Returns Are the Final Frontier for E-Commerce Dominance

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily.)

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily — but you couldn’t get almost everything else delivered for free in two days.)

First, there was online penetration. In 1999, only 44% of Americans had Internet access, either at home or at work.

Next, there was the fear of using your credit card online (65% in 1999). Most people got over that as they began to trust traditional retailers’ online sites and Amazon became a household word.

Shipping costs are too high. Enter Amazon Prime and FREE SHIPPING on orders over $30 from other retailers.

“I want to see it and feel it” and “I need it today” resulted in shopping online and buying offline, a common practice for several product categories even today, including high-end electronics and clothing.

Returns are a hassle and/or expensive. Yep! About 33% of global shoppers cited online return policies and processes as deterrents. (Chain Store Age, October 2015)

If there’s one thing consumers hate more than paying for shipping, it’s paying for return shipping. As counterproductive as it seems, I go out of my way to take Amazon returns to a return center to avoid paying $7 for return shipping. Returning an online purchase to a retail location is another option that consumers will choose — one that is probably more time-intensive, with a higher negative ROI. I don’t have firsthand knowledge, but I’m sure most online retailers have tested a higher price point with free shipping vs. lower price point plus shipping. Chances are, free shipping wins.

Zappos offers free returns so you can try different sizes and colors of shoes on in the comfort of your own home. However, free returns are met with the same skepticism regarding price as free shipping.

E-commerce continues to grow at a decent pace.

“Early analysis from Internet Retailer shows online retail sales in the U.S. crossed $517 billion in 2018, a 15% jump, compared with 2017. The growth in retail sales in physical stores reached 3.7% last year. This means that e-commerce now accounts for 14.3% of total retail sales, when factoring out the sale of items not normally purchased online, such as fuel, automobiles, and sales in restaurants. And it also means that in only a decade, the web has more than doubled its share of retail sales. Ten short years ago, e-commerce was at 5.1% of total retail purchases.”

While an almost threefold growth in 10 years is impressive, I think that making the return process more satisfying for consumers can accelerate the growth of e-commerce. Changing the consumer mindset about return costs may be the answer.  In his book, “Misbehaving: The Making of Behavioral Economics,” Richard Thaler notes that members view their Costco and Amazon Prime annual fees as investments and make no attempt to allocate those costs over the various purchases they make during the year.

Is there an opportunity for an unlimited free returns membership add-on from Amazon or another retailer? I know people who are chronic returners at brick-and-mortar stores who would welcome it. Pricing it certainly would be tricky. What do you think?

UPS Begins Preparations for a Freight Strike

UPS has now begun discussions with UPS Freight customers to inform them of the potential for service disruption and the need to arrange alternative carriers. Because it cannot guarantee against a work stoppage, UPS can’t afford to put its customers’ volume at risk of being stranded in the UPS system.

I had the following email forwarded to me yesterday from a UPS Freight customer. And I have to say, I can’t believe UPS is doing this! The news starts at paragraph three … UPS Freight will not be picking up freight as the freight contract with the Teamsters gets close to the vote. Essentially, UPS will not be picking up freight starting before the voting period (based on the below schedule) and will not resume operations until the vote has been completed.

This will have the same effect of going on strike. Luckily, it’s only UPS Freight this time. Here’s the email:

Dear (Customer Name):

UPS and the Teamsters Freight National Bargaining Committee concluded the current round of discussions on October 25, 2018. UPS’s offer, which we believe should be ratified, is an offer that rewards our employees with wages and benefits at the top of the industry and compensates them for their contributions to the success of the company. 

A union-hall vote, in which Teamster employees will go to their local union hall to cast ballots, is expected to take place November 7-11. At this point, UPS does not have an extension in place to the current UPS Freight contract.

To ensure transparency and not put your volume at risk, starting Thursday, November 1 UPS will not pick up any UPS Freight volume with a delivery date after November 8. The last day UPS will pick up UPS Freight will be Thursday, November 1 for five-day shipping commitments; Friday, November 2 for four-day shipping commitments; Monday, November 5 for three-day shipping commitments; Tuesday, November 6 for two-day shipping commitments; and Wednesday, November 7 for one-day shipping commitments.

If you have a bundled contract, or incentives dependent upon UPS Freight volume, we will ensure you experience no negative financial impact.

The UPS Small Package National Master Agreement (NMA) has been ratified. Customers can remain confident UPS is ready to continue to serve its small package customers throughout the holiday season and beyond.

