Internet product sales have been growing consistently in Brazil. After the initial euphoria of the early 2000s, when many stores opened and many also closed, e-commerce consolidated itself as an important sales channel in the country.
Over time, consumer distrust and fear of not receiving the purchased products gave way to improving the shopping experience over the internet, including some studies showing that the online channel can provide a better shopping experience than that traditional trade for certain audiences[1].
Today, Brazil registers a total of R$ 22,5 billion in product sales over the internet, with an expectation for 2013 to reach R$ 28 billion[2].
Figure 1 – Virtual consumer goods retail numbers in Brazil
Source: Web Shoppers 27th edition; Reviews: ILOS Institute
It is undeniable that logistics is one of the critical success factors for the development of internet sales. Virtual stores that, at first, believed that they would not need to keep products in stock to sell through the electronic channel, soon realized that it was necessary to stock goods to guarantee that they would have them available to deliver to their online customers. The strategy devised at the beginning of the e-commerce boom, of selling first and then running after manufacturers, was soon discarded by companies that ventured into this new channel. Today, all the large online retail chains have products in stock and even inform their consumers of this availability, making them more confident that they are buying something that actually exists.
But even with the evolution recorded over the years, not everything is going well with the level of service provided by virtual stores. Although they are more assured with their stocks and with websites that show more information about product availability, problems in the logistical flow still generate delays and malfunctions in the products sold, affecting the level of service.
This issue came to the fore strongly in 2011, when B2W, one of the main virtual retail companies in the country, had many delivery problems for customers and was fined R$1,74 million. According to Procon, the number of responses to problems with the company's websites (which includes the Americanas.com, Submarino and Shoptime brands) jumped from 2,22 thousand in 2010 to 6,23 thousand in 2011. Most consumer complaints was due to non-delivery or product defect[3].
In 2012, customer issues seemed to be settling down, and several investments to improve product distribution began to be announced.
In this context, seeking to evaluate the logistical performance of the main online retail stores in Brazil, the ILOS Institute carried out a survey, which began in December 2012 and ended in January 2013, which raised a series of aspects related to the delivery of products to consumers. The period was chosen due to its proximity to Christmas, a date of high retail sales peak.
The objective of the work was to record the promised and realized delivery times, monitoring possible logistical problems, such as delays, breakdowns and whether the correct product was delivered. In addition, knowing that there are regional differences in the logistical performance of virtual stores, the research sought to understand and compare deliveries made in two different cities in Brazil: São Paulo and Belém, verifying differences in service levels and prices charged.
To carry out the survey, ILOS placed 120 orders over the internet, between the 3rd and 14th of December 2012, and had them delivered to ten different addresses, five in São Paulo and five in Belém. The products purchased were glass bowls and glasses, chosen because they are fragile items, which would require protective packaging and special care to prevent damage. As for the payment method, half was made by credit card and the other half by bank slip, paid on the same day of placing the order.
Figure 2 – Organization of the ILOS survey
Source: ILOS Institute
Online purchases were made by the ILOS team in six different virtual stores: Americanas, Comprafacil, Magazine Luiza, Ponto Frio, Ricardo Eletro and Walmart. The stores were chosen because they are important online retail companies in the country, including a representative of the B2W group, a representative of the Nova Pontocom group (Ponto Frio, Casas Bahia and Extra), as well as other large retail companies that sell glasses and glasses on the web[4].
Shipping, time and delay
The first analysis presented is related to the freight price charged to the consumer. On average, shipping for delivery of a cup purchased online is R$ 7,1. However, there is a big difference in the price of delivery to São Paulo and Belém. The delivery price for the capital of São Paulo – where most of the distribution centers of the virtual stores are located – is less than half the price charged for Belém: R$ 4,6 versus R$ 9,6, respectively.
Figure 3 - Shipping price and use of the Post Office
Source: ILOS Institute
In addition to being more expensive, the delivery time to Belém is also very long, more than twice the time taken for consumers in São Paulo. The research recorded that, on average, those who buy online wait a little over seven working days to receive the requested product, with consumers in São Paulo waiting five days and those in Belém, ten.
The evaluation of the logistic service level, however, should not be based only on the practiced delivery time. The most diverse studies of consumer satisfaction show that one of the key points to measure service levels is to verify if the expectations of the clients were met. Thus, when talking about logistical performance in the delivery of products purchased over the Web, much of the consumer's expectations are based on the promise made by the website. Thus, it is understood that the delivery time promised by the site is key information, because more than delivering quickly, it is necessary for the site to fulfill what it promised to the customer.
From the perspective of the company that offers its products over the Web, establishing the delivery time that will be informed to the consumer is a critical decision. If it is conservative and promises very long terms, the virtual store may reduce its revenue by ceasing to sell to customers who want to receive products with shorter terms. On the other hand, if you promise very short deadlines, the chance of not being able to meet them increases, which could cause great dissatisfaction, loss of customers in the future and even lead to sanctions by consumer protection bodies. Getting the balance between the time promised and the time actually practiced is at the heart of the matter.
To make this decision, the company first needs to be sure of the reliability of its delivery partners. In Brazil, Correios is the main operator contracted for the distribution of products purchased via the internet. In the destination cities evaluated in the ILOS survey (São Paulo and Belém), the Post Office was responsible for around 40% of deliveries, with the remaining 60% of orders being delivered by different operators, depending on the store where the product was purchased.[5].
Regardless of who the contracted logistics operator is, the virtual store will need to have service level agreements with him, especially in periods of peak demand, as is the case in December. Again, the virtual store will need to analyze one more trade-off, as more reliable operators, which guarantee previously agreed service levels, may charge more and increase the shipping price for the consumer.
