Talking shop: Retailers must deliver online promises
Order fulfillment and delivery timing key challenges for online grocers
Unsatisfactory online grocery experiences - especially on special occasions - are a sure-fire way to undermine brand loyalty, writes Andrew Don.
A typical suburban family home last Christmas Eve: presents around the tree, table laid in preparation for Aunt Edna et al for tomorrow's turkey fest and Michelle McManus belting out O Holy Night.
All is right with the world and any minute now the turkey, sprouts and stuffing will arrive courtesy of one of the UK's premier online grocery shopping services.
Everything is shaping up for a perfect Christmas...or is it?
Not if you were one of those - in Asda's words - "small number" of its customers who did not get their fine fare in time for Christmas Day because of "an isolated issue" at its Morley home shopping centre in Leeds, West Yorkshire - the group's heartland.
Asda's recompense of a full refund plus GBP100 (US$161.5m) cash might have been gratefully accepted at any other time of year but on special occasions, Jonathan Miller, managing partner at PatelMiller Partnership, said the loss of trust engendered meant those who did not get their delivery would be much less likely to shop with offending companies again.
Asda, in its defence, pointed out its customer satisfaction scores were the highest they had been because of improvements in pick accuracy, punctual deliveries and "market-leading" mobile apps developed with parent Wal-Mart. It said, too, that its delivery service had been awarded an IDIS (Internet Delivery is Safe) Gold Standard award and Christmas week 2012 was its most successful online shopping week to date.
But Jonathan Pritchard, retail analyst for Oriel Securities, said: "Especially at Christmas, if you don't turn up with the turkey you will lose the customer for life. It is at a time when the sort of willingness to accept replacements is low and not delivering is unacceptable."
Asda was not the only multiple to get its online service scrutinised this Christmas. Tesco hit the headlines when a shopper complained in a national tabloid that the group delivered her vegetables and stuffing but nothing to stuff. Tesco also declined to answer questions about fulfilment at Christmas including the related issue of brand loyalty.
"This information is commercially sensitive and not something which we would give out," a spokeswoman said.
Indeed, order fulfilment appears to be an area of online retailing that the UK majors are particularly reticent about. Online grocer Ocado declined to comment when contacted by just-food, while Waitrose remained tight-lipped on the subject.
Likewise, Sainsbury's director of online Jon Rudoe insisted that the issue of order fulfilment was too commercially sensitive to talk about.
However, he did emphasise the importance that the group places on getting it right: "We put a huge amount of focus into delivering to our customers on time and in full at all times of the year - and at Christmas - because we understand that keeping that customer promise in the most important thing that we do online
"We always want to continue to improve the service that we give to our customers, and we have seen continuous improvement in the measures that we track, which include product fulfilment, timeliness and customer contacts over the last several years," he continued.
The motivation to get it right could not be more powerful with everything to play for in the online grocery market.
Research Farm estimated the online grocery market in the UK reached about GBP7bn last year - up 112% on 2008.
Daniel Lucht, research director, said: "Looking ahead, over the next five years, the online grocery market could double in size driven by new entrants - Morrisons - a more aggressive Amazon in food, new delivery solutions better logistics, more investment from the leading players and entirely new business models."
Lucht said the issues that could cause problems were bad weather, recalling last year's snow, and capacity issues, such as not having enough delivery vehicles if retailers suddenly experienced a surge of demand. He said retailers had to manage a tight line between the resources they made available and total fulfilment in an online sector that faced profitability challenges.
"What's the point of having a massive shiny new warehouse and lots of call centre staff and new IT if you haven't got people ordering from you. There are cost considerations."
He said Amazon was particularly good at predicting orders from data and historical transactions so it had just enough stock.
"Most of them are good at mining their data and accurately forecast what they want and what they need but they don't always get it right."
Pritchard said: "They have to be better at their game - that's clear".
Guy Mucklow, managing director of Postcode Anywhere, which supplies postcode validation software to Asda, Sainsbury's and Tesco, explained that things could go wrong in the online process because of human error if contact details were manually re-inputted for labels.
"Leave the K out of the Milton Keynes postcode, for instance, and the goods can end up in a depot in Manchester."
Mucklow said many drivers did not use satellite navigation and relied on local knowledge. But if a driver did not know an area well, particularly long roads in rural areas, the delivery process could go awry.
"The whole delivery process is ripe for improvement and technology is prone to breaking down from time to time," he said.
Mucklow added that there was no uniformity in the online market and everyone was still at the experimental stage. "Retailers are setting new standards to manage customers' expectations. They are all fighting a turf war for market share. They are trying to accommodate a whole range of different requirements from the customer. It will take time to get right."
Miller said it was a minority of times the supermarkets got it wrong and retailers would learn from mistakes to improve their processes.
He said: "You will see a lot more ‘dark' stores so you are confident availability will be there...the more that can be done to give customers absolute confidence...the better".
Those that get it wrong risk online business becoming their Achilles heel. Ensuring cost-effectiveness without compromising service is key - otherwise the enter brand suffers and ensnares bricks and mortar, too.
Sainsbury's has booked another quarter of like-for-like sales gains - bucking the downward trends in the wider UK grocery market and outperforming its peers. However, LFL growth has slowed significant...
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