Shipping according to your customer’s needs
The Retail Landscape in 2020
Brick-and-mortar and e-Commerce are constantly fighting for consumers’ attention and dollars. Sales channels are expanding, customers are widely distributed, and last year Amazon made the official move to one-day shipping for Prime members. Meanwhile, brick and mortar stores continue to close. There have been more store closures year-to-date in 2019 than all of 2018; the “Retail Apocalypse” is still in full force.
Retail isn’t dead, but it is different. As more sales move online, buying behaviours continue to change. Retailers who have failed to adapt to new consumer demands aren’t around anymore.
Amazon has changed the face of retail
Amazon has fundamentally influenced customers buying behaviour. It has not only affected their buying behaviour but also their buying expectations. From providing fast and free delivery to enhancing customer experience, Amazon realised that by providing utmost convenience and differentiated customer experience, would put the company ahead of its competitors.
Unfortunately, until now no other business has been able to build a thorough logistics infrastructure and provide its customers with fast and free delivery like Amazon. In fact, most companies have spent years trying to meet Amazon’s delivery promise but have failed.
In this era where Amazon reigns supreme, how can brands and small-scale retailers compete? What is standing in their way?
For the growing business that finds their supply chain and fulfilment workflows limited by operational or financial bottlenecks, the question arises; how can I manage costs while still acquiring the tools necessary to support expansion?
Bezos’ eCommerce Fulfilment and Logistics survey, sheds light on the numerous challenges and opportunities for retailers in the eCommerce industry. It discusses all the ways that retailers and brands can take to meet customer demands and stay competitive in their industry.
Over the years, many eCommerce businesses have tried their best to match Amazon’s promise of fast and free delivery. Now Amazon’s promise has become the new normal, but is there a way to find out if this is the right step for your retail business given the high delivery costs?
Additionally, Amazon spends more than $27 billion in shipping costs annually. Are you ready to afford that?
The shipping challenge: Free vs fast shipping
Recent studies have shown that online customers prefer free delivery over fast delivery. But still, majority of the retailers are prioritising faster shipping over free. This creates a clear gap between what customers are looking for and what the retailers are offering.
Consumers want free shipping over everything. According to a study conducted by Deloitte, 88% of consumers prefer free shipping over fast shipping. In an NRF report5, approximately 65% of online consumers research and calculate shipping costs before placing their order online.
Many brands and retailers feel it is equally important to offer both free (63%) and fast (64%) shipping, but when they were asked what they though their customers preferred, they by a 2:1 margin they said customers wanted free shipping. Based on the findings of a survey in 2017, the importance of offering free shipping has seen an increase by 43% whereas only 14% increase is seen in fast shipping.
The figures show that customers always prefer free shipping over fast shipping, yet the distribution of delivery offerings show that retailers are focused on optimising their business models for faster shipping, instead of free shipping.
Even though a number of respondents said they offer 20% same day delivery, 59% next day delivery and 74% 2-day delivery. But most businesses offer them for a price which is a major disadvantage.
How long will customers need to wait for free shipping?
On average, online customers are willing to wait 4-5 days just to get free shipping. According to our recent survey, retailers who have 3-5 day delivery as an option, only provide it for free only half of the time. Fortunately, anything longer, such as, 6+ days, is frequently offered as free delivery, but that is much longer than the average consumer is willing to wait.
Dealing with customer attrition
Businesses cannot afford to ignore what their customers want. Considering the amount of marketing spend that goes into attracting new customers; from your website, online advertisements, merchandising events, and regular promotions—the costs keep adding up.
Per industry standards, it costs 5 times more to get a new customer than to retain a current one. If you do not have the data, operations, and logistics in place to satisfy and retain your existing customers, then you’re very likely to lose them.
Abandoning the shopping cart
In its recent survey, the Baymard Institute found that the average shopping cart abandonment rate is 68%. The main reason why shopping carts are abandoned during checkout is because of the extra costs (shipping, taxes, fees) that are too high (53%). Only 16% of consumers chose to abandon their shopping carts because delivery times were too slow.
Majority of the online consumers are concerned about the price they pay for shipping. In fact, 65% of the customers report that “they look up free-shipping thresholds before they add items to their online shopping carts,” and 29% have abandoned their order because two-day shipping wasn’t offered for free.
Bridging the gap with on-demand warehousing
Our findings reveal that currently retailers and brands are facing a couple of key challenges, mostly related to logistics. Most of them are struggling with the choice between meeting the demands of their customers or keeping up with Amazon. In this struggle, they are faced with the limitations of fixed warehousing infrastructure and small logistics networks that prohibit them from improving their delivery promise.
Having on-demand warehousing network provides retailers and brands an unprecedented level of flexibility. They are not required to sign long-term contracts or pay for start-up costs. Bezos connects retailers and brands to their wide network of warehouse providers across United Kingdom.
Our research into the retail landscape reveals that the retail industry continues to change. There is immense pressure on the online seller and brands to be all things at once; customers need free and fast delivery. If you fail to satisfy your customer’s expectations, your business could lose its customers and could be the next one filing for bankruptcy.
The pressure to keep up with the standards being set by Amazon is causing most retailers to ignore a fundamental tenet of business: The customer is always right. When it comes to your delivery promise, what matters most is free and fast delivery, always remember what matters most to your customers.
1. The majority of online customers prefer to have free delivery over fast delivery. They would wait longer to choose free options.
2. With a margin of 2:1, survey respondents know their customers want free shipping instead of fast shipping, yet most respondents still focus on faster shipping.
3. Limited storage locations and fixed warehousing infrastructure prevent retail businesses from meeting customer expectations for quick and affordable delivery. On-demand warehousing could be a solution for this.