It is noteworthy that the total delivery time to the consumer must take into account not only the transport time itself. The entire order cycle must be considered at this stage, including picking, shipping and transportation. The activities that make up the total order cycle time are not necessarily completely outsourced by virtual companies, and this must be taken into account when establishing the promised deadline for the customer. At this point, the entire logistics structure of the company influences, from the number and location of its distribution centers to the technologies used and the training of its employees.
The research carried out by ILOS evaluated the deadlines promised by virtual retailers in Brazil and identified that some adopt more conservative strategies and others are more daring. But at the end of the day, one out of four products purchased did not arrive on time as promised. The companies that promised longer terms practically did not delay their deliveries in relation to what was promised (Americanas, Comprafacil and Ponto Frio). In turn, one company was able to deliver in very short terms compared to the others, but did not deliver on its promises, as it was very bold and ended up registering delays, even delivering very quickly (Magazine Luiza).
No product
On or off schedule, one of the most important factors in meeting customer expectations is delivering products in good condition, free of damage. The glasses purchased by ILOS, chosen because they are fragile products, were checked upon receipt by the recipient. It was recorded that nearly one in ten glasses arrived broken. At this point, more than the delivery distance, the quality of the transport packaging had a great influence on keeping the products in perfect condition. Magazine Luiza used reinforced packaging and did not record breakages; in turn, the transport packaging of Walmart products offered less protection, and this company had a higher number of damaged products.
In addition to damage, which leaves customers without products, some deliveries simply do not reach the consumer's hands. This was also recorded by the ILOS survey. According to the data collected, the deliveries that were not made were mainly due to lack of products or because some packages were returned by porters, because they verified that they were damaged.
Leaving the consumer without a product is a critical point of service level. Stores that did not make some deliveries due to lack of products must improve their stock management and inventory tracking, which need to be in line with what the website informs the consumer.
Perfect order
Finally, an important service level indicator to be calculated is the perfect order, which is one in which the correct product is delivered on time, with no damage. This important indicator shows the percentage of times that the consumer receives what is actually promised. In the survey carried out by ILOS, a total of 62% of perfect orders were recorded, which is to say that 38% of orders arrived with a problem or did not arrive at all, a high percentage that indicates possible dissatisfaction for consumers.
The figures show what happened to orders monitored in the different cities and stores chosen for the survey. It is worth mentioning the case of Walmart, which, despite having the lowest shipping price, making it competitive when it comes to choosing consumers, had the lowest percentage of perfect orders. Americanas.com, on the other hand, presented the highest percentage of perfect orders, and one of the reasons was that they did not promise what they could not fulfill.
Figure 4 - Summary of indicators by region
Source: ILOS Institute
Figure 5 - Summary of indicators by company
Source: ILOS Institute
Conclusions
The survey results show that Brazilian virtual stores still need to make adjustments in their logistics service levels. The good news is that, in many cases, just resetting delivery time promises would solve a lot of customer frustrations.
However, not everything is just adjustments in the information provided and promises to consumers. Especially because promising very long delivery times is not a long-term solution that meets the desires of consumers. Granted, it's better not to promise what you can't deliver, but if the store can only promise very long delivery times, it won't please its customer either and could lose sales.
Thus, some more complex actions need to be taken to guarantee the good logistical performance of online stores, such as stock management and inventory monitoring, picking, location and quantity of distribution centers, management of contracts with transporters and logistics operators. and the definition of packaging for fragile products.
Some important Brazilian virtual retail companies are already seeking to carry out these actions, especially after the problematic year of 2011, when many virtual consumers were left without the products they had purchased. However, research shows that there is still a long way to go.
Finally, it is worth mentioning that, although it is known that there are problems in delivery logistics, e-commerce continues to grow consistently, which should serve as an incentive for constant improvements in the delivery service, which is one of the essences and a critical success factor for companies. online retail stores.
Maria Fernanda Hijjar
Market Intelligence Director
Institute of Logistics and Supply Chain - ILOS
MariaFernanda.Hijjar@ilos.com.br
Tel .: (21) 3445-3000
[1] American Customer Satisfaction Index – Survey of US consumers http://ecommercenews.com.br/noticias/pesquisas-noticias/e-commerce-proporciona–melhor-experiencia-de-compra-que-o-comercio-fisico-afirma-estudo (29 / 4 / 13)
[2] E-Bit – Web Shoppers 27th Edition http://www. vidadeecommerce.com.br/27a-edicao-do-webshoppers/ (21 / 3 / 13)
[3] http://blogs.estadao.com.br/advogado-de-defesa/ americanas-com-submarino-e-shoptime-ficarao-fora-do-ar–por-72-horas/ (14/3/12)
[4] All data presented as survey results are indicative and are based on the sample collected by ILOS. For more detailed analyses, with greater statistical precision, research with larger samples is required.
[5] Other operators used by virtual stores to deliver products in São Paulo and Belém, in addition to the Post Office: Total Express (Texcourier), Transpacific, Easy Delivery, Direct, Trans
Maria Fernanda Hijjar
https://ilos.com.brExecutive Partner of ILOS, holds a master's degree and a degree in Production Engineering from the Federal University of Rio de Janeiro (UFRJ). With more than 10 years of experience in the field of Logistics and Supply Chain, working on several projects, management and participation in research associated with the subject. She has more than 20 articles in newspapers, magazines, periodicals and congress annals, being co-author of several titles in the COPPEAD Collection by Atlas publishing house and in the Panorama Logístico Collection ILOS and CEL / COPPEAD.
