The Business World: Delivery is the key to the cut-throat e-world

If you can get your delivery right, the potential benefits are enormous
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The Independent Online
YES, BUT how do you deliver? Amid the headlong rush towards e- commercing everything from car sales to banking, the little matter of delivery looms larger and larger. But while a vast amount of attention goes into organising the electronic side of things, getting the product or service to the consumer lags behind. And that is wonderful news - because it gives an opportunity for wise companies to shine.

The electronic side still leaves plenty to improve on. Many of us have had tried a transaction on the Internet - perhaps to book an airline seat - only to find that after 20 minutes' pecking at the keyboard to no effect you end up picking up the phone, talking to a human being and booking in two minutes. But, given time, that will be fixed, because it is just a question of buying adequate hardware and appropriate software. If companies are prepared to make the necessary investment, they will provide an efficient, seamless service.

But if some aspect of a service is easy, it is also impossible to gain a competitive advantage. That comes in the tough areas, and in e-commerce the tough area is delivery. As the legendary management guru, Peter Drucker, puts it in an article in The Economist's The World in 2000: "Delivery will become the one area in which a business can truly distinguish itself."

Not all delivery. It is easiest to divide retail e-commerce into four main areas: where the product or service can be delivered electronically, such as software or online information; where it is relatively easy to deliver, say, books; where physical delivery is inevitably quite clunky (a new car?); and where delivery is a complex interaction between buyer and seller, not just a one-shot sale.

More of the last in a moment. Consider the first three. As more and more homes have high-speed Internet access, the range of products that can be delivered this way will surge. Video rental stores will still exist because many people will still want to walk out to choose one, but more and more people will order it down the wire.

If goods can be delivered easily by post or courier, there is a simple rule to ensure success. Amazon.com has managed to dominate book retailing because it was a first mover, but it retained that dominance because it has an excellent delivery record.

Much the same applies to Dell computers, which, as I discovered the other day, has a very efficient system for tracking past sales - it managed to fax over a VAT receipt that I needed within 30 minutes, while the VAT inspector was still looking at the books. Whether delivery is managed by the seller or bought in on contract is irrelevant.

The customer does not know or care where the product is coming from, and certainly has no interest in how the delivery is managed. But it has to be good. Trouble again, though, is that it is hard to achieve much of a comparative advantage over other players. Being good is too easy for that. The third area, where delivery is inherently difficult, does hold out the prospect of retaining an advantage.

Take some examples. It is easy to deliver the new car to someone's door at a particular time, but not too easy to back up that sale with appropriate after-sales service. But if the vendor can attend to every difficulty with the car (and let's face it, all cars need some attention) over a months and years, the vendor both supports the sale and builds up a long- term relationship with the buyer.

This turns on its head the old relationship between seller and buyer. In the old days the last thing you wanted was for a customer who had bought something to come back with a query. Now you want to maintain a long-term relationship, partly because that is the easiest way of making another sale next time, and partly because there may be more profit in after-sales service than there is in selling the product in the first place.

Complex delivery applies to simple products. The home delivery services being developed by the supermarkets in theory is simple, but there has to be someone at home to receive the clobber. American-developed techniques to get round this, like having a locked fridge in the garage or leaving the goods with the doorman of the apartment block don't work in Europe. Most town houses don't have garages and most flats don't have doormen. Delivering at a precise time is also more difficult because our traffic is less predictable.

The result, as anyone who has waited at home all morning for something to be delivered will know, is that home delivery has not taken off as quickly as many predicted. In theory, it might seem ideal for the short- of-time executive. In practice, it is easier to pop into Tesco on the way home.

If, on the other hand, you can get delivery right, the potential is enormous. Standing in the check-out queue is not an inspiring aspect of modern life. The supermarket won't disappear, but my guess is that up to one-third of its sales could be replaced with home delivery within a generation.

But it is the final type of e-commerce, where the sale and delivery involve some kind of interaction with the customer, that the potential for outpacing rivals is greatest. It is easier to think of this interaction in terms of a service than a product.

Consider a visit to a doctor's surgery. This involves a two-way conversation, even when the visit is routine. Some such "visits" could be done electronically. Indeed, it would be much better if a larger proportion of such consultations could be done over the wire, as anyone who as picked up a horrid bug from someone else in the doctor's waiting room will know.

But delivering on-line medicine presents enormous problems of quality control. How can the doctor really assess the state of a patient, even with a high-quality video link?

But if something is difficult, it is especially worth doing. So there will be great prizes for organisations than can develop the right technology and the right procedures for these interactive aspects of e-commerce, including - and I know it stretches the definition of e-commerce, a visit to the doctor.

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