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At a recent logistics roundtable discussion, Louise Robertson from Australian last-mile solutions provider Localz declared that tech in the logistics industry’s should be more like Tinder. Logistics & Materials Handling finds out why.
Consumer behaviour is changing drastically. The taxi and hotel industry, the music industry and the media industry have all experienced significant disruption through digital concepts and have had to adapt accordingly.
One particular industry that has seen disruption on a large-scale is the dating industry, namely through Tinder, one of the world’s most popular apps for meeting new people. Tinder has been ranked by Apple as the most downloaded lifestyle app in America for nearly two years. According to data released by Tinder, 15 per cent of the population are using the app, equating to more than 3.5 million people.
Launched in 2012, Tinder is a free app and works by users swiping right if they like the look of someone, or swiping left to pass. The app uses a double-opt in method, only allowing two users to chat online when they mutually match. Tinder has made over 1 billion matches to date and more than 26 million matches take place on the app every day, according to data revealed by the company.
Louise Robertson, Chief Marketing Officer at Localz – a global last-mile solution specialist – thinks that the logistics industry needs to be more like Tinder. “Modern consumers are well informed. They are more engaged, connected and educated than ever before and carry real-time information with them in their pockets.”
The popularity of Tinder, and other similar apps, is largely attributed to its ease of use and simple mechanism. It’s a simple concept, with an intuitive menu and convenience that allows to users to access on the go.
The individual economy
According to Tim Andrew, Co-Founder and CEO of Localz, the changing behaviour of the consumer is presenting the logistics industry with a number of challenges.
“The on-demand economy is interpreted by most people as instant fulfilment. It’s all about what I want, when I want and how I want. That heightened consumer expectation and demand of being able to dictate the hour at which a delivery will turn up, we call the individual economy or Iconomy,” Tim says.
We now live in a connected digital age that redefines the way we live, the way we connect with each other and the way we consume. This has allowed an app like Tinder to change the norms around how people date and meet potential romantic interests. This same change in consumer mindset has increased the delivery expectations of consumers and placed increase pressure on logistics companies and retailers, Tim says.
Recent research carried out by Localz revealed that 94 per cent of consumers would choose a different shop or brand based on delivery or collection options alone. The researchers found that customers want to define the time and place that their delivery or service will occur and at a very minimum know when their delivery or service is coming. They also want to be able to change those details to suit their needs.
According to Tim, companies must offer flexible delivery services that are relevant to their customers, as individuals with specific needs, or they are at risk of seeing customer move their loyalties. “This is the behaviour of the individual economy,” Tim says.
The irrational, emotional, uneconomic consumer
Localz recently organised a roundtable event in Melbourne. The event was an opportunity to exchange ideas and information among executives and representatives from associations and local government on the challenges currently being faced by the retail and logistics industry. With a particular focus on meeting the demands of consumers who are irrational, emotion and uneconomic – but in control.
“Aussie retailers are under increased pressure to let go of the old processes, operations and logical order that optimise their efficiencies to deliver these discerning consumers,” Louise says.
James Westlake, Chief Revenue Officer at Localz, presented on the importance of data in providing the modern consumer with what they want. “You can always serve your customer better if you know them. We have had an explosion in the ability to collect data. But in Australia we are a bit behind. Often on an order there is no email, no phone number, no ID etc. If you compare this to a logistics provider in the EU, they wouldn’t touch without this kind of data,” James says.
The importance of data was echoed around the room, regardless of sector or role. Jonathan Reeve, E-commerce Fulfilment Consultant, said that it’s not that consumer motivation has changed. For him, people are still motivated by tangible things like convenience. “We’re motivated by a mix of tangible things, like convenience, and psychological and social aspects. All of these have remained largely the same over the years. It’s the context that has changed, we now have so much choice. The array of choices is now enormous for a consumer, that’s the big difference,” Jonathan says.
Jonathan attributes much of the success of Amazon to its ability to offer cheap and convenient delivery. He elaborates and argues that where Amazon already operates almost everyone has an amazon success story to share – and the hero of the story is the delivery experience. Having the ability to offer same day or, at the least, next day deliver is what has given Amazon the competitive edge, Jonathan says. According to him, it is the company’s collection of consumers’ data that will take Amazon’s success to the next level.
“The more data you have, the better you can run your supply chain. Humans are largely habitual, often ordering the same things in a cycle. If you look at Amazon, it is likely that in the future customers will receive deliveries containing products that Amazon predicts they will need, based on the data it has about their usage and past purchases. And if they get it wrong, there will be a box to send back what you don’t need,” Jonathan says.
The future of the high street
As consumers move more towards online shopping and digital-only outlets, Jonathan believes the high street has to adapt. “High street stores will have to change, but the retailers that give the customer every option are going to be the performers,” Jonathan says.
The omni-channel shopping experience changed everything – people want the same seamless service and experience that they have online, instore, Jonathan says. “This will have an impact on the physical store and tech can benefit the high street experience too. People need a reason to come to the store, it needs to become more of an experience than just buying something that could easily be ordered from home. Only 10 per cent of purchases are made online, that still leaves 90 per cent of purchases in Australia as face-to-face,” he says.
Jonathan believes that if businesses are timely and relevant in their communications and offers, consumers will be less cautious about data and start to volunteer information. He thinks that with this, retailers will be able to do more with the data and create a more competitive product.
Enticing the customers instore also presents benefits for the retailer, so long as the consumer has a good experience. Localz research found that 69 per cent of customers who collect a delivery in-store are likely to make an additional purchase when collecting that item. Retailers with brick and mortar stores are able to provide a mixed channel experience that increases their sales.
Why “Sorry, we missed you.” isn’t good enough
When asked what customers found the most frustrating about their recent delivery experiences, the Localz survey results revealed that 40 per cent rated receiving a “we missed you” card as the most annoying.
Getting delivery right the first time is not just good for the customer, but also cheaper for the logistics provider. “Increased first time delivery rates reduces the cost of delivering, so it doesn’t just have benefits for the consumer,” Louise says.
The second most annoying aspect for survey respondents was having no visibility of when the delivery was arriving. “It’s clear that control of when something gets delivered and visibility of what is happening through that process is key in logistics,” James says.
According to James, this has led to an increase in customers demanding ever smaller delivery windows. “When asked what was considered a reasonable delivery window, 30 per cent stated one hour and 47 per cent stated two hours. That’s 77 per cent of people believing an acceptable delivery window is under two hours or less. That’s a big challenge for logistics.”
In addition, receiving an accurate and up-to-date estimated time of arrival was stated as being very important to 47 per cent of customers and important to 36 per cent of customers. Much like Tinder, having information about potential love interests in real-time at the touch of a button is what many users like about the app.
The ability to communicate with a driver was less important than receiving an accurate estimated time of arrival, supporting the idea that many consumers are happy to manage their purchases online via a smart phone or PC, rather than an in-person service.
“There are clearly some challenges for retailers and delivery providers to meet the expectations of the on-demand consumer,” James says.
“Customers want simple, fast delivery with short delivery windows and transparency of what is happening through the process. They are also saying that the cost of delivery and collection services is still very important to their purchase decision. Reducing the cost of collection and delivery services, while still maintaining a high-quality service, is key to success for retailers and delivery providers.”
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.