Report outlines consumer expectations regarding delivery of online purchases

| March 11, 2019

There is a lot of fear-mongering when it comes to the delivery of online retail purchases, especially with the launch of Amazon Prime and eBay Guaranteed Delivery.

Retailers are aware that the expectations of the Australian consumer are higher than ever before, but what is achievable realistically and sustainably for online retailers? And more importantly, which business models need to be employed that will support the longevity of the sector?

Power Retail, a resource for Australian Online Retail Industry insights, content and news, has released the third installment in their ‘Spotlight Series’, a deep-dive monthly report on leading-edge e-commerce trends, titled Last Mile Delivery – A Race Against Time.

The nationwide research initiative surveyed over 1,500 Australian online shoppers who had made a purchase in the last six months. Alongside this piece, 88 in-depth interviews were also conducted with pureplay and multichannel retailers operating in Australia to gain further insights.

Managing Director of Power Retail, Grant Arnott says there has been a massive land grab over the last five years for retailers to be the fastest at getting products into consumers’ hands, but at what cost to the bottom line.

“This report highlights the truth about last mile delivery consumer expectations, with insights on how retailers can hit the sweet spot in the trade-off between meeting delivery expectations and maintaining profitability. Speed matters, but it’s not what you think.

“Our data shows that retailers who have invested heavily in superspeed delivery at the expense of profits may not reap the benefits they desire. Honouring the delivery promise is more important to consumers than all-out speed, so investing in reliable, sustainable and efficient last mile delivery is more effective than joining the space race to offer the fastest delivery option possible.”

The report explores and provides robust recommendations for the following questions: Where is the industry headed when it comes to delivery? What are the advancements in the fulfilment space? How can retailers separate the fear-mongering and hype from the reality of remaining competitive well into the future?

Key findings from the Delivery report:

  • In general, Australian shoppers view 3-6 days as the typical or standard delivery time offered by online retailers, which contradicts the conventional wisdom that it must be 1-2 days.
  • Virtually all online shoppers feel that retailers need to offer some form of financial restitution for late delivery with half preferring a refund of shipping costs.
  • Drones are emerging as a serious option for Australian online retailers, particularly for targeting either younger shoppers, or for delivering low value items.
  • While the longer the advertised delivery period offered, the more likely it is for a consumer to look elsewhere, short delivery periods alone however, will not reduce the likelihood of shoppers checking out competitors.
  • Overall, 30% of online retailers rate optimising delivery as a top priority.  However, pureplay retailers rate it as much more important compared to multichannel retailers.
  • The majority of consumers find the concept of convenient, free or very-low cost parcel lockers appealing.

Key considerations:

  • Retailers need to independently establish the delivery price elasticity of their particular target market, as their own perceptions most likely overestimate actual consumer demand. They also shouldn’t follow ‘standard’ practice as all customer segments differentiate.
  • Online shoppers are very savvy and aware of the elements that impact their online orders. They have the capacity to trade-off between cost, speed and other delivery related factors.
  • Offering short delivery timeframes are an important conversion strategy but should be part of a holistic approach when it comes to keeping consumers on-site.
  • Multichannel retailers who don’t have a broad spectrum of delivery options are missing out on growth.
  • Sustainability is becoming more important – this is connected to strategy for brand appeal as well as fulfilment.

Rob Hango-Zada, CEO of Shippit said when it comes to what customers are willing to pay for, we see customers moving beyond the instant gratification route and more towards a preference of predictability and reliability.