Expert insights on scaling last-mile operations without sacrificing margins or customer experience
Big & bulky eCommerce is complex and costly. But with the holiday season fast approaching and increasing online competition, it’s critical to provide exceptional customer experiences that drive ongoing loyalty. How can big & bulky retailers do this at scale and without sacrificing margins?
Ali Kamil, Expert Associate Partner at McKinsey, and Guy Bloch, CEO of Bringg, discuss current economic pressures, shifting buying behaviors, and what it will take to optimize last-mile operations for big and bulky eCommerce.
Key takeaways:
- Peak season success: Invest in delivery visibility, customer-centric approaches, digitized operations, optimized routes, and high standards for third-party carriers
- Revenue impact: 84-90% of customers do not return after a poor delivery experience
- Consumer priorities: Retailers must offer variety, quality, affordability, and exceptional service despite economic uncertainty
- Optimize drivers and routes: Leaders focus on driver training and route optimization to meet market demands
- Adapt or die: Use technology to rapidly adapt to customer demands and competition
Guy Bloch: The last six months are always critical, and everyone is rolling up their sleeves, getting ready to serve their customers. The last couple of years have made online competition with giants imperative. Without a strong online presence, you can’t win. I’d love to ask you a few questions to get into the conversation.
Ali Kamil: Happy to discuss and dive into the trends we’re seeing, especially in the last mile. Consumer behavior, as you mentioned, has evolved post-COVID. Consumers are flocking to eCommerce, ordering early, and expecting rapid service. This trend continues even after the pandemic.
Macroeconomics impact big & bulky retailers differently
Guy Bloch: The first question is to touch on the macroeconomic environment and how it impacts big and bulky retailers, and the shippers that help them deliver. What are you seeing at McKinsey in terms of the macroeconomic environment?
Ali Kamil: We’ve noticed that the markets have slowed down since the middle of last year. It’s not like the highs of 2021, but consumer spending hasn’t abated.
Consumers are spending more selectively, putting their money where they see value and expecting great service. This puts pressure on big and bulky providers like Walmart, Amazon, and Target. They’ve built strong eCommerce platforms. For everyone else, it’s added pressure to provide variety, quality, affordability, and great service.
Big and bulky delivery challenges explained
Guy Bloch: Why is big and bulky delivery so challenging?
Ali Kamil: It’s challenging due to labor constraints, as drivers are limited in the number of deliveries they can make in a day. Deliveries take time and require specialized skills for installation. Proper planning and execution are critical. The process is complex, requiring sophisticated tools for effective coordination.
Why delivery needs to be customer-centric
Guy Bloch: I agree. I’m following the big retailers and their quarterly earnings. Consumer behavior is not just changing in terms of expectations but also in spending patterns. They are spending more on consumables, which changes margins and impacts earnings. Deloitte’s recent research indicates a 30-40% drop in consumer electronics and home furnishing spend since early 2022.
If margins are already down, and last-mile delivery is expensive, how does this impact the economics of last-mile deliveries for big and bulky items?
Ali Kamil: Big and bulky deliveries are inherently expensive. Each delivery can take at least 30 minutes to an hour, requiring specialized and certified drivers for installation. This complexity makes it hard and costly. Customer expectations are high, and the delivery has to be accurate and timely. Proper planning and sophisticated tools are necessary to plan these deliveries effectively.
Delivery impacts repeat business
Guy Bloch: Interesting. Amazon approaches online retail differently from Target and Walmart. It combines technology and logistics to make deliveries exceptional, fast, and inexpensive. Consumers today expect to see delivery options and accurate time slots when they check out.
If delivery is not accurate, something like 84% of consumers won’t return. Is this what you’re seeing as well?
Ali Kamil: Yes, about 84-90% of customers do not return after a poor delivery experience. The ordering experience needs to be seamless, allowing customers to pick delivery slots and ensuring timely and accurate deliveries, including any installation needed.
Big players provide not just delivery but also a frictionless eCommerce experience. Making the delivery process smooth and predictable is key to retaining customers. This is why retailers have to think of the right capabilities and technology to invest in.
Core strategies to compete effectively
Guy Bloch: Working closely with big and bulky retailers, we see these challenges. Labor, carriers, and visibility are key issues. Digitizing and connecting every step of the last mile is crucial for coordination and optimization. What do you advise big and bulky retailers to do to compete effectively?
Ali Kamil: They need to invest in technology, people, and processes. Quite simply, it’s adapt or die. Having the right technology to integrate and coordinate deliveries, training drivers, and creating efficient processes are crucial. Providing seamless eCommerce and delivery experiences will help them compete.
How to prepare for the holiday season
Guy Bloch: If big and bulky retailers don’t adapt, they risk losing customers to those who can provide a better delivery experience. What should they focus on in the next six months to prepare for the holiday season?
Ali Kamil: They should invest in customer experience, making the ordering process seamless, providing delivery promises, and ensuring visibility and accuracy. Investing in technology to digitize and connect their operations is essential. They should focus on high-impact areas and adopt a strategic approach to be ready for the holiday season.
Guy Bloch: What should be the investment areas for a C-level executive in big and bulky retail?
Ali Kamil: Invest in digitization to create a seamless customer experience. Focus on planning and optimizing routes to maximize driver utilization. Ensure third-party carriers provide the same level of service. Analytics and continuous improvement are also crucial for long-term success.
Guy Bloch: Summarizing our conversation, it’s clear that adapting is crucial. Focus on technology, people, and processes. Don’t try to boil the ocean; start with quick wins and expand. Invest in technology and best practices available in the market. What are the next steps for those who want to adopt new technologies?
Ali Kamil: Start by evaluating your current customer experience and benchmark it against industry standards. Invest in technology that enables seamless customer experience and efficient planning. Ensure your processes are agile and your drivers and third-party carriers are empowered to provide excellent service.
To thrive during peak seasons, big and bulky retailers must swiftly adapt through technological advancements, process optimization, and superior customer experience. Investments in digitization, training, and strategic planning are critical for maintaining customer loyalty and driving repeat business. Success in the big and bulky retail sector hinges on leveraging technology and committing to customer satisfaction, safeguarding market share, and driving growth. As Ali Kamil, Expert Associate Partner at McKinsey, aptly puts it: “Adapt, or die.”
