The Battle is on for fastest shipping worth fighting?
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Consultancy firm AlixPartners has challenged whether the battle to deliver the fastest shipping is worth fighting, following Amazon’s move to free one-day shipping for Prime members from the two-day norm.
The firm’s Home Delivery Shopping Survey this year found that US customers are willing to wait up to 4.3 days to receive an item if they get it shipped for free.
AlixPartner’s research notes that while faster shipping translates to a higher perceived value for the customer, sustainability and social responsibility are also important to consumers. The implications of transportation and other shipping logistics on carbon emissions are substantial – some estimates say home deliveries add millions of metric tons of carbon to the atmosphere every year. There are also safety concerns for warehouse workers. Labour unions have questioned whether Amazon’s fulfillment centers can safely accommodate faster deliveries given that they manage 200–300 orders per hour over 12-hour shifts with two-day shipping.
Then there is the tremendous burden of added expenses. Amazon has spent more than 20 years and an estimated US$150 billion globally to build out its capabilities. It is improbable many other retailers would be able to invest at the same level.
Competitors have scrambled to follow Amazon’s lead. Most notable was Walmart, which announced that its own next-day shipping program – to be test launched in a handful of cities – would not even require an annual membership fee. Target also appears poised to become similarly competitive in its shipping offerings.
“Instead of blindly matching Amazon, you may be better placed ascertaining what your customers actually want and expect from you around service and experience and creating strategies to deliver on those expectations,” read an editorial released by the firm.
“Retailers must mine data insights to understand what’s being purchased in each specific store location as well as what customers expect from shipping options.”
“Retailers must mine data insights to understand what’s being purchased in each specific store location as well as what customers expect from shipping options.”
In-store pickup
The survey found that more than 60 percent of US shoppers have taken advantage of an in-store pickup program, and one in two are expecting to use such options more often.
Consumers were shown to sometimes prefer to receive access to all items in their order in one go or prize incentives such as discounts or store credits.
About 76 percent of respondents said retailers who use more mobile technology provide a faster shopping experience. The best way to harness stores is through a real-time inventory management system, which means having a precise view of what is available in the store and when, including for returns. Target’s Drive Up service, for example, allows online consumers to order items from a local location, pull up to the store’s parking lot about an hour or two later, and then have an employee deliver merchandise directly to their car within two minutes.
The pressures of maintaining an e-commerce edge have become harder, but trying to jump into battle on every single front can turn out to be counterproductive and, with something like ultra-fast shipping, potentially an expensive mistake. Consumers today have strong opinions and won’t shy away from conveying exactly what they need or expect.
Questions & Answers
Q.What primary factors might make retailers question the value of ultra-fast shipping?
What primary factors might make retailers question the value of ultra-fast shipping?
The substantial burden of added expenses, logistical implications for carbon emissions, and safety concerns for warehouse workers are key factors. Customers are also willing to wait longer for free shipping, suggesting speed is not always paramount.
Q.How long are US customers willing to wait for free shipping, according to the survey?
How long are US customers willing to wait for free shipping, according to the survey?
US customers are willing to wait up to 4.3 days to receive an item if it is shipped for free. This finding challenges the idea that ultra-fast shipping is the only priority for consumers.
Q.What alternative shipping strategy does AlixPartners recommend for retailers?
What alternative shipping strategy does AlixPartners recommend for retailers?
AlixPartners suggests retailers should understand customer expectations around service and experience through data insights, rather than blindly matching Amazon's speed. Focusing on in-store pickup options could be a valuable alternative.
Q.How does Amazon's investment in shipping capabilities compare to other retailers?
How does Amazon's investment in shipping capabilities compare to other retailers?
Amazon has spent an estimated US$150 billion globally over 20 years to build its capabilities. The article suggests it is improbable that many other retailers would be able to invest at the same level.