The impact of Instant Commerce on ecommerce business models
Connective Payments team, June 2022
You have a birthday tomorrow, the shops are already closing and you realize you don’t have a present yet. Or you are on a ladder and discover that you are missing a certain type of Allen key. And that while that job should actually be finished today! Or you discover that your gourmet set is broken, and you don’t have time to buy a new one a few hours before your friends come for dinner. Of course, you used to be busy and forget things. You improvised: you had another book on the shelf that looked good enough to give as a gift. Or you rushed to the nearest hardware store hoping it was still open. And in the absence of a gourmet set, takeaway Chinese is also delicious, right?
Last minute stress
In recent years, more and more online companies are responding to the ‘last minute’ stress of consumers. Many e-commerce companies aim to ensure that if you order before 10 p.m., your order will be delivered the next day. A few years ago that was still special, now it is the de facto norm.
The trend is that everything can be done even faster. Flash deliverers like Gorillas, Getir, Zapp and Flink are in a fierce competition to become the biggest. The stakes are market dominance, and it’s all about consumer favor, which is determined by speed, convenience and price. In recent years, the downside of ‘instant commerce’ has also become clear: underpayment of deliverers who are incited by apps (think of the judicial investigation into PostNL’s market conduct in Belgium), the distribution centers that disfigure the landscape and the city centers, and nuisance for local residents.
Central research question
In many sectors there is increasing attention for optimizing existing customer journeys, or setting up completely new ones. A gourmet set is not typically a product that must be able to be delivered immediately all the time, but sometimes the need is high. What can or should companies adjust in their business model to take advantage of or defend themselves in a market in which customers increasingly demand immediate satisfaction of their purchasing needs? That is the central research question of a ‘Shopping Tomorrow’ expert group.
Approach expert group Instant Commerce
Led by Connective Payments, this Visa-hosted expert group focuses on orders due between 10 minutes and 10 hours. To this end, the entire customer journey is examined. Because it includes more than just the promise of fast delivery. The entire process of searching, finding, comparing, choosing, ordering, paying, returns and customer service: it all has to take place quickly, without friction, “seamless”. The consequences for people and the environment are not forgotten. The results of the survey will be published by Shopping Tomorrow shortly.
We talked to chairman Maarten Deneer, consultant at Connective Payments, and Maarten Kolenbrander, Senior Acceptance Development Manager at Visa Europe. The two Maartens share their thoughts on the approach to the research and the highlights so far.
What is the central aim of the research?
“We recognize that there is a need among more and more consumers to get their hands on products as quickly as possible and we take this as a given. In recent years we have of course already seen “next day” and “same day” deliveries. Now we see the superlative with the flash deliverers. In the expert group, we discuss what you can do as an e-commerce company if you want to respond to those customer needs.”
How big is the expert group, and who is it?
“The expert group consists of 20 experts from various retail sectors. They are all people who bring in-depth knowledge of e-commerce, distribution, marketing, operations and general management.”
How does the expert group work?
“To get an idea of the things you could or should do to help your customer get their hands on something as quickly as possible, we look at every step in the customer journey: search, compare, order, pay, receive and return. In four sessions, we ask ourselves how you can speed up each step and how that step can support a fast delivery.”
Can you give an example?
“Take the search process. We believe that the factors ‘location’ and ‘delivery options’ will play an ever greater role in this. Currently in most situations, consumers only specify a location and delivery option at the end of the buying process. We think it makes sense for some products to be able to select location data and desired delivery date immediately at the start of the search process. For example today, or on December 5, between 2 and 3 p.m., within 4 hours or at the latest in 4 weeks, or only on Saturdays. Companies that have their data on stock, storage location, available capacity for order picking and transport options available online will soon appear at the top of the search results, compared to companies that have not yet arranged this.”
Ever faster delivery
What speed are you assuming?
“Good question! What is fast? Or fast enough? Those expectations are changing quickly. Ordered before 10 p.m., delivered the next day, that’s pretty much the norm now. But what a customer needs often depends on the situation. The question is what you could or should do if you want to agree with customers that they can get their hands on something within 12 hours or 8 hours or 2 hours or even less time.”
Ever faster delivery can also have consequences for people and the environment. How do you include people and the environment in your conversations?
“Those aspects are certainly discussed. When searching, comparing, ordering and paying, the effects on people and the environment are not very big. But the last two steps, receiving and returning, can have a lot of impact on that. What does speed mean for your storage? For the people who have to pick the orders? For the delivery guys? For the efficiency of your route planning?”
What role does Visa play in the expert group?
“Visa is the largest payment network in the world and connects billions of people in this way. Visa is in talks with retailers and online merchants worldwide to ensure that the payment section supports the overall buying experience and makes it easier for consumers. For example, there are payment solutions where you as a user can record your name, address and account details in a profile in advance. As soon as you choose that payment solution and identify yourself, the webshop will receive the data necessary to complete the order. This makes it superfluous that you have to enter that data yourself. Such a quick checkout will soon be possible with Click to Pay, from Visa, Mastercard & Amex, among others. This development will benefit the speed of ordering and payment, especially in situations where the retailer does not yet know the customer.”
Are there other developments that can speed up and facilitate the payment process?
“From this year on, the well-known Maestro and VPAY cards are gradually being replaced by Visa Debit, among others. A new card with which you can also pay online very easily. Certainly in combination with Click to Pay, this creates a range of new payment options, making payments more seamless and ‘instant’ than people are used to. Instant Commerce is then a very nice topic to explore.”
Insights so far
What insights have you come to so far?
“The first insight is that it is unnecessary and perhaps even impossible to offer an (even) faster delivery time for your entire product range.”
“It is better to differentiate and to offer visitors choices. The speed with which someone wants to get hold of something is often not determined by the type of product, but rather by the situation in which a visitor finds himself. Consider the example of the gourmet set. DeliveryMatch research shows surprising answers to the question of how many days people are willing to wait for a product. If the webshop informs you when the item is available for delivery, and you can choose a delivery time yourself, customers in many cases find a delivery time of 3 or 4 days fine, because speed doesn’t matter. In the Netherlands this is about a quarter of the respondents! If that choice results in a saving on shipping costs, that percentage may even increase. The share of consumers who say they want to receive the product the next day in all cases is 4% in the Netherlands, and even lower in countries like Germany, England and France.”
Those preferences are variable, aren’t they?
“Of course, those customer preferences are not cast in stone, but we believe that there are nevertheless plenty of opportunities for more efficient distribution. If you offer visitors choices about delivery, it will turn out that you don’t have to deliver some orders so quickly.
But in other situations, for example if you didn’t see something coming in advance, speed can be crucial. Most customers are happy to pay a little extra for this service.
If you then look at your logistics process, you can arrive at a more efficient use of people and resources by offering choices. The peaks may be a bit lower and the troughs less deep. This has an effect on stock levels, capacity on the shop floor and the utilization of your means of transport. It leads to lower costs, but also positive effects for the social and physical environment.”