The sharing economy is booming and will only continue to grow. According to PwC, it is estimated to hit $335 billion by 2025, up from $15 billion today. As the sharing economy takes off, more companies across industries are starting to get in on the action.
With rising labor costs and the unknowns of running an ecommerce business, many companies feel the need to outsource parts of their ecommerce operations. This is leading many companies to partner with sharing-oriented startups, like Instacart, Uber, and Postmates, to help ease the burden of entering the ecommerce space.
However, these partnerships may be doing more harm than good. While these providers offer new value and convenience for consumers without creating additional overhead costs or work for businesses, they also put brands’ customer experience at risk. On the other hand, if companies invest in the right tools themselves that allow them to forecast demand and effectively manage their labor to accommodate ecommerce orders, they won’t need to resort to using third-party providers.
Here are three reasons why third-party service providers are taking a toll on brands’ customer experience:
1. Loss Of Control
Partnerships with on-demand services might start out as convenient, but they can quickly become toxic as companies begin to lose control of the customer experience and hand over the frontline impression to their partners. As ecommerce continues to grow, more companies are turning to third-party providers to help streamline processes like delivery.
By giving away the last mile of the customer experience to third-party delivery services like Postmates and Instacart, companies have no way of knowing whether providers are meeting their standards or reflecting their brands appropriately to customers. If something goes wrong during the delivery process (i.e. the order is delayed or the wrong item gets delivered), the consumer will likely hold the brand accountable rather than the third-party provider.
According to a study by Acquity Group, 52% of consumers blame the brand the product is ordered from when a delivery fails to arrive on schedule and as expected. And of those who indicated an order hadn’t arrived on time, 63% claimed it influenced future shopping decisions in some way. The more components ecommerce companies give to providers, the more control they lose over the customer experience.
2. Hand Over Valuable Data
By partnering with third-party service providers, retailers end up giving some of that data away—sometimes without even realizing it. Companies aim to connect with their customers on a personal level and they do this by capturing all sorts of data—from email addresses and purchase histories to product feedback and customer service ratings. Having this data helps companies cater to customer preferences and better personalize the customer experience.
In many cases, when consumers interact with a product or service through a third-party, it’s the provider that captures the data and not the retailer (even though it’s their product being purchased). Without this valuable asset, companies will find it more difficult to fine tune their own customer experience.
3. Lose Competitive Edge
Partnering with a third-party service provider puts retailers at risk of losing some of their unique flare. Take grocery or food delivery platforms, for instance. Their platforms accommodate hundreds of grocery stores and restaurants, all of which have very little say in how their own company page looks or how their products are presented—and in turn each individual store ends up blending in with the competition.
With organizations facing such tough competition these days, it’s important they break through the clutter to catch consumers’ attention. When companies are stuck in a “sea of sameness,” they’re missing out on potential sales. Lacking a unique design or personalized user experience makes it more difficult for companies to stand out among their competitors to retain existing customers and attract new ones.
Companies that partner with these platforms also risk reducing their customer loyalty. As these platforms continue to build their wide company base and reputation, more customers may turn their loyalty to the delivery service as opposed to the actual retailer.
Partnering with third parties can offer companies some convenience, but their services come at a price. These partnerships can potentially damage a company’s brand, customer experience, and long-term competitive advantage. Though the sharing economy is taking off and might seem like a shortcut to the ecommerce space, businesses may want to consider exploring other methods of labor optimization that will better protect their brands while providing cost-effective services to their customers.