consumers.
“If retailers want their online delivery options to be in line with customer expectations, their supply chain and 3PLs need to provide a faster and more convenient delivery process. Some retail and e-commerce companies have started offering same day delivery options. This adds pressure on logistics providers to ensure they are able to keep up with this, and often this option comes with restrictions such as customers being required to live within a particular area.”
Investing in technology
The survey also found that over 53 per cent of Australian consumers are increasingly interested in new technologies, such as self-propelled vehicles and drones, being used to improve delivery times.
“Retail logistics providers need to understand and meet the demands of their customers or they will find themselves left behind. This means investing in new delivery methods and the technologies which support these approaches,” Michael said
Putting value back in delivery
While research showed that speed of delivery is key for Australian consumers, only 34% of survey respondents indicated that they would be happy to pay a premium for new delivery services.
“The supply chain industry needs to find a way to either make the new technologies affordable when they enter the market, or, convince consumers that it is worth the slightly higher delivery price,” Michael said
“Consumers have become accustomed to getting free delivery, as so many retailers have offered it for years, so it has become de-valued in a way. The supply chain must add value back into delivery services and new technologies present an exciting future for e-commerce logistics.”
Recent research revealed by Frost & Sullivan finds that global logistics spending is expected to reach $10.6 trillion in 2020, with transportation accounting for the majority at 70%.
Emerging technologies such as cloud computing, big data, and crowd sourcing, coupled with an influx of tech-savvy start-ups, are revolutionising the space of urban logistics.
About two fifths of the overall logistics costs are associated with the last mile that are forcing providers to come up with newer innovative solutions to deliver packages within cities.
The research predicts the logistics market will rapidly move toward mobile freight brokerage-type, on-demand deliveries and autonomous technology, such as the use of drones and delivery bots which are set to solve the last mile delivery challenge by being more cost-effective to end users with lesser regulatory mandates.
“Spiralling last-mile delivery costs and changing customer demands are causing retailers to rethink their strategies and look toward new business models such as click-and-collect, locker boxes, on-demand and autonomous solutions,” said Vijay Narayanan Natarajan, Visionary Innovation Senior Research Analyst at Frost & Sullivan. “Moreover, the influx of start-ups in logistics has enabled innovative solutions that not only provide value-creation customized solutions for the consumer, but also tackle the inefficiencies currently witnessed.”
Further trends and developments driving growth include:
- Digital freight brokering platforms reducing empty miles by 8% to 10%;
- Shift toward low-emission and zero-emission solutions, such as use of low-carbon vehicles or bicycles;
- Fleet operators expanding their strategies by developing urban distribution centers for effective logistics management; and
- Retailers focusing on compact stores to reduce capital expenditure and bring products closer to a growing urban customer base.
Recent research carried out by Australian crowd-sourced courier service Go People found that while Australian shoppers recognise that US e-commerce company Amazon may put local retailers in jeopardy, they still largely plan to purchase through it.
Its survey of 1,000 consumers across Australia found that despite more than half (59 per cent) of Australians seeing Amazon as a threat to small businesses, a similar amount (47 per cent) still plan to shop there.
“Local retailers are already feeling the ‘Amazon effect’ with the market’s disruption pushing them to evolve,” said Wayne Wang, Founder and CEO, Go People.
“Retailers are realising they need to deliver the best possible purchasing experience for their customers to stay relevant.”
Wang added that the research further showed that Australian shoppers now place more importance on delivery speed when deciding where to shop (41 per cent) than the ability to actually touch and feel the product (33 per cent).
“We’re becoming a nation of on-demand shoppers, with one in two noting the importance of same-day delivery when deciding where they shop. Local retailers need to ensure they delight their customers throughout the entire purchasing experience to remain competitive.”
After growing its monthly deliveries by 600 per cent over the past 12 months, Go People has raised a further $3 million in its latest funding round.
“The growth we’re generating shows there’s hunger for more flexible, convenient delivery services among Aussie consumers,” said Wang. “Investor interest during the capital raise exceeded expectations, and is particularly encouraging as we look to diversify our offering for retailers with new delivery options in 2018.”
In the early hours of Tuesday, 5 December, Amazon announced the launch of its full Australian online retail operations at Amazon.com.au.
The site stocks products across more than 20 categories – from consumer electronics to clothing, with fast delivery options.
Amazon is offering customers free delivery on eligible orders above $49, and one-day delivery in select areas across Australia.
Amazon expects to launch its ‘Prime’ shipping, shopping and entertainment benefits in Australia in mid-2018, and the company is directing customers to register online for more information.
“Focusing on customers and the long term are key principles in Amazon’s approach to retailing,” said Rocco Braeuniger, Country Manager, Amazon Australia.
“By concentrating on providing a great shopping experience and by constantly innovating on behalf of customers, we hope to earn the trust and the custom of Australian shoppers in the years to come.”
The selection at Amazon.com.au includes products offered by large Australian brands, as well as small and medium-sized Australian businesses selling on Amazon Marketplace.
Customer orders will be fulfilled from Amazon’s new distribution centre in Dandenong South, and Amazon also has corporate offices in Sydney, Melbourne, Perth, Brisbane and Canberra that are home to more than 1,000 employees.
