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What Matters Most To Consumers, Fast or Free shipping?

by Jon Eickman on 2019-08-15 15:02:58

If you’ve been sweating the ever growing consumer demand for faster and faster shipping, I have good news for you. It seems the shipping speed bubble has finally burst.

For the past decade, anyone in the logistics or ecommerce space has been told that consumers what their products faster than ever. And if you couldn’t keep up the pace to compete, well then you were out of luck. After all, the “Amazon Effect” was supposed to continue to drive the consumer expectation for delivery speed higher and higher. But few retailers have the kind of sophisticated infrastructure that allows them to guarantee one-day shipping. Faster shipping is far from cheap, which means smaller retailers can’t compete on the same scale as their larger competitors. Without sophisticated supply chains and extensive distribution networks in place, one-day standard shipping is not a sustainable, achievable option for most retailers.

post imageBut here is the good news. According to the latest data, faster delivery simply isn’t what's driving purchase decisions today. Not even close. Let’s take a look at the numbers.

A recent study done by Alix Partners  found that only 2% of consumers expect same day shipping and 4% expect next day shipping. A study by Bizrate that looked into same day shipping importance found that only 5% of consumers expect same day shipping, which adds more confidence that consumer expectations surrounding delivery times are slowing down.

And those studies aren’t alone. Other studies have found that less than 25% of consumers report delivery times as a reason for shopping cart abandonment. That same study found that a substantial 90% of consumers say they value free shipping.

The team at IDS found numerous other studies listing free shipping as the ultimate deciding factor between delivery speed and costs. The Alix also found 75% of respondents reported that free shipping greatly impacts their ordering decision and another 22% reported that it somewhat impacts their decision. Only 3% reported that free shipping had no impact on their purchase choices.

Clearly, free shipping has a far greater impact on cart abandonment and conversion rates than shipping speed does. However, the best answer to this problem lies in a blended approach and not one or the other. Retailers should seek to strike a balance between speed and costs to maintain their competitive edge.

Although it can seem impossible, most retailers are able to find a way to offer free shipping while still maintaining a respectable 2-3 day delivery schedule. Here are a few tips to get you started.

1. Expand your distribution network by working with a 3PL

3PLs, like IDS, can allow you to expand your distribution network without costly investments into your own infrastructure. Choosing the right partner, with fulfillment centers close to your customers, will lower your shipping zone and save you HUGE in shipping costs while increasing your delivery speed

2. Bake shipping costs into product costs

A slight increase in the price of your product could be all that’s necessary to make up the difference when offering free shipping. Studies show that consumers are more willing to pay a higher cost for a product than they are to pay shipping costs. Additionally, you can offer premium, expedited shipping options and use the margin from those upsell services to cover any additional costs of providing free standard shipping.

3. Group parcel discounts

If you ship on your own carrier accounts, you could be leaving a lot of money on the table. All carriers negotiate different shipping rates based on the volume of each account. We actively negotiate our shipping rates with carriers throughout the year and we make these group accounts available to all IDS clients. This shared pool has much more parcel volume than any single customer and therefore gets special discounted rates that can free up margin for other initiatives, like offering free shipping.

IDS provides complex e-commerce fulfillment and multi-channel order fulfillment solutions that optimize both parcel costs and transit times for business to business and direct to consumer businesses. Call us today at (866) 232-6533 or contact IDS online to learn more.

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