More people shop online, and there’s no turning back. Retail is different now. Approximately 17% of total retail sales in the U.S. will come from eCommerce, and nearly a third of those sales—31.4%—are Amazon’s. In an industry dominated by customer obsession, consumers expect a compelling delivery promise: Fast and free.
Amazon’s customer obsession drives sales
Retailers and brands must re-evaluate reasons for not offering fast and free delivery
Flexible logistics enables faster, more affordable delivery options
Why is Amazon so customer-obsessed?
Amazon dominates eCommerce. It built its brand around customer obsession, fueled by fast, affordable delivery. It defines what it means to get goods fast. And it’s where 63% of product searches start.
The majority of consumers (73%) and retailers (75%) agree that “fast” means two days or less—the original, longest-lasting Amazon Prime delivery promise. However, even two-day delivery is too long now.
CONSUMER EXPECTATIONS FOR FAST SHIPPING
Already, 45% of consumers use Amazon’s One-Day Delivery service, and 28% use Same-Day. Adoption will only continue to grow as Amazon opens 1,500 new same-day fulfillment centers across the country.
Why? Because 57% of Amazon Prime One-Day and Same-Day Delivery users say those offerings increase the amount of money they spend on the platform.
Amazon’s customer obsession pays off.
57% of Amazon Prime One-Day and Same-Day Delivery users say those offerings increase the amount of money they spend on the platform.
Consumers and retailers agree: Delivery promise matters
Amazon conditioned consumers to value a fast and affordable delivery promise. Seventy-eight percent of consumers say free shipping is important when making a purchasing decision, and 53% say fast shipping is important.
Retailers agree, but most view fast shipping as more important than free. Sixty-four percent of retailers say free shipping is important to consumers, but 71% say fast shipping is important.
It’s clear both consumers and retailers know delivery promises impact shopping behaviors.
Take shopping cart abandonment: When a purchase is intentional, the top two reasons for abandoning that purchase are high shipping costs & fees and slow delivery times.
These are logistics problems worth solving, but retailers and brands have reasons why fast and free delivery may not work for their business.
93% of consumers source products from other retailers to save on shipping costs.
Reconsidering fast and free
Fast, affordable delivery is ideal, but it’s not simple. Logistics is complex and expensive. Cost is the primary reason holding retailers back from improving delivery options. That said, it’s increasingly clear that retailers and brands must address delivery promises to stay competitive.
Five reasons to reconsider FREE shipping
|The Challenge||Counter Arguments|
|Products are expensive to ship, and embedding the shipping cost into the product prices would make the total price too high.||79% of consumers will spend more to meet free shipping minimums. 23% will spend more than $20 to qualify for free shipping, 40% will spend more than $11, and 18% will spend an extra $5.|
|Free shipping hasn’t been a priority for the company.||78% of consumers say free shipping is important when making an online purchase.|
|Customers are willing to pay for shipping.||93% of consumers source products from other retailers to save on shipping costs.|
|Outbound transportation costs are too high from the existing fulfillment network.||The top two initiatives to mitigate supply chain disruptions are diversifying carrier networks and expanding logistics networks to support eCommerce.|
|There isn’t demand from customers.||81% of consumers say delivery costs are the number one consideration when choosing an online retailer.|
Five reasons to reconsider FAST shipping
|The Challenge||Counter Arguments|
|Embedding the cost to ship faster would make the total price too high.||79% of consumers will spend more to meet free shipping minimums. 23% will spend more than $20 to qualify for free shipping, 40% will spend more than $11, and 18% will spend an extra $5.|
|Fast shipping hasn’t been a priority for the company.||53% of consumers say fast shipping is important when making a purchasing decision. And 49% of retailers say Amazon’s One-Day and Same-Day Delivery services pose a threat to their business.|
|Not enough fulfillment centers close to end consumers.||One of the top 3 initiatives in mitigating supply chain disruptions is investing in more flexible logistics solutions to bring products closer to consumers. Programs are available to help retailers expand their logistics networks without capital expenditures.|
|There isn’t demand from customers.||Slow delivery times are the number two reason for shopping cart abandonment. 85% of consumers source products from other retailers when delivery times are too long, with roughly one-third (30%) doing so often.|
|It doesn’t match the business model.||71% of retailers know that fast delivery times are important to their customers.|
Amazon continues to push consumer expectations for faster, more affordable delivery. Those expectations impact brand loyalty and overall sales. If retailers and brands want to compete, they must find a way to make fast and free happen logistically.
CONSUMERS’ WILLINGNESS TO SPEND EXTRA TO MEET FREE SHIPPING REQUIREMENTS
Fast and free delivery wins. Flexible logistics helps.
Customers spend more for better shipping. Amazon proved that. Faster, more affordable, and competitive delivery options translates to strong brand loyalty. That means more sales.
Positioning goods closer to end consumers makes better delivery promises possible. It centers logistics networks around the customer and that makes for better business. In fact, businesses that center their supply chains around their customers see revenue growth of 13% higher than businesses that don’t.
To see a revenue increase from online sales, retailers and brands must improve last-mile delivery costs and speeds. That can be difficult with traditional logistics solutions. Keeping up with ever-increasing consumer demands requires flexibility. It requires an ability to expand logistics networks fast and test new solutions with a technology-first approach. To solve these challenges, companies complement their fixed logistics network with a flexible logistics model.
A flexible logistics network—one that taps into an open network of warehouse and transportation providers—is a way to test the impact of offering fast and free delivery promises without capital expenditures. It enables retailers and brands to provide better delivery options, which leads to higher customer satisfaction and retention. Flexible logistics makes it possible to keep customers at the center, which makes it possible to compete.
All statistics in this article are from "The Omnichannel Retail Report: COVID-19's Impact on Consumer Expectations" unless otherwise cited. Download the full report to learn more about the importance of fast, free shipping to the omnichannel consumer.