The growth in the Indian eCommerce industry has leveraged companies like Myntra, Snapdeal, Flipkart etc. to provide their consumers the facility of same day delivery. Also, with the entry of International players such as Amazon and eBay, competition to acquire, retain as well as satisfy online buyers has been on rise in the past few years.
But do consumers really need fast delivery? Is it really profitable for an eCommerce company in long run?
Here are insights of some industry leaders that address these questions.
Mr. Manish Chopra, CEO, Zovi.com
Fast delivery has been a critical factor in building confidence. In buying online, the concept does not differentiate much in product per se, but in getting instant or very quick gratification, it is an important factor.
We do see that if delivery is due over a longer period of time, the buyer remorse sets in and the chances of the delivery, particularly the cash on delivery having a return becomes higher and higher. Hence it becomes a necessary evil to provide faster delivery.
From profitability point of view, for an eCommerce company, it is a fine balance in trying to manage the inventory time and the total cost of logistics. For same day deliveries, definitely the costs would be significantly higher and there’s a need to evaluate what are the advantages from the customer satisfaction point of view. I think we are at a comfortable level rite now and we are happy with the trade off that comes in providing the current level of delivery that we have.
Narinder Mahajan, CEO at Shopnineteen.com
Faster deliveries are important for quicker gratification of end consumers but it’s not the only thing for which consumers buy online. We believe that consumers just need great products and a great service is always a surprising add-on for them.
Today, every site is trying to woo their customers in their own projected USPs. Portals with same/similar catalogs are thriving on offers and logistic services and for them fastest delivery is a comparable bullet point.
However, stressing too hard for faster deliveries eventually leads one to use expensive Hi-end logistic companies like Blue Dart or in some cases their own delivery team on contract, which in turn eats up their profits.
For that, having a financial balance by making a scientific matrix of rates, performance and status transparency of courier companies for different locations might help. This helps us to operate at logistics costs just below 7% of the overall revenue, which we believe, is extremely efficient in current Indian eCommerce timezone.
Prashant Tondon, CEO at Healthkart.com
Consumers certainly appreciate fast delivery and love to receive the package on the same day. Data does show higher repeat purchases from customers who receive their orders sooner. In the long run, I believe eCommerce companies would be able to figure out the right model to make this economically viable, in fact attractive.
Essentially, eCommerce companies would have to move to a multi warehouse model with a nuanced predictive model determining inventory required. eCommerce companies should be able to plan to keep inventory close to the consumer, so that shipping is both quicker and cheaper. The further benefit of higher repeat transactions should outweigh the additional cost of quicker shipping – however this can be implemented effectively only once eCommerce companies reach a certain critical scale.
Pratik Kumar, Director-Digital Marketing at Zivame
Zivame caters to a niche market. We revel in filling the gaps present in the offline market in terms of availability of sizes, brands and styles. The brick and mortar stores stock the high-flying and popular sizes, and the tail ends remain mostly unserviced or women have to place advance orders to be catered as and when.
When they come to Zivame, they have access to over 83 sizes! So, as you see, our customers are expecting us to give them better fits than they can ever avail anywhere else. “Fast and speedy delivery” becomes a secondary concern.
However, since Zivame is changing the buying behavior of women and making them shop for lingerie online, we are constantly working on and improving our deliveries and making them faster. We have also introduced the Reverse Pickup service in select cities as of now and look at extending it to other cities soon. This is a profitable proposition for us as we enjoy a high level of repeat purchases. Hence, the extra costs incurred on fast delivery is covered by customers coming back and shopping with Zivame again.
Rajesh Nahar, CEO & Co-founder at CBazaar
For consumers, sooner you deliver, it makes you more closer to delivering an offline shopping experience. This really builds the confidence of the consumer as the time gap between the offline and online buying experience really gets reduced.
By and large, today most eCommerce companies can make next day deliveries. Given that, many business are getting into the marketplace model, unless the inventory is in the company’s warehouse, same day delivery becomes a little challenge.
