Can Ecommerce Continue To Meet Consumers' Growing Expectations?

Amazon's investment in faster delivery was expensive, but as its most recent financial results show, it more than paid for itself. The question is how many other companies can afford to make the same commitment.

And the issue is not just meeting current standards, it's how to keep allocating resources as customer expectations not only embrace heightened levels of service and speed, but demand even more. The reality is that not everyone can afford to do so and even among those who do, not everyone will be operationally capable of optimization. But for those who can, the opportunity is manifest. JL


Knowledge@Wharton reports:

“Today’s best practices are becoming table stakes. The cycle is faster.”  Customers expect omnichannel service to shop their favorite stores and brands anytime and anywhere they want. Brick-and-mortar stores can have an advantage, because “the puck is moving toward faster delivery speeds.” To achieve same-day or two-hour delivery, a business needs to have forward-deployed inventory (in small locations around the country rather than one large warehouse). (But) "seeing companies doing the same thing, how do you bring a better differentiated consumer experience?”

When consumers order online these days, they want what they want, and fast –whether it’s a pair of earrings, a lawnmower or a takeout dinner. They also expect a good price, and outstanding service if there are any issues. Meanwhile, e-commerce companies are vying to differentiate themselves, to fulfill customers’ ever-higher expectations, and to push online selling to the next level.

At the Baker Retailing Center’s Fall 2019 CEO Summit in New York City, e-commerce executives discussed their strategies and challenges. Among the speakers was Marc Lore, president and CEO of Walmart eCommerce U.S. Lore is a successful serial entrepreneur, having founded Jet.com, Diapers.com and other notable e-commerce brands. He landed his current post after Walmart acquired Jet.com in 2016.

Lore was asked how he sees the future of the competition between pure plays (the e-commerce companies) and brick-and-mortar retailers like Walmart. He said he thinks brick-and-mortar stores with the right strategy can have a significant advantage, because “the puck is moving toward faster and faster delivery speeds.”

He elaborated that in order to achieve speeds such as same-day or two-hour delivery, a business needs to have forward-deployed inventory (meaning inventory is maintained in a number of small locations around the country rather than one large warehouse). And Walmart, he said, has 4,700 warehouses all over the U.S. with 100,000 products in them. Walmart’s physical stores typically get plenty of store traffic and have a positive operating margin, which helps cover the cost of fulfilling orders out of their warehouses, Lore noted.

Moreover, Walmart is increasing the number of associates who can pick products; there are now employees picking at almost 3,000 stores, he said. The plan is to roll that out chain-wide, so that the store has the capability to “put your purchase in the back of your car at the lowest possible marginal cost. Way lower than anyone else could, Amazon or otherwise, because the infrastructure is already in place.”

Lore also described an innovative initiative in which Walmart delivers your grocery order directly to your refrigerator — literally entering your house while you’re at work or elsewhere, stocking your refrigerator and cleaning up all the packaging. The new concept was launched in three markets in fall 2019, he said: Pittsburgh, St. Louis and Vero Beach. Smart technology is enabling the effort, including a lock with a code on the refrigerator, cameras on the Walmart employees’ vests, and an app with which you can monitor the delivery person as they enter and leave your home.

“[The] puck is moving toward faster and faster delivery speeds.”–Marc Lore

While the scenario might raise some eyebrows, Lore noted that it was not much more invasive than renting your house through Airbnb and having somebody sleep in your bed. He added that the first consumers to use the grocery service were a little skeptical, but then they enthusiastically embraced it.

“Today’s best practices are becoming table stakes … and the cycle is just getting faster and faster,” said Bernardine Wu, founder and CEO of FitForCommerce, a boutique consultancy for e-commerce companies. The panel she was moderating agreed with her. They also shared her opinion that today’s customers expect omnichannel service: to shop their favorite stores and brands anytime and anywhere they want. That’s the baseline with which e-commerce retailers are working.

For Christiane Pendarvis, senior VP for e-commerce at FULLBEAUTY Brands, having excellent mobile functionality is essential. She noted that FULLBEAUTY, a plus-size apparel business, is actually a direct-to-consumer catalog company. But while the catalogs are a key marketing tool, 80% of the company’s sales arrive digitally, and more than half of that through smartphones. “If your business does not have a friction-free mobile experience, you’re really going to miss out,” she said.

