Signed, sealed, delivered – and then (often) returned
15 October 2018
There was a day—not even that long ago—when we all used to visit retailers for the express purpose of buying products and bringing them home. Today, of course, things have moved on, and ‘shopping’ often means ordering something online and waiting for a box to show up at the door.
But while business-to-consumer e-commerce is now mainstream—nearing 12% of total retail sales worldwide in 2018, according to some sources—product shipment remains one of the toughest nuts for consumer goods companies and retailers to crack. And it’s getting even tougher, with the sector facing acute and intensifying pressure to deliver ever better levels of service at an ever lower cost.
The source of this pressure is today’s consumers, who prize fast, flexible and reliable service—for free. In our latest Global Consumer Insights Survey (GCIS), we captured the voices and shopping behaviours of over 22,000 consumers globally in 27 territories. And our findings suggest that their demand for a high convenience at low (or no) cost is continuing to grow.
So, what did consumers tell us? Their responses showed that Amazon, Alibaba, Net-a-Porter, and other e-retailers have clearly raised shoppers’ expectations about shipments: for a third of all Amazon customers who use the company’s multi-faceted Prime service, far and away the most important benefit is unlimited free delivery—cited by 72% of Prime users globally. And their expectations aren’t easing off: one-quarter of users said they prize Prime’s free two-hour delivery option.
Asked what factors—other than price—sway them to buy from a particular retailer, survey respondents prioritised product availability, the retailer’s brand and location, uniqueness, and then shipping and delivery. Nearly a quarter of respondents globally rated fast and/or reliable delivery as important, and 23% said they value a good returns policy. We also drilled deeper, probing shoppers’ delivery preferences if certain services were offered at no extra cost. Close to two-thirds of global respondents were quick to pinpoint free return shipping as the most desirable add-on.
For consumer goods companies and retailers, such expectations bring profound implications. “Returns are such a big issue for online retailers,” says Peter Kauschke, a director of global transportation and logistics at PwC Germany. “Some can’t cope with the masses of returns that they get. For example, some sell returns to secondary retailers without doing any quality control, and those other retailers then export abroad. In other cases, online retailers may waive the return delivery for low-value items, which means the online shopper can keep the item without paying.”
Our research also looked at what delivery services shoppers would be prepared to pay for. Here the findings appear to uncover a sweet spot for retailers and their delivery partners: a willingness on the part of consumers to pay more for same-day or faster delivery. A quarter of online shoppers globally said they would dip into their wallets to be sure of getting their packages within a one- or two-hour window of their choosing.
Interestingly, older shoppers seem to place an even greater premium on narrow delivery time slots; according to the study, global shoppers ages 65 or over were eight percentage points more likely (52% versus 44%) to choose “delivery at a specific time slot.” PwC’s Peter Kauschke observes: “I think it shows that people acknowledge that delivery on the same-day or even faster is a special logistics effort.”
And effort it certainly is. In the lead up to Black Friday and Christmas, many leading consumer companies and their shippers are evaluating moves ranging from imposing caps on the numbers of packages shipped to implementing pricing schemes. Having helped to raise consumers’ expectations to a potentially unrealistic level, they must now find ways to manage those expectations—profitably.
Realistically, then, how can they do this? That’ll be the topic of my next blog. Stay tuned.