Home delivery is not exactly the most profitable aspect of any traditional retailers’ business but it does seem that merchants are not exactly helping themselves when it comes to managing this profit-draining service.
The biggest issue is the continued stance of virtually all retailers to treat every customer exactly the same. They are clearly not all the same. Some are way more valuable than others and it will inevitably be the case that something like 20% of a retailers’ shopper base will generate the vast majority of the profits for the business. Surely these people should be treated differently. There should be variations in the way customers are handled and the services they are offered.
Speaking to Retail Insider at the recent JDA Focus Connect conference in London Niklas Hedin, CEO of Centiro, argues that retailers must start to segment their audience: “Serial returners have to be managed differently. To date there have only been static choices at the checkout but retailers should be making the options dynamic, based on the individual customer.”
Only by segmenting the customer base and analysing the information relating to them is it possible to identify which of the customers who most frequently return products are actually the biggest spenders (and therefore most profitable) and which are the unprofitable ones who return pretty much everything they order and never buy anything.
“The best and worst customers could be in the 14% that represent the highest-returner shoppers for every retailer,” says Hedin. It is therefore essential to split them out and offer delivery options accordingly at the checkout.
Although many retailers are afraid to be seen to be discriminating in any way between shoppers (based on the amounts they are spending with them) John Lewis took the decision to put a charge on Click & Collect orders below a certain value.
The reality is that Amazon has long been amending its delivery options to customers based on their spending and order size. Retailers have to be brave and also more intelligent in the way they handle delivery and returns because otherwise it will continue to be a black hole. And as online sales grow it will become an ever bigger black hole eating up their profits.
Glynn Davis, editor of Retail Insider