Understanding Customer Preferences for Faster vs Cheaper Shipping
August 15, 2019
Read-Time: 4-6 Minutes
At a time when e-commerce sales continue to grow, speed of delivery is gaining attention as the most important deliverable for merchants to focus on. But are order fulfillment speeds really the most influential factor for online shoppers? How does the cost of shipping compare to speed? This article examines how shifting customer expectations regarding the cost and speed at which online orders are delivered have shaped the methods by which businesses execute their e-commerce sales, marketing, and fulfillment strategies today.
How Do Customer Preferences for Faster vs Cheaper Shipping Vary? While the cost of shipping remains a top consideration for online shoppers, new studies show that the speed of delivery is more important now than it’s ever been. The permeation of Millennial and Gen-Z populations into the market is a primary reason for this. However, customer preferences can vary broadly by industry, order size, and even age. So, what are today’s acceptable parameters for the cost and speed of online deliveries, and how do shoppers’ expectations shift on a case-by-case basis?
How Can Companies Effectively Deploy Faster & Cheaper Shipping Options for Clients? In a world where both delivery speed and cost are important to customers, businesses that sell online must be proactive in optimizing their fulfillment and delivery workflows. In order to offer the most attractive shipping options without adding internal costs, setting price floors before customers can receive free shipping, creating a subscription-based delivery service, or leveraging an on-demand fulfillment network are some of the primary methods used by businesses today.
The Rise of E-Commerce Heightens the Importance of Effective Order Fulfillment
Although the rise of e-commerce is making it easier for companies to market their products and connect with customers, it also brings a whole new wave of business challenges. In a world where shoppers can browse and compare an endless supply of products simply by clicking a button, merchants are being forced to reevaluate what ultimately drives an online customer to make a purchase.
The Urgency of the Purchase. If there is any period where shipping speed is more important than cost, it’s during the holiday season. Analysis of Google search volumes for “2 day shipping” and for “same day delivery” clearly exemplifies this reality. As these charts depict, 2-day shipping searches on Google spike heavily the week before Christmas, while same-day delivery searches spike before Valentine’s Day and Mother’s Day. In these circumstances, buyers have been proven to sacrifice shipping cost for speed, simply because they have a hard deadline for receiving their goods.
The Total Order Cost Relative to Shipping Costs. When same-day delivery was just beginning to impact the e-commerce space in 2014, McKinsey did research to determine the amount that buyers would be willing to pay to receive their purchase on the day the order was made. In a study of over 1,000 online shoppers in Europe, nearly half of respondents were willing to pay ~11% of the total purchase cost (6-7 euros for a 59-euro purchase) to receive same-day shipping. And while it has been some time since this research was published, it still sheds light on the exact trade-off point for consumers regarding speed and cost. For cheaper orders, buyers may be less willing to purchase same-day shipping (i.e. why pay $10 for the same-day delivery of a $7 bracelet?) because proportionally, the shipping costs are too high. Conversely, paying $10 to ship a $100 order seems like a better deal.
How Can Companies Deploy Both Cheap & Fast Shipping Options for Their Customers?
As the above scenarios highlight, there are circumstances where customers might prioritize the speed of delivery over cost, and vice versa. However, both speed and cost are vitally important elements of the online buying decision. But for many organizations, offering both cheap and fast delivery to everyone is not possible. After all, shipping can be expensive. That’s why customers have historically had to pay extra for the luxury of faster shipping. But as customer expectations increase, expensive and cumbersome delivery options are seen huge deterrent for buyers. In fact, higher-than-expected shipping costs are the #1 reason that online shoppers will abandon their check-out carts. So, for the business that is struggling to provide more efficient delivery options to their customers, the following list highlights a range of options that might help them.
For businesses that would like more information on how to optimize the cost and speed of their e-commerce delivery options, we encourage you to contact Ware2Go. Additionally, for any company interested in evaluating the on-demand warehousing and fulfillment model and how it could apply to their business, read Gartner’s latest report on the industry or schedule a meeting with Ware2Go for a more in-depth discussion.
We are a flexible and on-demand warehousing and fulfillment network, enabling seamless inventory and order management.