New Options Help Royal Mail, Figleaves Cover Shipping Issues

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Figleaves.com, the British counterpart to Victoria's Secret, has nothing to hide about its performance.


Last year, the lingerie retailer began allowing customers to pick up packages at any of Royal Mail's 16,500 post offices in Britain. The delivery option is called Local Collect. As a result, the online retailer's sales shot up almost 8 percent and site visitors rose 5 percent.


Figleaves also found that 80 percent of Local Collect users were first-time shoppers. Moreover, first-time average order values rose 25 percent and repeat-order values 35 percent.


"Customers want and will pay for delivery service, [and] delivery choice increases your sales," said David Taylor, managing director of Royal Mail Group's $750-million-a-year home shopping division.


Taylor was part of a panel yesterday on multichannel fulfillment at the National Retail Federation's 92nd Annual Convention & Expo.


Royal Mail's Local Collect worked for Figleaves, Taylor told a packed room of retailers and vendors. Royal Mail has focused on a fulfillment issue facing online retailers and catalogers in the United States, Britain and worldwide: Consumers are unhappy with their delivery options.


Eighty percent of people in the United States are not home during the day, making missed packages a headache to pick up, said Kerry McLellan, CEO of Kinek Technologies, a delivery solutions company. And shipping is 12 percent of an e-commerce transaction's cost.


It also is tough for delivery companies, McLellan said. Traditional delivery companies face having no one home to receive packages. Add to that issues like incorrect addresses, parcel damage, depot parcel handling, call handling and redelivery.


"The delivery process for e-commerce has the same costs as retailers," he said. "The costs are in the last mile."


While the U.S. market is split between the U.S. Postal Service and delivery companies like United Parcel Service, FedEx and Airborne Express, Royal Mail's hold in Britain is stronger against private competition. The government service delivers letters daily to 27 million addresses across the British Isles. It delivers 30 percent of all domestic home-shopped items. More importantly, Royal Mail fulfills 60 percent of local online orders.


Seeing an opportunity to expand its market among online retailers and catalogers, Royal Mail introduced Local Collect as one of a few new delivery options. There is evening service for an extra fee to consumers and a new decide-and-deliver online service option.


Even more interesting is its testing of locker boxes. The electronically enabled boxes are in select train stations and supermarkets. Once a package is dropped in that box by request, an SMS message is sent immediately to the consumer's cell phone. The consumer can pick up the package at his convenience.


Royal Mail is running another experiment in the Nottingham area of England. The postal service is populating its database with information about residents' delivery preferences online. They can go to this particular site and make changes at their convenience.


"We decided to get inside the bear pit of improved delivery by delivery companies," Taylor said.


Still, British retailers have been lethargic in accepting these new delivery options.


"Retailers in the UK are very reluctant to [accept] the idea that delivery is part of the [shopping] experience," Taylor said.


Nor is it better in the United States. According to a recent Shop.org study, only 60 percent of surveyed retailers can offer store pickup and show the shipping fee before checkout -- a major reason for shopping cart abandonment.


For retailers wishing to improve conversion rates, this is "low-hanging fruit," said Jim Crawford, senior analyst at Forrester Research.


Home delivery still dominates online or catalog orders. But consumers want to be pampered even more. They want online ordering and store pickup, e-mail notifications to track orders and unattended delivery, among a plethora of options with expectations of safety and security.


Crawford said retailers face many fulfillment challenges. First is the cost and timeliness of fulfillment. Next, returns are a growing problem. Some estimates put industrywide returns at 7 percent, from 2 percent for entertainment items to 15 percent for apparel and jewelry.


"Target and Sears report high return rates because of [offering] multi-category items," he said.


Crawford suggested unifying online and offline fulfillment to create a multichannel experience.


Outdoor-gear seller REI and Payless ShoeSource are among the few retailers he cited as doing it right. Both offer free shipping if consumers sign up to pick up orders in the stores of their choice. The retailers ship the product in the same truck that delivers the regular store items.


"This is an opportunity for retailers to truly differentiate and make shipping part of its differentiation before your competitor does," he said. "Improvement in delivery [boosts] raw conversion rates."


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