The future of faster delivery starts with the supply chain

It’s tough to find anyone these days who doesn’t shop online at least occasionally. Whether it’s a quick Amazon restocking purchase or a splurge clothing order from a favorite retailer, the e-commerce experience has become nearly ubiquitous.

New consumer research demonstrates just how common online shopping has become. According to the Walker Sands Future of Retail 2016 report released this week, 98 percent of consumers have made a purchase on Amazon over the past year, and three-quarters have shopped on a brand’s website. From a market penetration standpoint then, e-commerce has almost reached a saturation point.

But that hardly means it’s not growing. Over the past three years, the Future of Retail study has shown a drastic increase in the frequency of online purchases. Most strikingly, the number of consumers who shop online at least once a week has increased by 41 percent since 2014. Correspondingly, the number of people who shop online less than once a month has steadily declined.

For retailers, then, the question becomes how to capture a larger share of dollars from those frequent shoppers. It appears the answer lies in the speed and ease of the supply chain.

Growing consumer demand for fast delivery

The third annual Future of Retail report demonstrates a continued trend toward consumers’ heightened expectations for speedy delivery, easy returns and overall convenience in the online shopping experience.

With nearly a third (31 percent) of consumers now shopping online at least once per week, the sheer number of goods going through the supply chain is at an all-time high. Not to mention the complicated nature of online shopping means retailers need to keep track of inventory online and in-store, deliver faster and create an easy return process, all while being as transparent as possible to the consumer.

That leaves little room for error.

The supply chain can be one of retailers’ biggest headaches, but it also provides major opportunities as consumers shopping online more often are increasingly persuaded by the speed of the supply chain. While just 9 percent of consumers used same-day shipping in the past year, nearly half (49 percent) say it would make them more likely to shop online if it were offered more frequently.

The most frequent shoppers have even higher expectations. The study findings show that consumers who shop online more than twice a week are twice as likely to be persuaded by same-day shipping as consumers who shop online only a few times a year (63 percent vs. 32 percent). Because these are the shoppers who are primarily driving e-commerce growth, it makes supply chain and logistics improvements critical for retailers.

Retailers aim to improve fulfillment

It’s not like retailers don’t understand the need for better fulfillment technology, systems and processes. Data from the Global Retail and Consumer Goods CEO Survey by PwC shows that retailers planned to spend 29 percent of their capital expenditures in 2015 on solutions such as transportation and logistics, delivery, order management, inventory management, inventory visibility, and returns management. So it’s clear that retailers understand what’s at stake here.

At the same time, the same PwC study revealed that only 19 percent of CEOs at the top 250 retailers said they can fulfill omni-channel demand profitably, with the biggest challenges being transportation and logistics – specifically, shipping, delivery and returns. It makes sense then that 71 percent of the executives in that study cited omni-channel fulfillment as a top or high priority for future investment.

As consumers shop online more frequently, their expectations for faster delivery understandable increase as well. And with drones promising one-hour delivery, retailers will come under even more logistics pressure in the years to come. This undeniable link between frequency and speed will makes the supply chain a critical area of investment for retailers.