Changing Expectations: Customer Attitudes Towards Shipping Speeds
Shipping orders is one of the most critical steps that any supply chain needs to master. Unfortunately, it can also be one of the most costly business expenses (after transportation). But it’s a necessary evil: There’s no point in making a product and acquiring customers if you can’t efficiently get the product to those customers when they want it.
To compound this problem, customers’ attitudes towards shipping speed has been changing a lot in recent years, driven primarily by Amazon. Let’s take a look at just how these attitudes have been changing.
Shipping Speed Matters
Consumers are notoriously impatient. If they’ve ordered something from you, they don’t want to wait very long before it’s in their hands. If you can’t deliver what they want within the timeframe that they want it, they’ll go to another supplier who can meet their needs.
Free Guide: Top Order Fulfillment KPI Indicators
This theory has been confirmed by a study that analyzed e-commerce sites to find if longer wait times led to a higher percentage of abandoned carts. What they found is likely to give an order fulfillment manager nightmares:
- 7% of abandoned carts were abandoned when the estimated delivery time was three days or less from when the order was placed.
- 15% of abandoned carts were abandoned when the estimated delivery time was four to five days from when the order was placed.
- 15% of abandoned carts were abandoned when the estimated delivery time was six to seven days from when the order was placed.
- Nearly 40% of abandoned carts were abandoned when estimated delivery time hit 8 days from when the order was placed.
The takeaway is clear: Being slow to deliver goods will cost you sales. Reducing your total order cycle time is one way of driving this number down and retaining customers, but your timeline will ultimately always be limited by the geographical space between you and your customers. The first step staying competitive (viable) means being able to ship all orders the same day they are received. If your customer wants a package on their doorstep in less than 3 days, you are going to have to pay your package handler more money to get it there on time.
The problem with this is that customers don’t like to pay extra fees for fast shipping: according to a survey by Jupiter Media Matrix Inc., 63 percent of customers cite excessive shipping fees as a reason that they have canceled a purchase. What this really means is consumers don’t want to pay any shipping fees. That leaves supply chain executives in a predicament: Either pass the shipping fees on to customers and risk losing the sale, or eat the fees themselves and make less money (or even lose money) on the sale.
Impact of Amazon Prime
Amazon Prime follows a basic premise: For $99 a year, subscribers will get free, unlimited one- or two-day shipping on many items offered through the website. The service began being offered in 2005, and since then has ballooned to the extent that there are now 54 million Amazon Prime members.
As more and more people signed up for Amazon Prime, the expectations of the general public towards shipping has dramatically shifted: If Amazon can offer quick, cheap shipping, then why can’t other retailers?
The rise of Amazon and other online retailers is likely directly correlated to the rising customer impatience noted in the study referenced above. But that doesn’t change the fact that, for most small and mid-sized operations, shipping costs are expensive.
Flexibility is Key
Chances are, you won’t be able to meet the shipping expectations that Amazon Prime has generated from the average customer in today’s market: Waiving shipping fees is in many cases cost-prohibitive; charging too much for shipping can lead to a loss of sales; and having delivery times far outside what customers are willing to accept is liable to lose you customers.
You’ve got two options: Sell your business to Amazon, or embrace flexibility. I’m assuming you don’t want to sell your business, so let’s talk about flexibility.
Though customers want their orders faster than ever before, they don’t want to pay for that service. Luckily, many customers are willing to meet you in the middle: If one- or two-day shipping is too expensive for their tastes, many customers would like the option of picking up their order in person. This does two things: It drives down shipping charges for both the retailer and the customer, and it speeds up delivery time.
In a sense, this forces all e-commerce and retail companies to become omni-channel in some sense of the term, and there is a lot of groundwork that has to be done to make this option a reality. But regardless of the work that it entails, omni-channel delivery is becoming increasingly necessary.
Any company selling to consumers needs to stay flexible if they are going to remain relevant and competitive in today’s market. By offering customers the option to either pay for expedited shipping, pick up from a store, or have an item shipped to them from a store instead of a fulfillment center, businesses can continue to meet customer expectations—which will lead to more retained customers, more revenue, and ultimately higher profit margins.