New data analytics approach helps retailers improve customer delivery

Major e-grocer in the United Kingdom saw a 4 per cent increase in profits on average over six months when doing a test simulation of the data-driven approach to customer home delivery

Using data analytics to predict when customers want to access home delivery services can help retailers lower delivery fees and become more efficient, researchers claim.

Representatives from Warwick Business School, Lancaster University Management School and the University of Southampton have undertaken new research into a “foresight approach” to home delivery, which predicts when people want their shopping delivered based on what delivery prices or incentives are being quoted for different delivery time slots.

By mining customer data, the new approach takes into account accepted orders to date as well as orders still expected to come in, and creates dynamic pricing for home delivery time slots. This allows retailers to optimise price and timing of delivery and offer discounts on certain time slots.

“Traditionally, online retailers would collect orders including delivery time requests until a certain cut-off time and plan their delivery schedule accordingly,” said Dr Arne Strauss, assistant professor of operational research at Warwick Business School.

“Therefore, maximising profits is a problem because the final set of orders for a given delivery day are not known until shortly beforehand, yet decisions on the pricing of delivery time ‘slots’ have to be made in advance based on an estimate.

“With our new approach we demonstrate that analysing the customer data already at retailers’ fingertips and using it to predict the impact of future expected orders in the estimation of delivery costs produces higher profits than only using orders accepted to date in this estimation.”

Why predictive analytics matters
How predictive analytics is tackling customer attrition at American Express
The keys to smarter data analytics Using data analytics to power customer lifetime value

The researchers conducted a simulation test of their new approach on a major e-grocer in the United Kingdom and saw a 4 per cent increase in profits on average over six months.

Tight profit margins can be an issue for many retailers, especially as more retailers are offering same-day delivery such as fashion retailer, The Iconic. The increase in online shopping spurred on by the growth in adoption of smartphones and tablets is also pushing retailers to find ways to differentiate themselves through their delivery service.

“Business failures such as Webvan who went bankrupt in 2001 after trying to offer a same-day delivery service brought home the message that while small delivery windows appeal to customers, they do cost the retailer money,” Dr Strauss said.

“It is important to incentivise customers and steer them to particular delivery times,” said Dr Strauss. “This could be in the form of ‘points’ or vouchers or even something along the lines of asking the customer to consider the environmental impact.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, or join us on Facebook: https://www.facebook.com/CMOAustralia

Signup to CMO’s new email newsletter to receive your weekly dose of targeted content for the modern marketing chief.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

More Videos

Extremely informative. One should definitely go through the blog in order to know different aspects of the Retail Business and retail Tec...

Sheetal Kamble

SAP retail chief: Why more retailers need to harness data differently

Read more

It's actually a nice and helpful piece of info. I am satisfied that you shared this helpful information with us. Please stay us informed ...

FIO Homes

How a brand facelift and content strategy turned real estate software, Rockend, around

Read more

I find this very strange. The Coles store i shop in still has Flouro lights? T though this would have been the 1st thing they would have ...

Brad

Coles launches new sustainability initiative

Read more

Well, the conversion can be increased by just using marketing, but in general if you are considering an example with Magento, then it is ...

Bob

How Remedy is using digital marketing and commerce to drive conversion

Read more

yo nice article

Bob

6 Ways to ramp up Social Media to Your Web Design

Read more

Blog Posts

9 lessons from 7 months of relentless failure

The most innovative organisations embrace failure. Why? Because it is often through failing the most creative out-of-box thinking happens. And with it comes vital learning opportunities that bring new knowledge and experience into teams.

Jacki James

Digital product lead, Starlight Children's Foundation

Why conflict can be good for your brand

Conflict is essentially a clash. When between two people, it’s just about always a clash of views or opinions. And when it comes to this type of conflict, more than the misaligned views themselves, what we typically hate the most is our physiological response.

Kathy Benson

Chief client officer, Ipsos

Brand storytelling lessons from Singapore’s iconic Fullerton hotel

In early 2020, I had the pleasure of staying at the newly opened Fullerton Hotel in Sydney. It was on this trip I first became aware of the Fullerton’s commitment to brand storytelling.

Gabrielle Dolan

Business storytelling leader

Sign in