She talked about FULLBEAUTY’s efforts to speed up its check-out cart experience so potential purchasers don’t lose interest or run out of time. If Pendarvis herself is shopping on her phone while on the train commuting to work, and a transaction takes too long, she ends up abandoning the digital cart: “I’m one of those notorious consumers that probably has carts in ten different sites on my device…. [Companies] need to get it done, and done quickly so you can convert [site visitors into buyers],” she said.

The panelists also discussed the challenges of serving customers outside the U.S. Today, whether an e-commerce company is U.S.-based or not, it must function as a global brand, noted Sapna Parikh, executive director of digital and e-commerce for the luxury skincare and cosmetics company Clarins Groupe.

Companies need to use data to build a single view of each customer, she said, especially since customers may travel between countries or have multiple addresses. She characterized the shopper’s perspective: “Whether I’m buying this product in Shanghai or the same product in the U.S., I want that brand to understand who I am and what I’m looking for.”

The nuts-and-bolts issues faced by global brands were vividly evoked by Cynthia Hollen, the U.S. president of eShopWorld, an e-commerce platform that helps brands build their digital capabilities. International customers’ expectations are much higher than they used to be, she said. Retailers need to seamlessly handle issues such as different currencies or the lack of a zip code.

“Today’s best practices are becoming table stakes … and the cycle is just getting faster and faster.”–Bernardine Wu

They also need to resolve fulfillment difficulties, Hollen pointed out. She described how shipping lingerie, cosmetics and perfume to a customer in the same package, for example — something domestic customers take for granted — can present a roadblock in cross-border orders because perfume is subject to hazardous materials regulations. When eShopWorld recently designed a solution, there was a significant uptick in basket size, she noted. Consumers bought more when they could receive the items together.

What does the future hold for e-commerce? FULLBEAUTY’s Pendarvis talked about some developing concepts. Voice commerce — the ability to tell your smartphone or other device to ‘order me such-and-such an item’ — is going to gain traction. “I know it sounds sort of fairytale or Jetsons-like, but it’s coming,” she said. (While voice-activated assistants like Alexa have been around for a while now, only 17% of consumers have browsed or shopped using this method, according to TotalRetail.)

Pendarvis also asserted that the idea of “going shopping” is fundamentally changing. For example, soon a customer using Instagram or Facebook, or playing a video game, may see a relevant product appear and be able to complete a purchase transaction in that moment.

Although some might think that “no one’s going to go out and buy a $5,000 Chanel bag” through methods like these, eventually they will, Pendarvis said. She noted that similarly, many experts had doubts about mobile retail five or so years ago, and now it’s commonplace.

Satisfying the Hungry Consumer

Supplying a different take on the retail environment and e-commerce was a panel on the food and beverage industry. Food and beverage is a huge market in the U.S.: It’s about $1.5 trillion more or less split between groceries and prepared foods, according to moderator Eric Dzwonczyk, a managing director at AlixPartners. How are the players competing for “share of stomach,” he asked?

“Igroup VP for corporate affairs for Kroger, one of the country’s largest supermarket chains. “We spend a lot of time thinking about freshness because that’s why people typically come into the grocery store. It’s the number-one driver.” Another priority for the company, she said, is minimizing waste. Adelman described Kroger’s partnership with Ocado, a U.K. retail solution that uses robotic pickers and warehouses. She stated that Ocado achieves less than 1% food waste on its system.

Zak Normandin, the founder and CEO of Iris Nova (a beverage startup that owns the Dirty Lemon brand), cited the eye-opening statistic that by 2023, 70% of millennials will be buying all their groceries online. He said that as hard as bigger chains try to fight the trend, the format is definitely changing, and the way we’ve experienced grocery stores historically — walking up and down the aisles with our mom or dad when we were kids — is not the way we will experience them in the future.

Discussing the take-out and delivery space was Jonathan Zabusky, a managing partner of Bounce Ventures and former president of GrubHub. He pointed out that while early services like GrubHub were competing against a paper menu and a phone call, today there is a proliferation of food delivery services. “Now you’re seeing a bunch of companies doing the same thing,” he said. “The question is, how do you bring a better differentiated consumer experience?”