Report: Retailers are Hemorrhaging Costs from Premium Delivery Services

Tags: Retail, E-commerce, Logistics, Supply Chain

2017 brings unprecedented competition for retailers. Not only has Amazon set the standard for how to do retail well, it’s set the new consumer standard on shipping. Prime-like shopping is the new benchmark with Americans demanding ultimate convenience and immediacy at a low cost. Temando’s, a shipping and fulfillment software platform for commerce, 2017 State of Shipping in Commerce report uncovers the evolution of the American retail landscape in the last twelve months, and highlights where retailers need to be today to reap the rewards of tomorrow. The survey polled 270 small and medium (SME) and enterprise retailers and nearly 1300 consumers about a range of shipping-related challenges they face.  

“The State of Shipping in Commerce report shows the increasing significance of shipping and fulfillment, and highlights the continued gap between retailer capability and consumer expectation. The missing piece for many retailers is a solution that balances CX-friendly shipping experiences with automation and efficiency,” said Carl Hartmann, co-founder and CEO of Temando. "Shipping is truly the last frontier for commerce, and retailers who master the use of technology to optimize the process are giving themselves the best chance to not only survive, but thrive in these trying times."   

Consumers Want and Retailers Need Better Control of Shipping          

Multiple shipping options are critical to CX. Consumers want more options to control their deliveries – they want to dictate how, when and where products are shipped.

● The survey revealed that 41 percent of consumers want hyperlocal delivery and 38 percent would pay for it. However, only 24 percent of retailers offer it now and 18 percent of retailers would like to offer it in the next 12 months. 

● 40 percent of consumers expect to access Amazon-prime style memberships in the next 1-3 years vs. 25 percent of retailers who plan to introduce these services in the same period.

● Almost 100 percent of shoppers would like delivery date estimates but currently over half of retailers don’t offer this feature.  

Shipping causes shopping cart abandonment. Compared to Temando’s 2016 survey, shoppers have a more genuine intent to purchase in 2017 but high shipping fees combined with lengthy wait times is still a serious issue.

● 73 percent of consumers are loyal to brands and return if they have a positive experience, while 50 percent of consumers won’t buy again if it’s a negative experience.

● 54 percent of shoppers abandoned their carts due to expensive shipping, while 39 percent abandoned their carts due to no free shipping, and 26 percent abandoned their carts due to slow shipping.

● 47 percent of shoppers will abandon their carts and buy from a competitor’s site when a premium delivery option is not available.  

Shipping Ambitions Tempered by Rising Business Costs  

There is a major disconnect between retailers and consumers when it comes to shipping expectations. While retailers understand that consumers want free shipping, they’re grappling with the rising costs of shipping online orders.

● 59 percent of shoppers will opt to buy from a bricks and mortar store if they perceive that the delivery fee for buying the same item online is too high.

● 66 percent of shoppers think that the high cost of shipping is not relative to the experience provided.

● Whereas, 51 percent of retailers listed the rising cost of carrier services as a key challenge.  

Retailers are hemorrhaging costs from premium delivery services. While retailers are experimenting with premium delivery services, they have limited knowledge of how much these services cost and/or are held back by operational barriers. Temando’s research highlights that retailers are struggling to find a profitable model for premium delivery services, and as a result, retailer adoption has slowed down.

● 53 percent of retailers offered same-day delivery in 2016 compared to only 29 percent this year.

● 40 percent of shoppers wanted hyperlocal delivery in 2016, but only 24 percent of retailers offered it this year. ● 34 percent of retailers in 2016 offered weekend/afterhours delivery in 2016 compared to only 25 percent this year.  

Additional Survey Highlights  

A major point of difference for retailers is the total experience they offer to consumers – from providing multiple delivery options to better tracking to a seamless returns process. Temando’s study reveals retailers can profit from introducing good shipping experiences to shoppers and grow basket size with delivery campaigns. Shoppers are willing to pay up to $18 for same-day delivery and $19 for international shipping, and 65 percent would increase basket size to qualify for free premium shipping. Tracking is an area for improvement with only 31 percent of retailers offering email tracking updates today, despite demand from 78 percent of shoppers. Returns influence conversion with 43 percent of Americans stating they would shop more online if offered free and easy returns.  

The full report is available here.






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