The e-commerce industry has grown rapidly over the past decade as consumers embrace the convenience and accessibility it offers. But e-commerce is a highly competitive, low-margin business, and one of the biggest challenges facing e-commerce retailers today is managing operational costs, especially those associated with customer acquisition, inventory management, and last-mile delivery.
On average, last-mile delivery accounts for 53% of total transportation costs, and as e-commerce retailers in 2023 face declining customer willingness to buy and rising operational costs, they must find ways to streamline their processes while still providing a seamless and satisfying customer experience. In this article, we will explore some of the methods e-commerce retailers have at their disposal to reduce the costs associated with last-mile delivery.
Starting in 2020, physical stores were forced to adopt an omnichannel approach. They built or strengthened their online presence to deliver an integrated, seamless customer experience wherever their customers were.
As a result, retailers struggled with the ability to test, select, and integrate new solutions, adapt to new processes, and scale operations to differentiate themselves from the competition.
Fortunately, digital technologies are augmenting physical logistics capabilities, and today you can easily deploy the IT infrastructure you need in the cloud to connect your existing internal systems (ERP, warehouse management systems, transportation management systems, e-commerce platforms, or marketplaces) with the third-party providers you need to expand your sales channels, product portfolio, geographic reach, or customer segments. You no longer need to own warehouses, fleets, or fulfillment teams, but you do need the ability to scale quickly, integrate the right solutions available in the market, and operate with complete control.
Open platforms like Postis help retailers, e-commerce players, and fulfillment companies transform their siloed logistics systems into an integrated, synchronized ecosystem. Streamlined processes can be deployed across all components, whether in-house or outsourced. Information on cost, performance, customer satisfaction, and ROI is orchestrated and analyzed in real time, enabling management to make data-driven decisions.
More than 200 delivery providers from all over Europe are already integrated into the Postis platform, so new service providers such as couriers, transporters or quick commerce operators can be immediately activated, tested and, if successful, scaled.
New customer features and delivery options (locker, in-store or curbside delivery, express, scheduled or delayed, with value-added services attached) can be deployed in days, making the experience personalized and optimized for each territory, channel or customer profile.
This is how you achieve the significant cost savings listed above.
If you have successfully completed the previous step, you now have an integrated last-mile platform with multiple delivery options and full visibility and control over your end-to-end processes. Now you need to make sure you get the most out of it. Here is how.
With process automation, the right data is collected, processed, analyzed, and dispatched across systems without human intervention, which is often error prone. Print AWBs, send notifications and status updates to all parties involved, email or text to customers - it all happens automatically at the touch of a button. You can free your staff from mundane tasks such as data entry, claims management, or reporting to more productive tasks such as data analysis and customer consultancy.
Then there is the diversification of carrier options, which gives retailers greater flexibility in delivery options and reduces the costs associated with delivery. According to a study by Accenture, aggregating carriers can reduce delivery costs by up to 20%. Transportation costs are important in this step. Obviously, the least expensive delivery options are usually preferred, but the cost of each delivery is not necessarily the price you pay. Some customers would prefer faster delivery and pay for the premium. Or they may want extra care, such as concierge, heavy-duty handling, or installation. If they do not get the option they need, customers may go elsewhere to find it.
The cheapest is not always the most cost effective. That is why the Postis platform uses artificial intelligence to analyze over 100 selection criteria related to product, cost, pickup and delivery locations, additional services required, customer preferences, carrier capabilities, past performance and satisfaction ratings, contract terms, agreed SLAs, and more, and instantly selects the best delivery option for each package.
There are many other ways to optimize costs at this stage: reusable packaging with automated reversed logistics, distributed fulfillment networks, order consolidation, bulk deliveries, route optimization, and many more that we could discuss at our first meeting.
So you've been able to cut all the costs listed at the beginning of this section through automated processes, carrier diversification, data-driven decisions, and AI.
Your conversion funnel starts from the moment your promotional message is delivered to your customers, generating a desire, interest or reaction, continues with the experience they have within the site, continues with the shopping cart and is only completed at the moment the buyer receives, uses the product and is happy with it. In the Postis community, we have many partners who can help you improve your conversion, and we are happy to introduce them to you, therefore we will only cover here the part that we can help you with.