“Over time, we will create thousands of new jobs and invest hundreds of millions of dollars in Australia,” said Braeuniger. “The result will be an ever-improving customer experience driven by the regular introduction of new products and services that we hope customers will love.”
The Australian Financial Review has revealed that shares in Australia-based global delivery logistics software company GetSwift doubled on Friday, 1 December, following the news that it has signed a ‘master services agreement’ with Amazon.
“GetSwift is pleased to announce that it has signed a global master services agreement with Amazon,” GetSwift said in an ASX announcement. “The extent of the services to be provided and the revenues to be derived will be generated from specific transactions agreed with Amazon pursuant to the Master Services Agreement.
“Due to the terms of the agreement the number of deliveries this agreement may generate is currently not determinable.
Australian customers can now also access Prime Video and Twitch Prime, for an introductory price of US$2.99 ($4.00) per month.
Jim Power – consumer sector research analyst at Martin Currie, a division of asset management firm Legg Mason – noted that Australia’s retail sector will cope with the arrival of Amazon.
“While Amazon will have an impact on the Australian retail landscape, based on my discussions with a wide range of market participants in the US, I remain positive of the Australian retail sector.
“My main take away [from meeting US retailers] was that Amazon’s key advantage is that its strategy is driven by data, not gut feel, and the key source of this data is the Marketplace.
“For Amazon’s Marketplace to be successful in Australia, Amazon will need a good product range, including local specialty suppliers. I think this may prove difficult.”
Edit – 30 November 2017: News site LifeHacker has shared that Amazon’s failure to launch may have been due to a glitch in the software used to apply goods and services tax (GST), as announced by Jason Mahoney, Managing Director – ANZ of market research firm Kantar Retail.
Following months of speculation about Amazon’s intentions to launch a local presence in Australia, and months of subsequent speculation about the logistics of the move once the company had confirmed its Down Under aspirations, the latest speculation revolves around the launch date for the e-commerce company’s local website.
Email correspondence with retailers leaked last week revealed a soft launch planned for Thursday afternoon, suggesting a Black Friday rollout could be imminent. Alas, reports emerged on Friday from retailers revealing that the soft launch had in fact not gone ahead, prompting speculation that Amazon had purposefully sent the email to prompt local retailers into promoting their own Black Friday discount offers.
News site Tamebay has offered its own thoughts on the likely timeline for Amazon’s Australian expansion, surmising that a pre-Christmas unveiling looks likely, and a Black Friday launch was never on the cards. “The last thing that Amazon would have wanted would be the extra pressure of running thousands of Black Friday deals and having their brand new warehouse staff (many of whom will still be being trained) for their first day’s trading,” the site wrote.
We’ll be watching keenly for developments, and are excited to make a purchase once the full site is up and running – to test its fulfilment and delivery capabilities, of course.
Australian retailers partnering with Amazon have been left confused after the e-commerce company failed to launch its full Australian site on Black Friday, 24 November, ChannelNews reports.
The retailers have reportedly not received any communication from Amazon, since getting an email earlier in the week advising them to be prepared for a soft launch at 2pm yesterday, Thursday, 23 November.
ChannelNews shared that an executive from Synnex, a major distribution partner for Amazon, said it had not received a single order.
“It appears that something has gone horribly wrong and they have decided not to launch,” the executive said.
One retailer told ChannelNews that it felt that it was being kept in the dark. “We have no order, we don’t even have access to an Amazon tracking portal,” the source said. “Our stock is sitting in warehouses ready to go.”
Technology distributor Ingram Micro said it had had no orders so far, and suggested that the original communication announcing a soft launch may have been a tactic by Amazon to prompt local competitors to announce their own Black Friday discounts.
Parcel delivery company CouriersPlease’s new National eCommerce Manager, Jessica Ip, has been tasked with driving the strategy and innovation of the business’s e-commerce services to “enhance the customer experience and position the business at the forefront of online retail delivery,” the company explained in a statement.
“Jessica’s mantle will be the design and implementation of a suite of innovative e-commerce solutions to make last-mile delivery as hassle-free, flexible and convenient for the customer.”
Ip spent seven years at Qantas Freight, where she in worked in technology consultancy, improving business performance and global key account management and e-business. Most recently, she was Courier Product Manager at Rohlig Australia.
“To take the helm of CouriersPlease’s e-commerce management, at what is such a pivotal time for the logistics, supply chain and retail industries, is a great opportunity,” said Ip. “With the growing demand for online shopping and competition from major global players, our focus is on enhancing the customer experience right from the time an order is made to the final moment when the parcel is delivered.
“To meet customer expectations, we will continue to innovate and implement technology solutions such as CouriersPlease’s flexible Delivery Choices, on-demand notifications giving customers the choice to redirect their parcel to our network of parcel lockers and retail outlets, leave the delivery without a signature, or with a neighbour close by if they won’t be home to receive their order.”
Mark McGinley, CEO, CouriersPlease, added, “Jessica’s experience implementing strategic business technology innovations will be a great asset for CouriersPlease, as we work to develop more solutions to help ease the delivery experience for our customers and online retailer partners. She will be key in continuing to roll out our network of POPPoints in retail outlets around the country, and implementing our flexible Delivery Choices.”
Jessica joins a senior leadership team made up of 80 per cent women.