The platform economy and the rise of platforms did not pass silently. The impressive growth and successful diversification of digital natives such as Amazon and Alibaba is causing companies to rethink their position within the platform economy. Capgemini defines a platform as an online business based on enabling value-creating interactions between multiple parties. Although concepts and definitions are constantly evolving, many players acknowledge the potential benefits platformization entails. This blog highlights the benefits and risks of collaborating with platforms related to customer experience, branding, scale, and costs of delivery in the last mile.
Collaborating with a platform can grant companies access to advanced last-mile services, which helps in providing a valuable customer experience. As the last mile services offered are becoming an increasingly important decision factor in a consumer’s buying decision, offering the right set of last-mile services can lead to better sales and higher customer retention.
A well-known example of increased convenience is order integration. Rather than placing two separate orders in different company-specific web shops, it is more convenient for consumers to place one order at a platform that sells and delivers a wide range of products from different retailers. Examples of this increased convenience are picking up a package or staying home for a delivery once, and paying shipping costs only once.
Platform companies are well aware of the impact of last mile on their customer service levels. In the Netherlands, bol.com is constantly working on creating delivery propositions for its platform partners to ensure that partners can guarantee the promised service levels. Whereas bol.com does so with intensive partnerships for its outsourced transportation, JD.com has insourced delivery of 95% of its orders, using a fleet of 65.000 of their own drivers and vans, ensuring that 90% of its orders (in China) are delivered the same or next day. Such initiatives make platforms thoroughly in control of their last mile and therefore an interesting partner for retailers.
For retailers who want their brand to be at the forefront of technology, innovation, or sustainability, it can be wise to organize the last mile through a platform in terms of branding purposes, especially when it propagates a strong vision. For instance, Amazon now executes their last-mile delivery using electric-powered delivery vans, showing they care for the environment. JD uses drones for last-mile delivery service, which shows that they leverage technology in all parts of their business. By selling products on such a platform, consumers feel that they are ordering at an innovative or sustainable company.
However, retailers should carefully consider their branding strategy and possibilities when their last mile is carried out by a platform as this leaves less room to fully control branding yourself.
Scale, cost, and ease
For retailers and CP companies that do not have a strong online presence and traffic, offering products through a platform opens doors to several scale-related opportunities. Platforms generally have a bigger reach, as consumers increasingly start their search for a product on a platform. For instance, in 2020 63% of all consumer product searches worldwide started on Amazon (Statista 2021). Besides, through a partnership with a platform, companies can leverage the platform’s knowledge of different consumer categories to tailor their product offerings and marketing campaigns. Next to offering sales opportunities, the scale of platforms can also lead to cost reductions. Within pure retail platforms, this is driven by for instance better price arrangements with logistics providers due to higher volumes.
The benefits that are found in collaborating with platforms on the front of last mile are countless; in terms of customer experience, cost, scale, branding, and many more. Although collaboration does not come without certain risks, platformization is disrupting online retail and will continue to do so in the future. As a result of COVID-19, we have seen a massive increase in online sales in 2020 as businesses are digitally transforming at a rapid pace. To come out on top as a retailer, it is key to choose your position towards platforms and leverage their potential.
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A year ago, Capgemini Invent initiated a blog series around the last-mile theme. Not knowing that 2020 would be the year where ecommerce would portray an unprecedented growth, causing the increased significance of the last mile in all its aspects. Retail businesses around the world are being affected by COVID-19 through everything from rapidly changing customer behavior to supply and fulfilment issues.
As a thought leader, Capgemini Invent is guiding retailers in rethinking their last-mile strategy and is happy to share the challenges that managers, retailers, and e-commerce companies will encounter in shaping the last mile. We hope you have read this with interest and that it helps you in your own situation. We would love to hear your views on last-mile and platformization, so contact us at: email@example.com or firstname.lastname@example.org.