We appreciate your patience as we work through this negotiation.

What This Means for Retailers

A strike could have a major disruption to retail and e-commerce businesses that rely on UPS Freight. Apart from DC-to-store shipments and some store-to-store loads, the less-than-load (and truckload) carriers transport inbound freight to DCs and warehouses once they clear ports, not to mention larger (non-parcel) deliveries directly to customers.

UPS has now begun discussions with UPS Freight customers to inform them of the potential for service disruption and the need to arrange alternative carriers. Because it cannot guarantee against a work stoppage, UPS can’t afford to put its customers’ volume at risk of being stranded in the UPS system. UPS is actively working to empty its network of freight by Fri., Nov. 9. UPS doesn’t want customer inventory custody issues as loads are abandoned throughout the network.

UPS Freight is the fifth-largest provider of LTL services, with $2.6 billion revenue in 2017. Keep in mind that even with UPS Freight in service, there was already a capacity crunch in the LTL market. Today’s announcement will leave many retailers scrambling to find alternative carriers.

I guess if there’s any good news, it’s that — unlike small parcel, which is dominated by the FedEx and UPS duopoly — there are many LTL alternatives in every region. Shippers that need help transitioning freight away from UPS have several options. They can directly contact other LTL providers or work with 3PLs and freight brokers. If they need referrals, Shipware is happy to help. Email rob@shipware.com.

Google Opens the Door to the Trusted Stores Program

Google has changed the requirements for its Trusted Stores program to make it easier for stores to join the program. What does this promise for the consumer, for merchants taking advantage of the offer, particularly those who went through the initial vetting process necessary to obtain the designation, as well as for Google? When Google first set up its Trusted Stores program, it provided a level of purchase protection for consumers and a conversion enhancement incentive for merchants displaying the Trusted Stores badge. The program badge provides consumers a level of confidence prior to purchase, and for consumers opting-in at time of purchase, a free purchase protection program; whereby, Google promises to intervene if there was an issue with the purchase. To display the Google Trusted Stores badge, the merchant had to submit feeds with shipping and cancellation information to prove that the merchant met specific levels of shipping and customer satisfaction performance set by Google.

Google has changed the requirements for its Trusted Stores program to make it easier for stores to join the program. What does this promise for the consumer, for merchants taking advantage of the offer, particularly those who went through the initial vetting process necessary to obtain the designation, as well as for Google? When Google first set up its Trusted Stores program, it provided a level of purchase protection for consumers and a conversion enhancement incentive for merchants displaying the Trusted Stores badge. The program badge provides consumers a level of confidence prior to purchase, and for consumers opting-in at time of purchase, a free purchase protection program; whereby, Google promises to intervene if there was an issue with the purchase. To display the Google Trusted Stores badge, the merchant had to submit feeds with shipping and cancellation information to prove that the merchant met specific levels of shipping and customer satisfaction performance set by Google.

What Has Changed and Who Benefits?
To increase merchant enrollment, Google has announced that it is dropping the requirement that stores submit shipping and cancellation information. To be a member of the program, a store must do a sales volume of 200 orders per month, so the program will still exclude the casual on-line merchant fulfilling just a few orders a day. The merchant must also provide assurances that email inquiries are addressed within one day. When the program was initiated some merchants were reluctant to join because they did not want to provide Google, an ad-selling monolith, business sensitive information on their order volumes. Google has removed this barrier.

A change benefitting all merchants in the program is that they can now custom position the badge on their site and display it on their https pages. Previously, it had to appear in the lower right hand corner of the home page. An additional carrot to attract new enrollees is that reviews garnered through the Trusted Stores program will help advertisers, using Google’s AdWords program, qualify for review extensions that boost click through rates by offering the consumer merchant quality assurances.

Google’s intent is clear. The ad giant wants to enroll more high volume merchants in its program. A greater number of stores would enhance Google’s position as a shopping resource. By dropping the data sharing requirement, Google removes a clear and significant barrier to participation. Surely, a merchant with a stellar performance rating, attaining the coveted review extensions for AdWords and enjoying enhanced click through rates will be more willing to purchase more AdWords, a clear win for Google. To industry watchers, this move is not just a program change or a way to gain more AdWord sales. It is a strategic move to counter the growing influence of Amazon as a commerce source for consumers and to consolidate Google’s position as a source of trusted reviews versus other review platforms. This program change is a signal of things to come and bears careful watching.