The cost of delivering on the same day is at least two times the next day delivery and only if the returns are also on the same lines than it makes sense. So, it has to be a fine combination of both. Also, if you are able to charge the consumer for same day delivery then that’s a perfect scenario.
Ravi Vora, VP Marketing at Flipkart
There is definitely a demand in the market for faster delivery in eCommerce. This could be for occasion-led gifting, pre-travel/last-minute shopping or a variety of other reasons.
At Flipkart, we have had a lot of customers requesting urgent deliveries over the years. But given the large volumes that we handle it wasn’t feasible to address them on a case-to-case basis.
However, since one of the main advantages of online shopping is the factor of convenience, it was important for us to be able to offer this service to our customers as and when they asked for it. Keeping this in mind, we streamlined our supply-chain at various places and modified our existing delivery model. Today, our In-A-Day Guarantee is available at an additional shipping fee of Rs.90
In pure numbers, we expect that around 5-15% of our active customers will avail of this feature over a period of time. In order and revenue terms we expect it to have a larger contribution.
Mr Sachin Oswal, Co-founder Infibeam.com
Consumers will always prefer fastest delivery, where in such services are either add on or available on specific categories by default like-gifts. For add-on extra shipping charges are applicable.
There is no direct implication of fast delivery at low prices to repeat customer purchase.
While on the other hand, Profitability for eCommerce companies is compressed in short term to build logistics, supply chain and invest in low prices. In the long term, with repeat purchase, economies of scale builds to profitability.
Sanjay Sethi, CEO & Co-founder at Shopclues.com
There’s a lot of talk about one-day delivery and couple-of-hours delivery being offered by shopping portals. This can be economically viable only for eCommerce sites that work on the marketplace model where goods stocked in the company’s warehouse can be shipped directly to the customer.
For an online marketplace, that is a platform for sellers in distributed geographies, the dynamics are different. Soon enough, even the customer realizes that for all the hullabaloo around ‘fast delivery’, the service is restricted to select cities and just a handful of products. And for the online retailer, there can be substantial cost implications around scaling up the fast-delivery offering beyond the initial promise.
At ShopClues, we believe that as opposed to ‘fast delivery’, a customer actually expects timely delivery. It’s all about setting the right expectations so that there’s minimum suspense or anxiety around when the package will at her/his doorstep.
We recently launched a new feature on our site which attempts to accurately communicate the ‘Estimated Date of Delivery’ to our customer after an order is placed. This estimation factors in variables such as product pickup time, handling time, transit time and business holidays, to arrive at an accurate date for when the customer will receive the package. The feature has a complex processes at the backend but is our pivot for streamlining our fulfilment operations.
Saurabh Goyal, VP-Supply Chain Operations at Snapdeal.com
The same day express delivery service that we are providing here at Snapdeal.com, is a value-added service that makes online shopping a convenient and viable option even for last-minute purchases.
Keeping up with our company motto of providing the widest assortment of goods and the best services we have managed to evolve our supply chain system to such an extent that we can now offer this service with ease.
Iamwire Take: Most views are centered around two main things: firstly, fast deliveries make a ground for repeat purchases and greater customer satisfaction. And secondly, there must be a fine balance between the various inventory, logistics costs and the profit raised from adding the facility of speedy delivery.
Also, many agree with the view that to cope up with the challenges of same day delivery, it requires companies to manage their own inventories, which we believe that in itself is a daunting task to do. At present, eCommerce companies dealing especially in apparel and lifestyle segments are sitting on huge piles of dead inventory, thus, forcing many to move to inventory-less, marketplace model. Also many investors shy away from inventory led eCommerce model.
Even the biggies like Myntra, Snapdeal and eBay India, who are providing free same day deliveries are coping with the margins not only on behalf of their online sales but with a major support from their investors.
Can we then say that same day or faster deliveries is a luxury that small or early stage online retailers cannot leverage? One solution to this could be, as said by Rajesh Nahar, making the same day delivery paid as currently done by brands like Flipkart and Amazon India.
Further, is raising customer service expectations higher, a mechanism to stop new eCom startups from growing, thereby making Indian eCommerce space a play between the existing, richly funded companies.
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