The COVID-19 pandemic has triggered a substantial change in consumer shopping habits from retail to eCommerce. In the first quarter of 2021, online sales were 74% higher than in the same period in 2020. By 2025, the estimated number of packages delivered globally will climb to 200 billion, up from fewer than 90 billion in 2018.
Orlando Mathias, Director at BCG Platinion.
While the continued digital transformation of many businesses will continue this trend, and although many consumers support environmental issues, few consider the environmental effects and social consequences of their delivery choice. However, the increase of congestion on streets and the decreasing air quality is unsustainable.
Addressing this requires a behavior change from both consumers and the industry to bring increased collaboration, compromise and compliance now and for the future. This ensures both consumers and retailer’s benefit.
Clearing the street
When consumers select their delivery option, convenience is typically their primary consideration. Despite this, respondents in a recent BCG survey highlighted issues around their inability to control the delivery process and multiple daily deliveries. There is an opportunity to develop a delivery system that improves efficiency and have less impact on the environment.
There are three ways to address this...
1. An Out-of-Home (OOH) delivery network
An OOH network of convenient destinations that meet customers’ delivery and return needs, could reduce carrier vehicle miles by 66%. With additional services shopping online can be made even easier for everyone. These would vary in size: large ones located in shopping centers and other frequently visited spots could offer convenient services such as package wrapping, labelling and mailing.
Medium-sized locations in high-street shops such as coffee or flower shops would provide pick-up and drop-off services. Small pick-up lockers could also be placed in community hubs such as parks and recreational areas, based on demand and foot traffic.
2. A green certification
Cities, covering the entire delivery network, should develop transparent, common-sense environmentally friendly standards (a green certification) – including green fleet management and sustainably operated out-of-home pick-up drop-off (PUDO) points. Greater visibility into carrier practices would promote greater awareness of the tangible impact of carrier’s delivery among consumers.
Going a step further in introducing green certificates, this would build consumer trust in the companies they are buying from and ensures carriers create a more sustainable delivery ecosystem and a greener future.
3. A smart platform
Lastly, carriers; eCommerce companies and cities should be working together to implement a single-smart platform that integrates all delivery and PUDO options. Creating a smart platform allows eCommerce customers to choose the most suitable options and consolidate their multiple deliveries. Shipping companies can follow suit by consolidating their delivery schedule and map the efficient route. Doing so would create a much-improved shipping and delivery experience for consumers.
Delivering the benefits
To weave these three elements together into a coherent ecosystem, organizations must work with an independent orchestrator. The primary goal of this type of delivery ecosystem is to provide consumers with a range of options while increasing delivery efficiencies and reducing the need to incur further costs. Consumers would have the ability to consolidate their orders through a personalized, one-click delivery solution and having visibility on the environmental impact their delivery option is having. However, just as vital are the benefits to other stakeholders involved in the network.
Online retailers are already responsible for integrating the delivery options they offer the customer, often handling delivery tracking, inquiries, and complaints on their own accord. By actively participating in the new ecosystem, they can improve their basket conversion rate and incremental revenue. Moreover, as a more sustainable delivery option will be available, eCommerce companies can bolster their brand’s green credentials, which has been proven to have a real impact on business performance. The benefits of an integrated delivery system are clear but achieving it is another matter.
The road ahead
To deliver the benefits of the delivery ecosystem, all stakeholders will have to commit to a concerted, collaborative effort and make compromises.
First, policymakers must determine the current nature of a city’s delivery network and uncover its inefficiencies and external costs. For an accurate assessment, various elements must be taken into consideration, such as geography, population density, infrastructure, health, and the number of carriers to their relative delivery destinations. Policymakers then need to design the delivery network and package of interventions needed to reduce costs and inefficiencies.
Retailers have a role to play too by adopting technical solutions to allow checkout processes to integrate with third party smart delivery platforms. Retailers should also tailor the checkout process to enable and promote greener delivery options, by offering a dense network of OOH accessible destination for their customers.
The benefits of an integrated delivery ecosystem are clear. Achieving it will take concerted effort, collaboration, and compromise on the part of city policymakers, carriers, and retailers. Ultimately, everyone must come together to consider the needs of society over the individual and imagine what future societies will require.
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Orlando Mathias, Director at BCG Platinion.