The hidden cost of poor deliveries over $8,000 per lost customer, reveals ParcelHero

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International courier reveals the true price retailers pay for cheap service

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In 2011 86% of consumers quit doing business with a company because of a bad customer experience

Online parcel delivery company ParcelHero says that failed and poor quality deliveries could cost internet retailers at least $8,064 (£5,300) for every customer that defects to another site. The company is calling on retailers to act now to improve delivery standards, or face paying a very heavy price.

ParcelHero's Head of Public Relations, David Jinks MILT, says: 'Failed and delayed deliveries cost the UK economy over $1 billion (£771 million) and retailers over $718 million (£473 million) directly in 2014. But that’s just the tip of the iceberg. What is less appreciated is how much those failed deliveries will cost retailers in lost future earnings. It is six to seven times more expensive to acquire a new customer than it is to keep a current one, yet in 2011 86% of all consumers quit doing business with a company because of a bad customer experience and 59% of online shoppers said they were less likely to order from a retailer again if they have a bad delivery experience.’

Online customers are increasingly savvy about delivery issues. Not only are they very likely to switch to another online retailer following a bad delivery experience, but they increasingly examine not only delivery options, but which delivery companies a retailer uses. Over 1 million people view tweets about customer service every week. Roughly 80% of those tweets are negative or critical in nature. And that means consumers are becoming very aware of the reputations of some delivery companies.

Says David: ‘Let’s assume for a moment that customers do overlook the fact a retailer is using a budget carrier, which could have cost retailers the sale before the consumer even placed an item in the basket. The true cost for retailers of using very cheap delivery services is still potentially enormous. The average UK internet order is $89 (£59) per transaction. If an online store loses a customer because of an inept or late delivery, it hasn’t just lost that $89, or even their next $89. In the UK customers make an average of 18 online purchases a year and spend around $1,137 (£749) online, while American shoppers are expected to spend $1,680 online.

David continues: ‘Let's say that the lost customer might have made an average of six purchases from a particular online store this year, that’s actually $537 the retailer has lost from that one shopper in a single year. How many years might they have remained a loyal online customer? If we assume they remain loyal for at least five years (and some Amazon customers have stayed loyal for 20!) then that’s $2,688 lost. But the real kicker is that customers tell on average at least ten other people about a bad delivery experience. If only two of those would have been future customers for a particular site we can times that $2,688 by two more lost customers. That’s $5,376 in sales a site might have lost without ever having had a chance. Add that initial lost customer and overall that one bad delivery could have cost the retailer $8,064.’

And those figures are just for average size internet retailers. ParcelHero research suggests that poor customer experience could result in a swing of $184 million for a large Internet retailer.

Professor Richard Wilding OBE of Cranfield University, an expert in e-commerce logistics, has shared his views on how internet deliveries can be an active selling point for retailers with ParcelHero recently. He says: ‘Your main point of contact is with the retailer, and they're handing over responsibility for the delivery to another organisation. You've got to make sure they do it well. If they do, it will build loyalty and generate more business. But if you do it badly and use poor couriers it will cost your business an awful lot and customers won't come back.’

ParcelHero's David Jinks concludes: ‘Can retailers really afford to be losing this kind of custom for the sake of a few extra percent on their delivery costs? Our reasearch suggests 7 out of 10 consumers are happy to spend a little extra for a good customer experience and delivery, so cheap deliveries are an entirely false economy. Retailers should think long and hard about retaining delivery companies whose names shout trouble’.

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