E-tailers Seek Deliverance from Delivery Challenges

In theory, online shoppers should be easy to please. Simply deliver purchased goods when promised, in good quality and at a reasonable cost. Catalog retailers have been doing this for decades, right?

However, the fact remains that the difference between a satisfied online shopper and a disgruntled one often hinges on the crucial last step in the e-commerce process -- the timely and economical delivery of merchandise to consumer doorsteps.

Even on occasions when a late delivery is the fault of the shipping service, e-tailers can still suffer the consequences -- in lost future sales, for example.

"The larger point that e-tailers should keep in mind is that they themselves are ultimately responsible for all retail activities -- not shippers -- because e-tailers' business will suffer if problems occur," analysts from research firm Gartner (NYSE: IT) said in a recent brief.

These days, e-tailers are pursuing a number of different strategies to fortify the delivery processes of their operations. Interestingly, picking a particular shipping agency does not seem to be the biggest worry that online sellers have.

Promises to Keep

In 2005, US$118 billion worth of U.S. online retail spending will result in 2 billion deliveries, according to Jupiter Media Metrix (Nasdaq: JMXI), mainly by major carriers like UPS (NYSE: UPS), Federal Express (NYSE: FDX) and the U.S. Postal Service.

To execute these deliveries effectively, e-tailers need to manage customer expectations, analysts say.

"The challenge for online retailers is accurately setting expectations regarding product delivery," Jupiter Media Metrix research director David Schatsky told the E-Commerce Times. "Best practices for online retailers include rapid order confirmation, with accurate delivery date indicated. The key is not speed but predictability."

Keeping Promises

Global Sports (Nasdaq: GSPT), the logistics provider running Kmart's BlueLight.com, bases its core operations on customer expectations.

"We have learned that what is most important to a consumer is to receive their order in the timeframe that they have been promised," Global Sports senior vice president of business development Michael Conn told the E-Commerce Times. "If it is going to take two weeks to get a product to a consumer, they are okay with that, as long as they were informed before they placed their order."

Still, as UPS spokesperson Steve Holmes noted, many e-tailers are attaining overall process efficiencies by integrating technologies pioneered by shipping companies -- like package tracking -- more deeply into their businesses.

"E-tailing is about convenience," Holmes told the E-Commerce Times. "There are two elements that make it come true -- a computer and a shipper. The [e-tailers] that are successful are the ones that are selling the convenience of [e-commerce]."

Next Stop, Albuquerque

Automated package status checking -- which lets e-shoppers see precisely where their package is in the delivery process -- significantly lightens the load on customer service representatives at UPS and at its partners who offer package tracking on their sites, Holmes said.

James Crawford, an analyst at Forrester Research (Nasdaq: FORR), agrees, pointing to Amazon.com (Nasdaq: AMZN) as the prime example.

"Amazon made package tracking a household term," Crawford told the E-Commerce Times. "It changed the consumer expectation for delivery from, 'It will get there when it gets there,' to 'What time did my package leave Albuquerque?'"

The Last Mile

When UPS first offered online package tracking on its site in 1995, there were 100,000 tracking requests in the first month, said Holmes. During the 2000 holiday season, in contrast, UPS and its partners received 6.3 million requests in a single day.

According to UPS, it delivers $1.5 billion worth of packages every day, including more than 55 percent of all the goods ordered online.

But here is the final twist. Even with all that responsibility in the delivery chain, UPS and its shipping brethren are rarely mentioned as e-commerce saints or sinners.

Ship Shape

In fact, Web merchant feedback suggests that cost efficiencies and competitive advantages are not usually gained through the selection of a shipping company, according to Jupiter.

Rather, e-tailers aim to meet their last-mile demands through strategic partnerships with fulfillment partners and seamless technology integration. These factors come to bear in the earlier steps of the logistics process -- such as order management, warehousing and distribution.

"There's no evidence that choice of shipping carrier in itself has any bearing on [e-tailers'] success or failure," said Jupiter's Schatsky.

In coming days, the E-Commerce Times will take a closer look at the logistics riddle for e-tailers.