The Evolving E-Commerce Value Proposition

Online merchants, e-marketplaces,  parcel carriers, and technology advancements each impact the e-commerce value proposition. In simple terms, that value proposition is still based on an innovative service offering: one with multiple features and benefits that make e-commerce attractive to the consumer and drive purchasing behavior. Some of the primary components of that value proposition include:

  • Product speed-to-market
  • Free shipping
  • Easy on-line order process
  • Product availability
  • Simple returns process
  • Subscription service benefits

Component Parts of the E-Commerce Value Proposition

Let us take a deeper dive to better understand these component parts of the e-commerce value proposition:

Easy online order process

The internet changed everything, and as technology advances, it continuously becomes easier for the consumer to order products online. This saves time for the consumer and is a huge benefit in today’s fast-paced social environment.

Product speed to market

Twenty years ago, it might have taken legacy catalog retailers up to two weeks to deliver products to the consumer. Modern online retailers like Amazon saw an opportunity to differentiate their retail service offering and started delivering products faster, between 5 and 7 days, and other online retailers followed. Delivery service commitments have since morphed to 2-days for preferred subscription members and we are now seeing next-day and same-day delivery in select markets. In most cases, consumers did not demand faster transit times, it was the merchants that drove faster transit times as they realized it allowed them to differential their service offering. In the end, the consumer benefitted.

Free shipping

First of all, there is no such thing as free shipping; merchants simply bury the cost of shipping in the sale price of the product. However, there is no turning back and the merchants must now offer a free shipping option to remain competitive. In many cases, strings are attached to free shipping, like fee-based subscription memberships. Once again, the consumer has benefited.

Product availability

Merchants have realized that limited product availability turns off the consumer and turns off sales. As a result, we are seeing giant fulfillment centers constructed, that supports greater product availability, which is a wonderful thing for the consumer.

Simple returns process

The returns process for on-line purchased products was once a nightmare, and in many cases, the consumer had to pay to return products. Today, technology is making the returns process easy; it is usually free and there are thousands of access points where you can drop off a product return.

Subscription memberships

In most cases, these types of fee-based, membership relationships help to make all the new added value, e-commerce services possible, and usually offer additional benefits, so the consumer wins again.

How the Value Proposition Has Evolved

The e-commerce consumer has never had it so good, with merchants adding value at every turn via seemingly free and improved service enhancements. Allow me to detail and take a look at how the value proposition has changed and is benefitting the consumer.

Delivery, Returns and Store Pickup

  • Weekend and appointment delivery, making it easier for the consumer to directly receive their purchased product while at home, without shipment release that can result in loss due to theft.
  • Thousands of new access points make it easier for the consumer to pick-up order or drop-off returns at conveniently located retail locations.
  • Consumers can now request direct-ship from a merchant to an access point.
  • UPS and FedEx offer robust delivery apps that permit the recipient to redirect their deliveries, while in transit.
  • Parcel lockers that offer 24/7 access, are slowly becoming a pick-up and drop off option across the US.
  • The growth of forward-stocking micro-fulfillment centers is making it easier for merchants, both national and local, to offer same-day and next-day delivery, via on-demand delivery solutions.
  • Click and Collect store pick-up is now a widely available option, for the recipient that prefers this solution.
  • Electronic messaging keeps the recipient informed of shipment status.
  • Transit times continuously improve.

On-Liner Purchasing/Returns Process

  • More reliable and faster internet connectivity allows consumers to process purchase transactions in seconds, versus minutes.
  • Purchasing apps can search product cost and availability across multiple merchants, making the shopping and purchasing process faster and easier.
  • Numerous electronic payment options are now available.
  • Mobile device shopping/purchasing functionality now permits near-instant purchasing capability for the consumer, no matter where they are.
  • Tech supported returns capability is making it easier to process a returns transaction and receive near-instantaneous credits to your electronic payment platform, which may not be a credit card.
  • Electronic messaging advises the consumer of order status.
  • The growth of electronic retail marketplaces offers improved product selection options.
  • Free returns and an unencumbered returns process are now a requirement if the merchant chooses to be competitive in the marketplace.

Product Cost

  • E-commerce continues to drive an improved, and nearly seamless electronic shopping solution, which in turn drives price competition and the lowest cost possible for the consumer.
  • E-commerce, on-line purchasing models and supporting technology are creating smarter consumers, that demand competitive pricing. Retail store price gouging, with 40-50 percent profit margins, is a doomed retail model.

The Future: Mostly Good, But Not All Good, E-Commerce Giveth and Taketh Away

There are challenges out there that can and will negatively impact the e-commerce value proposition as we know it today:

  • The integrated carriers like UPS and FedEx will start being more aggressive towards migrating the ugly Home Delivery to an access point pick-up, and they are doing this today by targeting the largest e-commerce merchants with punitive surcharges, specific to the residential delivery.
  • Products that are large and bulky will continue to see additional punitive pricing measures by the carriers as these shipments take up a lot of space, are prone to damage, and difficult to handle. Consumer-based free shipping will likely go away for large and bulky items that still move as a parcel.
  • Consumers that tender a high percentage of returns will need to pay for returns service as the e-commerce merchants realize they need to better manage the bad customer.
  • The carriers will become more aggressive towards redirecting deliveries to access points for pick-up, without the consent of the recipient, as this has already started to occur on a small scale.
  • The growth of micro-fulfillment centers will also result in the increased usage of on-demand delivery services, which probably do not train or vet their drivers as well as the large, integrated carriers do. This could have a negative impact on the overall delivery experience and could be a security concern for the consumer as you have more ununiformed drivers making deliveries via their personal cars.
  • The consumer will have to be enrolled in a fee-based, subscription service with the merchant to realize the benefits of the e-commerce value proposition as we know it today.

The e-commerce value proposition will continue to change over time with an improved service offering and some compromises in the overall value proposition. Pay attention to how the various merchants are treating you and stick with those merchants that demonstrate they value you as a customer. Remember, value is a combination of both price and service.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.