According to the Baymard Institute, the average shopping cart abandonment rate is 69.99%, based on 48 studies containing statistics on e-commerce shopping cart abandonment. Every customer who gets to the cart and does not complete the purchase is a waste of all the effort that went into getting them there. All the purchasing, creative, marketing, media, and UX teams have done their jobs correctly, but unfortunately with no return.
We can identify a few reasons for checkout abandonment based on 2022 research:
We have all the solutions you need at this stage when it comes to delivery.
With a simple API integration into your shopping cart, our eShop Delivery Widget shows your shoppers all the delivery options you make available. They can choose the location (home, brick-and-mortar, or parcel locker) and the delivery time (next-hour express, next-day express, scheduled). They can either enter their information using predictive text and address validation tools, scroll through a list, or select the destination by swiping and clicking on the map of their neighborhood.
Once their preferences are clear and our AI identifies the best delivery option, the precise price quote is calculated in real time and presented to the customer in the shopping cart. There are no more average prices per volume, weight or distance ranges. There are no more differences between the delivery price paid by the customer in the shopping cart and the actual cost charged by the courier after the package is weighed at the distribution center. Everything is accurate, transparent, and real-time.
So again, if you get your shipping right, you reduce significant costs.
Even if the sale was successful in the previous step, the customer still has the right to refuse or return the package. Some reasons are beyond your control, or you have limited tools to prevent them. For example, clothing comes in a variety of sizes and cuts, and therefore fits differently for each individual. Technology can be less intuitive than expected. Or the customer may simply change their mind.
But there are times when returns happen because of bad delivery experiences. Packaging is torn, deliveries are late, or couriers have a bad attitude. When these problems occur, returns are likely and can be costly.
Last year, we calculated that for an online fashion retailer, the average cost per returned package was 10 to 15 EUR, including transportation from the warehouse to the customer and back, replacement packaging, inventory handling, restocking, or reselling at a discounted price if the product was returned damaged or unsealed.
Add to that all the costs you have incurred with marketing, creative, media, UX, web design along the conversion funnel. Moreover, in a very competitive market like the one we are facing this year, the cost could be even higher, as a returned package can be equivalent to a customer lost forever.
You can prevent this from happening with our best option selection, as our artificial intelligence takes into account past carrier performance and satisfaction ratings from other customers.
During delivery, customers have full visibility and control with real-time status updates via SMS, email or the Parcely by Postis mobile app. As a retailer, you are also in control, so you can be proactive if an issue arises, even before the customer is aware of it.
After delivery, they can give their own satisfaction rating, so you know if something went wrong and can respond to your customer's problem. So even if you have a return order, you would keep a customer.
So in this step, you further improve your margin, not only by reducing costs, but also by preserving revenue.
Customer retention should be a constant priority for your business. Trust must be maintained because it can easily be broken by a bad experience.
Especially now, when markets are stagnant or even shrinking and new cross-border competitors are fighting for your market share, it is more difficult and costly to attract new customers. So a great strategy to reduce your customer acquisition costs would be to retain and upsell your existing customers by improving the purchase experience, from click to door.
The ability to deliver personalized customer experiences is a key benefit of our AI-powered delivery platform. You can increase customer loyalty by offering a range of delivery options that fit each customer profile. Customer data and individual preferences can be analyzed and used to personalize delivery journeys, such as time, place and method. In the CEE region, more than 70% of customers say that delivery options and real-time tracking information are important when making a purchase decision, so this is BIG.
By providing real-time tracking information via SMS, email or the Parcely by Postis mobile app, you can keep your customers engaged even after they leave your site and use real-time updates to promote new products and start new sales cycles.
Keeping up with the ever-evolving expectations of your customers can be challenging, as technology and IT developments are not cheap and do not happen overnight. With our open platform, you can benefit from market best practices, new features and tools, and share development costs.
With our customer experience tools, you continuously improve your customer loyalty with new ways of engagement.
Congratulations, you made it to the end!
This has been a long read, but we have barely scratched the surface of what you can do with our platform. If you got here, cost reduction may be one of the biggest concerns keeping you up at night.
We can help with ideas, tools, and great technology to optimize your costs, improve your margins, and better position you for the next cycle of growth.
