SPEAKER: 'SUPPLY-CHAIN EXCELLENCE' IS KEY

JON SPRINGER

NEW YORK -- E-commerce retailers should focus on "supply-chain excellence" -- particularly returns, packaging and delivery options -- if they want to survive, according to a speaker at the Private Label Manufacturers Association Consumerama conference here.

James Morehouse, vice president for Chicago-based consultant group AT Kearney, said "what happens after the click" could determine the winners and losers among dot-com retailers.

Morehouse based his talk on results of a consumer-based study his firm performed on a variety of Internet retailers. Grocery delivery businesses covered just a small sample of the study since the category is well-behind other sectors, Morehouse said.

According to Morehouse, the quality of the delivery experience can be critical in turning satisfied customers into delighted customers. Those in the latter category are the core of Internet shoppers, who will account for the largest percentage of sales now and in the future.

While most dot-com retailers are doing a fairly good job in the areas of product selection and billing, shipping is where some problems start, Morehouse said.

Consumers want options in product delivery, he said, with a choice of carriers and the option to send a single order to multiple addresses. Most shoppers will pay a "reasonable fee," for delivery, Morehouse said, but added, "Free is not reasonable."

Return policies tend to be more problematic for consumers and retailers, Morehouse said, citing a study showing only 29% of Internet shoppers returned the wrong purchase because it wasn't worth the hassle. Consumers will demand Internet shopping returns to be no more complicated than store returns.

Morehouse suggested e-tailers re-engineer the returns process. "This has become an issue that's got to be wrestled to ground," he said. "It's the most damaging issue in creating dissatisfied customers."

Focusing on the last mile -- allowing the customers to have a say in how and when they receive their orders -- will be the "battleground for customer delight," Morehouse added.

Packaging can distinguish brands and make a positive impact on the customer, Morehouse said, though he acknowledged few e-tailers are taking advantage of the opportunity. Of 200 packages inspected by Morehouse, he described 190 as "horrid."

He noted, however, that consumers were delighted when they received packages in white boxes or in branded packaging.

Replacing the messy styrofoam "peanuts" with bubble wrap can also make a positive impact, he said. He noted e-tailers could also make better economic use of their packaging budget by using smaller boxes that would cut down on shipping costs. Mst boxes, he said, are several times too large for the items they ship.

"Distinctive packaging enhances digital brands and drives customer retention. Branded packaging should be very important," Morehouse said.