Delivery speed has been the focus for most merchants looking to compete in the ecommerce marketplace, but is it really the most influential factor for online shoppers? How does the cost of shipping compare to speed and how can merchants stay ahead of evolving consumer delivery preferences?
Delivery Preferences Shaped by eCommerce Growth
Consumer shopping habits have shifted, and as a result, so have consumer delivery preferences. 2020’s COVID-19 shutdowns accelerated the existing trend towards ecommerce, but now that consumers have become accustomed to having all manner of products delivered straight to their door, a rush back to brick and mortar stores hardly seems likely.
According to a Ware2Go study on shopping behaviors during the pandemic, 87% of Americans are shopping online, 58% are browsing online retailers daily, and 55% are purchasing items from retailers they’ve never shopped with before. This gives small to mid-sized merchants an opportunity to make an impression on first-time shoppers through their ecommerce shipping service levels. But should merchants prioritize offering fast or cheap shipping?
What Shapes Customer Preferences for Cost over Delivery Speed?
Rather than focusing on the general argument of cost vs speed, it is important for businesses to recognize that there are often trade-offs between the two. That is, depending on the specific scenario, industry, or customer type, preferences for faster shipping vs cheaper shipping can shift dramatically. For example:
Customer Age: Millennial and Gen-Z populations care more about shipping speeds than the generations before them. And as these younger age groups increasingly penetrate the market, shipping speeds become a more important deliverable. However, older populations are generally more driven by cost.
Urgency: If there is any period where shipping speed is more important than cost, it’s during an emergency. Google search volumes for “2-day shipping” and for “same-day delivery” shows that 2-day shipping searches on Google spike heavily the week before Christmas, when buyers are under pressure to give timely gifts. In these circumstances, buyers are likely to sacrifice shipping costs in favor of delivery speed.
Total Purchase Price: For less expensive orders, buyers may be less willing to purchase same-day shipping (i.e. why pay $10 for the same-day delivery of a $7 bracelet?) because proportionally, the shipping costs are too high. Conversely, paying $10 to ship a $100 order seems like a better deal.
Offer Options to Meet Diverse Delivery Preferences
Speed and cost are both critical to online purchasing decisions. However, offering both cheap and fast delivery to all customers may feel out of reach for some SMB’s. After all, shipping can be expensive. That’s why customers have historically had to pay extra for the luxury of faster shipping.
But as customer expectations increase, expensive and cumbersome delivery options can quickly turn off buyers. In fact, merchant survey respondents indicated that offering fast or free shipping options was their most effective tool for improving their ecommerce conversion rate. Below are a few tactics for businesses struggling to offer options to satisfy their customers’ diverse delivery preferences.
Minimum Spend Threshold: Offering free shipping after a minimum spend threshold is a win-win for ecommerce merchants. It allows them to realize economies of scale with an outsourced fulfillment provider and increases their Average Order Value (AOV), increasing the profitability of the sale.
Subscription-Based Delivery Incentives: The rise of Netflix and other subscription-based services like Dollar Shave Club has built consumer preference for services they can receive on an ongoing basis that don’t require them to continually swipe their card. Sports recovery drink, O2 offers a 20% discount and free 2-day shipping with a monthly subscription. Turning customers into subscribers can lower customer acquisition costs and drive up Average Order Value (AOV).
On-Demand Warehousing: The model of on-demand warehousing connects businesses with warehouses that have excess storage space available. Because warehouses are happy enough just to make use of their unfilled space, the costs for merchants to store their inventory are kept low.
How to Achieve Faster Delivery Speeds
Ultimately, consumer expectations for speed to delivery have increased across the board. In fact, our recent consumer survey revealed that 42% of shoppers expect a 2-day shipping option for every online purchase they make. That means that in order to compete at scale, merchants of all sizes need a fulfillment network to support affordable nationwide 2-day shipping. The levers that merchants can pull to improve their delivery speeds are:
Inventory distribution: Merchants who fulfill all of their order volume from a single location will be relying on expensive solutions like next-day air. By distributing their inventory to multiple fulfillment centers, they can get as close as possible to their best customers to meet their 2-day shipping expectations with ground shipping.
Integrated technology: Small to mid-sized merchants especially should rely on technology to scale their fulfillment operations as opposed to personnel. A tech-enabled fulfillment provider like Ware2Go can offer in-depth reporting to monitor geographic patterns in demand so you can quickly pivot your fulfillment strategy if your order profile changes.
Optimized warehousing protocols: Speed to delivery starts with fulfillment speed. If your current fulfillment solution doesn’t offer same-day fulfillment, find a partner with the proper warehouse slotting protocols to fulfill your orders faster and meet consumers’ 2-day shipping expectations.
How Delivery Preferences Affect SMB’s
The benefit of ecommerce sales channels for small to midsize merchants is that they are easy to launch and scale. They are also incredibly flexible, able to be switched on or off quickly and marketed purposefully. The challenge is that consumer expectations for ecommerce delivery are constantly evolving.
Merchants looking to compete in the digital sales environment need a fulfillment solution that is as flexible and scalable as their ecommerce sales platforms. Because while digital sales technology has evolved to adapt quickly to shifting consumer shopping habits, scaling sales without scaling fulfillment capabilities could be a recipe for a disappointing customer experience.
O2 recovery drink learned the importance of a flexible fulfillment solution when COVID-19 shutdowns halted sales through their primary retail sales channels. Their Shopify storefront was easily able to process the sudden increase in direct to consumer orders, but without a fulfillment provider that could pivot from LTL retail shipments to small parcel residential deliveries, they would not have been able to make the pivot that ultimately grew their revenue by over 5x year over year.
To learn more about how Ware2Go’s flexible fulfillment model is helping merchants like you meet ecommerce delivery expectations, take a look at our solution or reach out to one of our fulfillment experts.
What is a delivery time? The time that elapses between a customer placing an order online and receiving the order is broken up between fulfillment time and delivery time. Fulfillment time refers to the time that it takes for the fulfillment center or 3PL to pick and pack the order and prepare it for shipment. Delivery time refers to the time it takes the postal carrier to pick the order up from the fulfillment center and deliver it to the end customer.
How can I increase my delivery speed? Delivery speed can be improved either through next-day air shipments or by adopting a nationwide distributed warehouse model. Next-day air shipments tend to be costly and can either eat into margins or deter shoppers who are looking for affordable shipping options. The distributed warehouse model helps merchants position their inventory closer to their end customers so they can achieve nationwide 2-day ground shipping. This not only increases delivery speed but also cuts down on delivery costs by eliminating long-zone shipments and lowering time in transit (TNT).
Why is fast delivery important? Fast delivery is an expectation for ecommerce shoppers and retail partners alike. Research shows that offering fast delivery actually drives more conversions, driving up top-line revenue and expanding market share. In a 2020 survey, merchants reported that offering 2-day shipping drove more repeat customers, better online reviews, and an edge over their competition. Additionally, merchants reported that offering 2-day shipping increased cart conversion rates by up to 25%.
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