Leading home-grown tea retailer, T2 Tea, experienced a 120 per cent growth across its digital sales channels in 2019 and as a result needed to rethink its WMS provider. MHD sits down with the technology and logistics team to find out more.
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.
Australian retail turnover rose 0.3 per cent in March 2019, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.
This follows a 0.9 per cent rise in February 2019.
“Cafes, restaurants and takeaway food services (1.4 per cent) and Food retailing (0.4 per cent) led the rises,” said Ben Faulkner, director of quarterly economy-wide surveys. “Strength in food prices has contributed to rises, especially in supermarkets and grocery stores. Clothing, footwear and personal accessory retailing (1.2 per cent) and Household goods retailing (0.2 per cent) also rose. The rises were partially offset by falls in Department stores (-1.5 per cent) and Other retailing (-0.4 per cent)”.
In seasonally adjusted terms, there were rises in Victoria (0.7 per cent), Queensland (0.6 per cent), New South Wales (0.2 per cent), Tasmania (0.4 per cent), South Australia (0.1 per cent), and the Northern Territory (0.7 per cent). The Australian Capital Territory was relatively unchanged (0.0 per cent) and Western Australia (-0.7 per cent) fell in seasonally adjusted terms in March 2019.
The trend estimate for Australian retail turnover rose 0.3 per cent in March 2019, following a rise of 0.3 per cent in February 2019. Compared to March 2018, the trend estimate rose 3.0 per cent.
Online retail turnover contributed 5.7 per cent to total retail turnover in original terms in March 2019. In March 2018 online retail turnover contributed 5.1 per cent to total retail.
For the March quarter 2019, there was a fall of 0.1 per cent in seasonally adjusted volume terms. This follows a relatively unchanged (0.0 per cent) result in the December quarter 2018. The quarterly fall in volumes was led by Household goods retailing (-0.6 per cent), and Department stores (-1.2 per cent). Cafes, restaurants and takeaway food services (1.0 per cent), Other retailing (0.3 per cent), Food retailing (0.1 per cent), and Clothing, footwear and personal accessory retailing (0.3 per cent) all rose in seasonally adjusted volume terms.
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.
Especially during the holidays, customer satisfaction revolves around one thing: did my gift or Christmas food hamper arrive on time? It’s estimated that Australians spent $25 billion collectively last Christmas. And behind every dollar spent were people in the transport and logistics industry working frantically to ensure each step of the supply chain runs smoothly. Fortunately, there are solutions that can help with ensuring the smooth flow of goods in peak periods that all businesses must consider.
But first, let’s address the notion of peak periods. One of the biggest challenges transport and logistics companies face is the evolving retail cycle. Traditionally, we could expect peaks with Christmas and then Boxing Day. Now, things are busy all year with the addition of Singles’ Day, Black Friday, Cyber Monday, Click Frenzy and countless other sales events to the Australian retail calendar.
From a transport perspective, the peak is smoothing out and many organisations aren’t coping well with the requirement for a constant level of scalability. What options do these businesses have? Do they scramble to find extra drivers? Use a gig-economy model for unexpected peak periods? Invest in establishing an overrun service (such as what Fastway Couriers has with Blu Couriers)? Or simply work longer hours in attempt to cope with the increasing demand?
There are two areas that will greatly increase operational efficiency and put businesses in a good position to deal with peak periods.
The first area in which there’s a long way to go is visibility. Transport and logistics companies need visibility of what’s happening with their fleet and drivers to manage expectations for customers, operations and management, especially during peak periods (expected, or not).
Closing the gap in visibility starts with determining your goals and assessing your ability to meet those goals. Businesses should be asking themselves: does an existing system meet your current and future needs for all necessary modes of transportation? Does it interface well with other systems and can you easily add future interfaces? And most importantly, does the system accommodate your business process? If a business can get this foundation right, it will be starting in a good place for all of the other details.
Most supply chains use a variety of logistics service providers, transport service providers and others. As soon as the chain of custody of a particular order or shipment transfers to another party, the degree of visibility changes. This has resulted in many companies exploring establishing a multi-party supply chain ‘control tower’ through which all activities are coordinated and controlled. But, while this is where technology is headed, there remains a lot of operational and cultural challenges before it is widely adopted.
The second key piece is to optimise — and then optimise again. Many in the industry continue to take an ‘if it isn’t broken, don’t fix it’ attitude toward supply chain management. Particularly at peak times, there is a clear opportunity to be constantly reviewing and refining processes and procedures that are not optimal.
This starts with having quality data — and putting it to work. For example, if a vehicle breaks down on route to make a delivery, often companies would call on the nearest driver to step in. While that driver might be closest, adding an additional drop off could impact a number of deliveries down the line. Instead, the use of data and analytics in this situation can identify the best available driver to step in, with minimal impact on other orders.
