Delivery pricing

Firstly a big thank you to those who sent me feedback on my last post about click-and-collect (and especially to those who "liked" it or forwarded it to all their contacts in turn)!

And now, a warning...

You cannot proceed because you have not reached the minimum order value of €19. Eh?? And this is only the German site. If you want to try the same thing in Belgium, then it's €25.

Congratulations to C&A on possibly the most unorthodox way of avoiding "sticker-shock" at checkout I have yet seen! Doubtless they can be extremely confident that their online customers are not going to abandon their carts due to being unhappy with surprise delivery charges. And on the other hand, delivery is free if you spend more than this minimum. But this does seem a very  strange way of emphasising their very strong "free delivery" message - by hiding it competely on the site homepage, and then jumping on you later if you try and checkout.

Better (best?) practice is demonstrated here by John Lewis. This is the top-left on their homepage (the red circle is my addition):

 

The free delivery message is considered so important it takes pride-of-place just below the navigation and above the hero product offer.

The C&A "alternative shock" approach seemed unusual enough to prompt a bit more research, and at least validate that my shock was not reflective of some British bias. I've taken a quick look at a few top British, French and German sites:

 

And no, nobody else is trying this "minimum cart size achtung" approach! No surprise there then... However the first surprise is how hard it is to find this information. Consumer unhappiness with delivery pricing is THE top reason for cart abandonment (assuming you have a basically clean-functioning site). From Forrester's 2010 cart abandonment reasons study:

 

And the top consumer expectation of a website is that pricing and shipping information is clear:

 



So why hide it? Customers demand this information. No points to Next.co.uk, whose help pages were simply not working (it's a priority guys, not an annoying bit of the website that doesn't matter much). But particularly on the German sites, it is remarkably difficult to find the facts. A standard footer would be a strong recommendation (example from John Lewis again);

Second surprise is how few sites (and not just top sites) offer free delivery above a threshold level. Free delivery over threshold is a very good idea for a few reasons:

1. checkout conversion rates are known to be lower at psychologically critical price points (it's the old $9.99 thing again), especially at the critical 3-digit point in dollars, euros or pounds. If you want those €95 carts to convert - a figure remarkably close to the average cart size on many sites - don't slap a delivery charge on which takes it over the €100 mark.
2. customers will add an extra article to their cart to get above the free delivery threshold. Set your free threshold to just above your typical cart size!
3. any free delivery message is a very powerful messaage
4. turning away orders (like C&A) is turning away all distress-purchases. Given that a primary driver for customers to use online is convenience, eliminating all those potential customers having a panic-buy moment for that item they desperately need for their summer holidays is a big loss of trade. OK, servicing small orders is expensive, but customers will pay for this convenience. Make the charge standard, waive it over any reasonably threshold.

The ubiquity of delivery charges also implies another misconception (I see this quite often when I work with clients new to online): multichannel is not free, and is no more/less profitable than stores. There is a cost to having stores: expensive space in town-centres and shopping malls, presentable staff, distribution networks. The customer comes to this expensive space. In effect you have paid a high cost per unit sale to have the customer come to you. In a non-store/online model, you pay a cost per sale to take yourself to the customer - fulfilment centre, picking/packing, shipping. The costs are (or should be) comparable per unit sale.

Very small online orders do need a delivery charge to be applied, because they are disproportionaly expensive to handle. The cost per unit sale for larger online orders is most likely comparable or lower than the cost of the equivalent store sale. Attempting to pass this cost onto customers, when they would not have paid the cost in store (has anyone tried charging a customer £3.95 to take their purchase through the store exit door?) is an artificial charge that is costing you sales.

This conclusion is starting to become particularly clear when you look at the cost of delivery for large articles such as white goods. To ship a washing-machine to a customer costs around £30-£35 in the UK. John Lewis charges nothing for white goods articles over £50, Tesco Direct charges a flat £7. Customers won't tolerate having the high cost of shipping passed through to them: it's not added in store, why should they pay it online? Sites such as Carrefour electricals (France: €59.99 (!!)), Baur (Germany: €39.95), MediaMarkt (Germany: €34,95) need to rethink their model sooner rather than later.

Click & Collect - Calling Time On Store Space?

Philip Clarke, Tesco's CEO, made a speech last week stating that: "...we’ve called time on the old retail 'space race'. We’ve recently opened our 1,000th click and collect collection point..." Is click-and-collect really quite so game-changing?

Well actually, maybe... But it's multichannel game-changing, not necessarily traditional retail-space game-changing by itself.

Not all top UK retailers publish the data, but from those that do, we can see that customers really like this clicks-then-bricks option:

** of eligible General Merchandise sales (i.e. excluding food and impossible items like washing machines and sofas)
* John Lewis state that 34% of John Lewis sales are collected in Waitrose Stores! So actually their figure is probably higher in total. Click-and-collect was offered at 97 Waitrose's and 35 John Lewis's

The latest published data from IMRG indicates that over 10% of all online transactions are now collected in store (up from 7.4% in the previous quarter): more and more major retailers are introducing it, and the take-up is often dramatic.

