Trends in e-shop logistics

What role will logistics play in the success of e-commerce stores in the near future? And which trends in logistics will have a direct impact on their growth? The answer stems from the increasing expectations of customers who shop online. After all, the success of e-shops is defined by quality and the ability to satisfy and retain customers.

The key needed to gain an edge over the competition lies in striking the right balance between the right product price, customer service and delivery time. The largest and most renowned e-tailers have already implemented same-day delivery in order to impress customers who don’t want to wait even one day for their goods to be delivered. Thus, they have set a clear trend in the world of online sales. Dotcom has conducted a study focusing on the e-commerce and packaging industry. The following key findings demonstrate the importance of logistics in the decision-making process of customers shopping online.

Fast delivery promotes customer loyalty

• 87% of e-shoppers say that delivery time influences their decision to repeat purchases with the same retailer.

Customers are willing to pay more for fast delivery

• 67% of shoppers would pay more for the option of same-day delivery.

Transparency is also important for consumers during the shipping process

• 21% of shoppers would like to know as much information as possible about the current status and location of their order.

To be competitive, traditional retailers are adapting their stores to multi-channel sales and converting them into distribution hubs that combine online sales with traditional bricks-and-mortar sales. E-shops that cannot deliver goods quickly to their customers are slowly but surely doomed to extinction.

Gaining competitive advantage

The real challenge for e-shops is the ability to deliver goods within a few hours of ordering. Large online retailers are investing in express logistics services that can already deliver goods to customers within 90 minutes. In the Czech Republic and Slovakia, the largest trend-setter is clearly Alza, which has more than 90,000 products on offer and currently operates on a total area of 70,000 square metres. It has 2 main, fully automated logistics centres in both the Czech Republic and Slovakia, enabling it to handle 90,000 orders per day with an average waiting time of 7.5 minutes. As it also delivers to other EU countries, it plans to build a third large logistics centre in 2019, which would focus on Western Europe. The company plans to expand its warehouse space with the expansion of automation, meaning that not only warehouse operations, but also the entire packaging and dispatch operations would be automated.

Availability and speed of delivery of goods is essential. Alza has all the products that are on the site in stock. For fast delivery, it uses not only external delivery companies, but also its own AlzaExpress for Prague and Bratislava. Thus, the customer can choose a specific hour or time period when the goods will be delivered to him. And if the customer is interested in express delivery, the express courier will deliver the package within 90 minutes (note: only in Prague for now). In order to satisfy its customers completely, it has also introduced weekend delivery. However, the initial interest in this service declined rather quickly, so Alza is evaluating whether it will continue to provide this service.

It does not underestimate the possibility of personal pickup. According to Alza, up to 1/3 of their customers still choose personal pickup as their delivery method. That is why they have installed the so-called AlzaBoxes in all regions of the Czech Republic and major cities in Slovakia. It is a fast, cheap and above all easy way to pick up your goods. And let’s not forget the mobile e-shop AlzaStreetShop, which combines sales, dispensing and returning goods, complaints and advice (note: service only in the Czech Republic).

And what’s in it for Alza?

• Year-on-year sales increased by 22% to a record CZK 21 billion, including VAT. (The company did not state the amount of profit, but we know that it earned CZK 568 million in 2015 and is increasing its sales by 22-26% year-on-year.)
• Year-on-year increase in orders handled by more than a million.
• A 70% year-on-year increase in the number of visits to the eshop.

There are other ways to do it

But the figures confirming Alza’s success are a reflection of the investments it has made in warehouse logistics and technological innovation. How can e-shops that don’t have or don’t want to invest hundreds of thousands in logistics be competitive? The solution is third-party logistics (3PL) companies that handle orders, inventory, order logistics and returns. The use of third-party logistics companies is growing by 12% to 15% globally every year.

The increasing trend towards the use of third-party logistics companies for comprehensive logistics coverage is also visible in Fortune magazine’s annual ranking of the top 500 U.S. corporations with the highest gross sales. Approximately 85% of the Fortune 500 companies use 3PL companies to contribute to their success.

TheKorn Ferry Institute published a study on outsourcing logistics. This study identifies the benefits of using 3PL companies.

• Up to 70% of respondents in the study say that using 3PL companies has helped them reduce their overall logistics costs.
• More than 83% of respondents also claimed that working with 3PL logistics companies resulted in improved customer care.

The increasing speed and volume of online sales is pushing the need to find efficient logistics solutions. In the next five to fifteen years, the following technologies will play a significant role in e-commerce logistics.

Big data

Investing in complex data analytics and the ability to predict customer requirements is the mantra of all big players looking to reduce their cost per delivery. In 2016, logistics company UPS invested $1 billion in collecting and analyzing so-called big data. This investment is set to revolutionise the logistics industry by being able to analyse vast amounts of incremental and changing data in real time from multiple, previously unconnected sources to optimise processes, reduce costs and improve time management and delivery times. Big data should minimise the need for human labour in logistics warehouses in the future, which should move to fully automated efficient processes.

Digital identifiers

The use of technology in logistics operations is essential for maintaining customer satisfaction. Digital identifiers in the form of biometric and electronic tags enable electronic tracking of the movement of ordered goods due to their unique code.

In the aforementioned Dotcom study, more than 41% of participants said that information on the current status and location of ordered goods contributes to the perception of an e-shop as an excellent retailer. More than 53% of participants rated the provision of similar information by the seller as a parameter of a good e-shop. Additionally, 47% claimed that they did not repeat a purchase in the e-shop precisely because of low transparency about the status and location of the order from a previous purchase.

Not only tracking of specific products, but also tracking of logistics vehicles plays an important role in ensuring the necessary control and in efficient route planning for faster delivery. Vehicle tracking technologies have already surpassed manual procedures and contribute significantly to speeding up transportation. The challenge lies in tracking shipment movements in real time.

Sensors

The use of sensors in logistics will enable the identification of free space on a pallet, in a truck or in a warehouse, which can then be optimised.

Augmented reality technologies

Logistics warehouse employees can use augmented reality goggle technology to handle goods. Such glasses can scan codes, display a list of products or their specific location.

Samsung Virtual Goggles

Robots and drones

Automated robots that can replace human labour in logistics warehouses or hubs, such as self-driving trucks, are among the newly introduced technologies in the logistics industry. An automated trolley can track an operator at a warehouse or distribution centre and, when full, will make its own way to the packing room and, at the same time, send another empty trolley.

Drones represent another potential option in logistics that is being explored and tested by most major logistics companies. Mall and Alza have also tried their practical use, but have stopped the projects for the time being. The reason? There are so-called no-fly zones in cities, through which police, military or rescue units can fly.

Drones and autonomous vehicles

The importance and maturity of autonomous logistics has also shifted over the past few years. These innovations open up a whole new perspective on the time and routes of delivery of goods being transported.

Ecologies in the logistics industry

The trend towards environmental sustainability has also had a direct impact on the logistics industry, which is striving to reduce the negative impact of logistics on the environment through the introduction of new technologies. The greening trend will be most visible in the packaging industry, which is increasingly using recycled packaging materials that are environmentally friendly and represent an important part of logistics. The use of digital identifiers and significant optimisation in the planning of logistics vehicle routes will also have an impact on reducing emissions, in line with the ‘think more, drive less’ principle.