It’s never too early to plan ahead. Businesses should not be planning for peak to start in October this year — with the market flattening out, this needs to be happening now. To be forewarned is to be forearmed!
Paul Soong is the regional director, ANZ, of BluJay Solutions.
More than half of Australians (53%) have been left disappointed during the festive season after online orders failed to arrive on time, new research from location mapping company HERE Technologies has revealed. West Australians are the worst off with three in five left empty handed, while Tasmanian shoppers are the least likely to be left hanging during the festive season (41%).
With retailers and logistics companies struggling to meet booming digital shopping demands, late deliveries (47%) or inaccurate estimated delivery times (39%) topped the frustrations of online Christmas shoppers. The trauma of waiting for parcels to arrive before a festive event has caused stress and anxiety for 43% of buyers, and one in five has had to rush in-store for a last-minute gift when an online order failed to arrive on time.
“Order tracking in the last leg of the purchase is a crucial issue for retailers to address, as there is a clear mismatch between what customers expect and what is currently provided by retailers,” said head of Oceania at HERE Technologies Daniel Antonello.
“We know shoppers want to have more visibility and real-time information on their online orders, in fact 90% want to be able to track their parcel in the same way they can see where a Deliveroo or UberEats driver is with their dinner.”
“Given most of the frustrations faced by shoppers relate to shipping challenges, there is a huge opportunity to improve supply chain management and customer service with tracking technology, which our research shows customers would be willing to pay a premium for.”
Ensuring a seamless delivery could also boost sales for retailers, given three quarters (76%) highlighted punctual delivery as the most important consideration when shopping online during Christmas, and almost a fifth (19%) would pay more for an item from a store that they trust to deliver on time.
Despite the risk of late deliveries, many Australians still opt to do their festive shopping online. Over a third (36%) of Australians split their Christmas shopping list between online and instore, with almost twice as many men (21%) choosing to do their shopping exclusively online than women (12%). Some shoppers also opted to take things into their own hands by using ‘click and collect’ (38%), of which millennials were the most likely to decide to head instore to pick up their online purchase (18-35, 44%).
The research was based on a survey conducted by PureProfile of 1,004 participants between the ages of 18 to 65 across Australia.
Other key research findings include:
- Top shopper frustrations when doing Christmas shopping online include:
- Delivery is late (47%).
- Inaccurate delivery date/time (39%).
- Retailer does not provide regular updates on my order (34%).
- Inability to track my order like I can for a Deliveroo/UberEats order (29%).
- To avoid the frustration of a late festive delivery, shoppers have:
- Completed online shopping earlier (71.9%).
- Chosen to click and collect (37.9%).
- Paid more for an item from an online store they trusted would deliver on time (18.5%).
- When looking into the millennial shopper, findings revealed:
- 1 in 5 millennial shoppers would pay more for an item from an online store they knew would deliver on time.
- A quarter of 26-34 wanted to be updated when stocks were replenished.
- Younger millennials (18-24) most likely to pay for express shipping (31%).
- The younger the shopper, the more likely he/she would only do his/her festive shopping online.
- 27% (18-24)
- 24% (25-34)
- 15% (35-44)
- 8% (45-54)
- 8% (55-65)
- Older consumers (55-65) more likely to double check an item instore first before deciding to purchase online (48%).
Australian exporters are riding the global e-commerce wave into new international markets, with plans to invest in online marketing and the workforce to optimise this opportunity. Research from the 15th DHL Export Barometer 2018 shows that export confidence among Australian exporters is at an all-time high – a new record since the study began in 2003.
E-commerce continues to dominate the agenda – the DHL Export Barometer 2018 shows that 61% of exporters reported favourable growth in actual orders over the past 12 months, the highest record in the last decade. 75% of them also expect to record an increase in international sales over the next 12 months, a rise of 8% from last year’s result.
Commenting on exporters’ confidence in the international export market CEO and senior vice president for DHL Express Oceania Gary Edstein said: “This year’s positive sentiment among the majority of exporters is a significant sign that the Australian export market is close to peak performance. Australian exporters have demonstrated a real tenacity that sees them pursuing further expansion in the face of global political and economic developments. Undoubtedly, e-commerce has been a positive force for this continual growth, contributing significantly to the confidence of Australian exporters and equipping them with the platforms necessary to go global.”
New Zealand remains the top export destination and Asia Pacific markets hold promise
Australian exporters are continuing to find strength in historical trade partners, with New Zealand remaining the most popular export market at 66% (up from 61% in 2017).
