Part 1: Delivery Promise Gap – The Distance between What Retailers Offer and Customers Expect

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Every retailer with a stake in eCommerce (and that should be everyone by now) knows delivery promise is critical to sales. As customers, we value cost and speed and we expect retailers to keep their word. It’s a trade off… we order something online and want it quickly.  If your delivery promise falls short, you’ll lose the sale.

In fact, delivery speed and cost are two of the biggest considerations when making a purchase online. Why, then, is it difficult to offer fast, affordable shipping? Why What’s standing in the way?

Earlier this year, we surveyed 100+ eCommerce retailers on shopping cart abandonment, delivery promise, and logistics. You can find the full report here, but in the coming weeks, we’ll be diving deeper into the findings in a three-part blog series, “Breaking Down the Cost of Innovation”:

  • Part 1: The Delivery Promise Gap
  • Part 2: The Implications of Doing Nothing
  • Part 3: The Cost of Innovation

What Is the Delivery Promise Gap?

The Delivery Promise Gap is the difference between what customers expect and what retailers can offer in terms of delivery speed and cost.

Industry data shows customers value free shipping. According to a recent UPS report, 74% of consumers say “free shipping” is the most important delivery option and 44% of shoppers will choose a slower ship time if it means it’s free. Additionally, 49% of shoppers say “free shipping” is the second most important influencer when making a purchase.

FLEXE survey responses corroborate the impact free shipping has on buying behavior. When asked why their customers abandon their shopping carts, 56% said the number one reason is because shipping fees are too high. Clearly, cost of shipping plays a critical role in making a buying decision.

So where is the Delivery Promise Gap?

Despite understanding the importance of free shipping, survey respondents appear to be prioritizing fast shipping over low-cost shipping. 56% of respondents said offering 1-2 day shipping is essential for business. Only 44% rated free shipping in the same regard.

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How’d We Get Here?

Not that long ago, waiting multiple days for an online order was customary. Paying a premium was also normal. Today is different. Fast, free shipping—on every online order—is the new normal.

It’s not surprising that Amazon is responsible. Amazon Prime has more than 80 million members in the United States. The backbone of its subscription service is free, two-day shipping—on every order. You can buy a set of 20-pound hand weights and they’ll be delivered in two days for free. The same is true for a package of pens or boots or dog food. Every Prime-eligible order has the same standard delivery promise, and some items are eligible for even faster delivery.

The trouble is, Amazon was designed for eCommerce retail. It has spent years cultivating its loyalty program, garnering more members, and building out its fulfillment network to speed up and improve its delivery promise. Currently, it’s so far ahead of the competition, the only retailer it’s competing against is itself.

But Amazon can’t be our only option for fast, free shipping. Other retailers have to catch up.

The Cost of Prioritizing Speed

The problem with Amazon is it can afford to offer fast and free shipping to customers. And wiht 80 million Prime memberships, it’s created the demand. In truth, offering free, two-day shipping is expensive, but Amazon willingly absorbs these costs because the end payoff of customer retention and ongoing spend is higher than the immediate costs it’s absorbing.  

Not every retailer can do that. Nor should they. However, it is possible that retailers’ current strategies that prioritize speed over cost are actually causing customer attrition and negatively impacting sales.

In fact, respondents that offer next- and two-day shipping, are more likely to associate extra fees than those that have a longer delivery promise. Similarly, retailers that have a standard delivery promise of 3-5 days are three times more likely to associate free shipping.

 

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The truth is, both cost and speed are important to your customers (and you, as a consumer). But if retailers continue to prioritize speed over cost, it may be a “tortoise and hare” scenario. It isn’t enough to deliver quickly, cost will continue to hold the highest value for shoppers.

Retailers that want to compete in today’s market have to implement new, innovative solutions that make the supply chain flexible and adaptable to evolving customer demands.

There are myriad ways of doing this, but the first step is to discover what is the focus of your delivery promise, what are your customers actually demanding, and what outcomes are you seeking to improve business?

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// from Jordan Furdock at Net-Results