Tags Posts tagged with "Obstacles"

Obstacles

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The military has used drones for years, for a variety of missions. Now ecommerce retailers are evaluating their use.

Consumer research firm eDigitalResearch conducted a survey that found that 33 percent of online shoppers are open to using drones to speed up the delivery of their orders. Another study conducted by Walker Sands Communications reported that 66 percent of the surveyed American consumers think that online merchants will use drones for delivery within the next five years.

Consumers are apparently keen to utilize this technology, in other words. Amazon’s announcement in 2014 of a potential drone-based delivery service called Amazon Prime Air has led other retailers to consider drones.

AmazonPrimeAir

While the U.S. Federal Aviation Administration is evaluating the use of drones and the regulations related to them, there are challenges retailers need to overcome before drone-based order delivery becomes a reality.

In this article, I’ll list eight of them.

8 Obstacles to Drone Delivery

1. Order staging. Before orders are shipped, they are typically assembled in a staging or docking area in a warehouse to be loaded into trucks. With drones, this docking process will need to be redesigned and may require changes to how products are picked for an order. This is not a small change, as existing processes will have to be redesigned for supporting drones and employees will need to be trained on these new processes to make drone delivery successful.

2. Weight limit. Since drones can presumably only support orders below a certain weight, the retailer may have to split the order into multiple shipments. This will increase the delivery costs and will need to be somehow offset or passed down to the consumer.

3. Drop ship vendors. Many retailers use drop ship vendors. These vendors will have to invest in drones to support faster delivery, to remain competitive, or retailers will have to look for other options.

4. Distance limit. Drones can travel only a certain distance. This may require retailers to load the drones, along with the ordered products, in delivery trucks and use drones for delivery only when they are within a defined radius for customer deliveries.

5. Requires investment. Introducing drones as part of the delivery process requires investment. But this investment will be a bigger strain on smaller retailers — or use third party services that utilize drones.

6. Shipping big-ticket items. Drones fly a few hundred feet from the ground and could become targets of thieves who want to steal merchandise. Retailers will have to consider this before using drones to ship big-ticket items. Retailer shrinkage could increase significantly after introducing drones.

7. Weather restrictions. A customer who signs up for faster delivery using drones will need his orders to be delivered regardless of the weather. Drones are not ideal for inclement weather, such as snow, hail, rain, and high winds, which could delay delivery to the customer.

8. Uninterrupted service. Drones are machinery that can fail. When that occurs, retailers will presumably have to send another drone to deliver an order. They will also have to determine how to collect the broken drone or write it off as loss.

In short, drone technology sounds exciting. But the reality of putting it into use is not straightforward. While the F.A.A. considers regulations on the use of drones, retailers can ponder and plan their strategy.

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Business-to-business merchants face ecommerce challenges that are different from their business-to-consumer counterparts. This has slowed the entry into ecommerce for many B-to-B manufacturers and distributors.

Forrester Research projected 2013 B-to-B ecommerce in the U.S. to reach $559 billion and B-to-C ecommerce to reach $252 billion. B-to-B, in other words, is roughly twice the size as B-to-C. Moreover, only a small percentage of B-to-B suppliers currently use ecommerce — making the opportunity very large.

Most small-to-medium manufacturers and distributors do not have an ecommerce presence at all. If they have an online store, it is likely a first-generation version from 7 to 10 years ago. Its functionality is likely far behind what buyers now expect in online retail stores. Larger B-to-B operations likely have online stores, but most service only a small percentage of buyers. Others sell only a small portion of their products online.

B-to-B companies that invested early in ecommerce increased their revenue and lowered operating costs. Their customer satisfaction ratings improved, leading to higher customer retention. Profit and market share increased.

There are notable B-to-B companies that are currently growing their revenue and profit by heavily investing in ecommerce. W.W. Grainger, a supplier of industrial parts and equipment, is one of these. It ranks 15 in Internet Retailer’s 2013 Top 500 Guide with more than $3.11 billion in online revenue. That’s more than one-third of W.W. Grainger’s total. Moreover, ecommerce is reportedly the company’s most profitable channel. Grainger has targeted it to be 40 to 50 percent of total revenue in the next few years.

W.W. Grainger

Obstacles to B-to-B Ecommerce

Many B-to-B companies have long believed that ecommerce would create channel conflicts between sales personnel, suppliers, and other channels. But in reality, B-to-B sales channels are already disrupted by ecommerce. Manufacturers are selling directly to consumers. Manufacturers and distributors are selling products on AmazonSupply.com,Alibaba.com, and other portals to other businesses. Wholesalers are consolidating rapidly because they are caught in the channel chaos.

Companies with direct sales organizations want to control the sales process through their sales staffs and existing channels, where they have often made huge investments. In reality, companies that aggressively drive their customers online often find that their sales increase and their cost per order goes down significantly. That’s because outside and inside sales teams can focus on more strategic activities and less on transactional ones.

Beyond channel conflict, there are other obstacles to success in B-to-B ecommerce. Here are some of them.

  • Products are highly complex and customized. Kits, assemblies, and style options require configurators tied to backend resource systems to create valid assemblies.
  • Customers have many locations for ship to, bill to, and many buyers.
  • Shipping is very complex. There are multiple warehouses and drop shipping requirements — all with many carriers. Orders are often split to multiple destinations.
  • Availability is critical. It’s also dynamic. Customers must be assured of availability and timelines before they order.
  • Payments are generally “net 30″ rather than via credit card. There are credit limits and purchase order processes that add to the complexity.
  • System integration is critical. Unlike B-to-C companies, most B-to-B companies have separate systems to manage (a) products, pricing, and orders, (b) customers, (c) content, and (d) product information. These must all be integrated with the ecommerce platform.
  • Complicated pricing. B-to-B commerce typically includes many tiers of pricing (as well as custom pricing) by customer, rebates, and other items.
  • Differing roles and authority. Some B-to-B customers demand support for their buying process with different roles and authority defined for shoppers, buyers, and administrators.
  • Order history. Customers want access to their order history, status, and budgets. Customers also want to pay online.
  • Product restrictions are common. There are geographic restrictions, specific products by customer, and hazardous materials.
  • Tax issues are complex.

Beyond these obstacles, B-to-B companies must deliver a sophisticated online shopping experience (similar to what consumers experience at Amazon) with cutting-edge site search, merchandising, product information, and reviews — all accessible from multiple devices.

It is complex and expensive. To spread our your investment and mitigate risk, start small and grow. Involve all your business operations.

B-to-B Ecommerce Coming

Ecommerce will be increasingly common for B-to-B companies going forward. Many companies that have fully embraced ecommerce are striving to get 100 percent of their orders online. Some are leveraging their investment to enter global markets they never would have been able to enter with traditional channels.

B-to-B companies will likely shift customer support resources to other jobs, as support needs will decrease. Companies will likely add personnel to marketing departments and to online operations. Sales staffs will be more productive and more strategic. Some will reduce the number of brick-and-mortar stores. Some will need larger or more distribution centers to handle fulfillment.

If you are a manufacturer, you may drop ship directly to consumers to support both your own online retail store as well as your distribution partners. This will impact your fulfillment operations.

This does not happen in a day or even a year. Ecommerce is an investment in the future of a company. It will likely impact every area of a B-to-B organization.

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