JW Nevile Fellow in Economics, UNSW Sydney and Host of The Airport Economist Tim Harcourt commented: “New Zealand continues to be an attractive export market for Australian business, thanks to the close bilateral ties shared under the long-standing Australia-New Zealand Closer Economic Relations Trade Agreement. Among exporters who have been exporting for more than 20 years, 80% of them continue to show confidence in trade with New Zealand – a testament to the enduring strength of the Trans-Tasman relationship.”
North America comes in at second place at 54% with growth of 6% on 2017, followed by Europe (42%), and the UK (41%). This is consistent with the findings from the study last year.
In the last 12 months, Australian exporters have also looked beyond traditional trade partners, with a focus on Asia Pacific. China leads at 41% (compared to 6% on 2017), with other countries and territories following close behind:
- South East Asia at 38% (up 10% from 2017).
- Hong Kong at 35% (up 8% from 2017).
- The Pacific at 28% (up 4% from 2017).
- Taiwan at 22% (up 8% from 2017).
Australian exporters remain optimistic amid global political developments
Australian exporters remain unshaken in the midst of the current global political and economic environment, opting to remain mostly positive or neutral towards these changes and developments.
This year, close to half (49%) of exporters believe that US foreign and economic policies will have limited impact on their export orders in the next two to three years, but 21% of them are cautious about the impact of US and China trade tensions on their export business.
On the flipside, exporters are positive about the impact of the Trans-Pacific Partnership (34%), China’s Belt and Road initiative (27%) and emerging export technologies such as artificial intelligence and blockchain (31%).
Mr Harcourt commented: “What history has taught us is that political and economic events do come in peaks and troughs, and this may explain the record high level of confidence among Australian exporters despite these ongoing developments. They recognise that trade will inevitably continue, and there will be new growth opportunities to explore further. Australian exporters have developed exceptional skills in assessing their competitive position in the international market, adapting to regulatory changes and implementing innovative strategies to take on new challenges.”
E-commerce continues to drive growth
This year’s research indicates that Australian exporters have decidedly taken to e-commerce as a selling channel, with 4 in 5 exporters (79%) now generating orders or managing enquiries online. Pure e-commerce businesses are also on the rise, evident from the 12% increase, over the last four years, in exporters who generate 100% of their export orders through online channels. Amongst them, exporters in the fashion sector are reaping the most benefits from e-commerce, with 68% of sales generated from online channels – higher than the average of 47% across all other sectors.
“E-commerce, with its global accessibility and affordability, has been the real driver for growth among the consumer goods sector and particularly for small businesses. Tools like e-commerce plugins and social media have provided small Australian businesses with the opportunity to reach the international market with relative ease and within a shorter set-up timeframe. The traditional barriers to international trade, such as finding local distributors and negotiating partner contracts, are significantly lowered when a business adopts e-commerce as a channel to directly reach the customer,” Edstein commented.
Exporters plan to tackle new markets with growth strategies
In the coming year, close to 50% of Australian exporters are seeing potential in new markets, making plans to expand:
- Europe tops the list as the most desirable new territory (17%) among exporters
- South East Asia (15%), the UK (11%), Indonesia (11%) and Japan (11%) follow in close stride
- New businesses which have been in operation for less than 5 years, are at the forefront of this trend, with 63% of them indicating that they plan to expand in the next 12 months
To support these growth plans, 39% of exporters are looking to increase their online marketing spending and looking into social media to enhance their marketing mix. More than half of exporters (58%) are employing social media to market their products. Among the favourites are Facebook (45%), Instagram (30%) and LinkedIn (20%). Newer platforms are also growing in popularity, with exporters beginning to introduce Instagram Stories (10%), Facebook Messenger (8%), WeChat (6%) and Snapchat (3%) into their marketing mix. Online marketplaces, such as eBay, are also gaining traction with 23% of exporters utilising them to generate orders.
Other growth strategies include an emphasis on fulfilment and delivery (37%), customer service (29%), website design (27%), and to make available more localised products (24%). 70% of exporters also indicate that they will increase employee wages to drive retention and 51% of them will make new hires.
Mr Harcourt commented: “Rising wages and the creation of new jobs are positive news for both Australian businesses, employees and the local economy. This year’s results show that growth on the international stage does bring investment back into the local economy, further strengthening the confidence of Australian businesses to continue with innovative strategies for international growth.”
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.”
The Australian Business Software Industry Association (ABSIA) is holding its Annual Conference on ‘e-Invoicing: Efficiencies and Industry Impacts in and for the Region’ on Wednesday 31 October 2018 in Melbourne. ABSIA cordially extends its invitation to industry, government and business representatives from the supply chain sector. Read more