Some published commentaries are also quite illuminating. First of all this quote from Halfords annual report:

"Our product mix lends itself to a multi-channel offer as customers often want further advice, a demonstration or fitting. Online purchasing patterns reflect this, with 86% of sales on Halfords.com reserved and then collected from a store"

In other words, these customers are basically using the Halfords website as a place to guarantee that the item they want is definitely in stock in a nearby store when the customer makes their visit. Once at the store, the store has little value as a showroom or place to transact, but very high value as a place to get added services impossible to execute online. Interestingly this tends to help validate the KnowHow based strategy for PCWorld and Currys - but it does require your products to be difficult for customers to just point-and-shoot in the first place. These Halfords customers aren't using the store-advice to choose their item, they are using it afterwards to configure it. This is a great differentiator against the online pureplays for bikes, and probably therefore also for laptops, but less good news for e.g. TVs.

Secondly, a note from Sainsburys:

"Customers use Click & Collect for about half of all online general merchandise orders – a figure which rose to 75% for the week before Christmas 2011."

Or in other words, if you could only trust the postal service, then click-and-collect might be less attractive. An alternative explanation is also possible: click-and-collect is almost always offered for free. Customers hate paying delivery charges, and faced with the option of a free collection service compared to a paid delivery, have a natural bias towards the perceived free service, even when there is a hidden travel/time cost. Of major UK retailers, only TopShop seems to be attempting to charge the same for click-and-collect as it does for home delivery. Unfortunately they don't publish statistics indicating how the take-up varies with these fees.

Another quote from John Lewis tends to suggest this TopShop approach is seriously misguided anyway. This, to me, is the most significant data point in the whole click-and-collect space:

“We are seeing about 34% of those visits translating into additional sales in shop and that number is growing exponentially at the moment. It’s typically or increasingly for purchases that the customer didn’t think they would make. So it is quite outwith whatever they were going to collect.”

Customers want to click-and-collect, and then when they do, they find themselves buying extras in the store as well. Sounds like the ultimate retailer win-win.

It's noticeable that fashion retailers are lagging behind this curve. M&S, New Look and TopShop do, but surprisingly few others. Possibly this reflects the in-store space challenges, but Tesco's 1000 Click-and-Collect points now include quite a few Express and Metro stores, especially in central London. If Tesco can fit a collection point in an Express store for awkward boxed items like PCs, then surely it can't be so hard to fit a few parcels in e.g. a River Island store. In fashion, with its high returns rates for home-delivered orders, bringing the customer to store to a) spend more; b) try on, and return or exchange in the store environment must surely make sense?

Perhaps the most interesting experiment in this area in the UK right now is House of Fraser's Buy & Collect only store in Aberdeen.

"...its new 1,500 sq ft House of Fraser.com shop is the first to offer purely a Buy & Collect service... The new format, merchandise-free, store has opened in Aberdeen’s Union Square. Instead of stocking goods that shoppers can take away with them, the emphasis [...] is on personal customer service. Goods ordered from the more than 1,000 brands it stocks can then be delivered the next day to either the customer’s home or to the store for collection."

Another similar shop (in Liverpool) is on the way, suggesting that the first pilot must be going pretty well. Other retailers, watch this space!

Fix cross-functional before you try do cross-channel

Having singled-out River Island rather unfairly in the last post, another interesting site issue in which they appear to be in rather elite company.

Their home page featured a rather nice promotion "after dark":

Maybe I'm just not your typical customer, but I did an obvious thing and typed "after dark" into the search box.:

and there it is... no search results. Sloppy, but is this just River Island, who to be fair are hardly a top 10 internet retailer? Let's take a look at a few who are.

Marks and Spencer, for example. Here it is, big banner for an event named "shwopping":

But apparently the M&S search doesn't believe in this nonsense. Instead it thinks I've mistyped the word "shopping" and, better still, helpfully offers to sell me a dictionary to help my spelling:

Maybe this is connected with having their site running on Amazon's system. I'm going to spare you the screenshots, but Amazon is currently running a "summer of sport" promo on my version of its homepage; entering "summer of sport" in their search just offers me some obscure Kindle-only book with this name, followed by a digital camera.

Debenhams goes one better, or rather worse, by apparently not believing in the existence of its own sale event. Here's the home page...

and here are the search results for "half price sale":

"Did you mean halo price sale?" Well no I didn't actually. And I certainly don't want to see a pathetic 2 items, both on discounted promo but neither at half price.

The point of all this is that these sites just don't seem to have their internal teams working together. In most retailers online merchandising and marketing, search, and product data admin are owned by separate functional areas. A typical set up would be to have these three tasks owned by web-merchandising, IT and category management respectively, although it varies in each retailer I've ever worked with. And quite clearly in River Island, Debenhams and M&S, they aren't speaking to each other.

By contrast lets look at a couple who get it right, in two different ways. First of all John Lewis's clearance event. Homepage banner:

And search results for "clearance":

Very simple and effective: the search just drops you straight onto the clearance page. Minimum  site maintenance effort, maximum customer journey coherence.

Finally, Tesco Direct, which goes the whole hog. Again first the banner:

and now the search results for "summer of sport":

Someone has gone to the effort of tagging every one of these 73 products in their product master data with "summer of sport", their search algorithm has been adjusted to prioritise the phrase, and the whole thing coordinated with site merchandising. Full marks for both effort and results, for getting the basics right, and evidently for having a proper cross-functional team managing (and testing!) it all.

Full marks also for recognising that site & search admin is a time consuming, labour intensive task and managing it. It's analogous to refilling the shelves and sweeping the floors in your brick-and-mortar stores: difficult to automate, human-intensive, but an essential success factor.