eCommerce Shipping: Is Cost or Speed More Important to Customers?

True or false: 60% of consumers say that they would wait 5-7 days to receive an item if there was free shipping.

In our “gotta have it now” society, where Amazon is conditioning people to expect faster and faster delivery, even same-day, many would say “FALSE. It’s all about the speed.”

But they’d be wrong. 

According to numerous studies, most eCommerce customers would prefer to spend less money even if it meant waiting longer for delivery. 

In eCommerce Delivery, Cost Trumps Speed

Consumers like receiving their orders quickly. However, research repeatedly shows – and has for a long while – that when it comes to shipping, low (or no) cost is more important to more eCommerce customers than delivery speed.

A late 2015 Deloitte study revealed that “free shipping is the top priority for shoppers when it comes to retail policies” and that “nearly 9 in 10 shoppers (87 percent) prioritized free shipping over fast shipping (13 percent) when purchasing gifts shopping online.”  

Similarly, a recent study by AlixPartners – a leading consulting company – examined the shopping habits and shipping demands of eCommerce consumers and found that: 

• 97% of respondents say that a “free shipping” option affects their purchasing decisions to some degree; 75% said that it greatly affects their decisions (that’s up from 64% in 2012)
• Many consumers will not pay extra for same-day delivery; 54% said that they do not request it when shopping

A third study – this time by Bizrate Insights – found that delivery cost is more important (74% of eCommerce shoppers) in comparison to delivery timing (26%). 

Yet another study – from Purolator International - found that “76% of Canadian consumers who made an online purchase from a U.S.-based retailer within the last six months, as well as 63% of U.S. online shoppers, identified shipping costs as very important; while 44% and 32%, respectively, said it was the single most important factor.”

And, there are more studies and more surveys, all reaffirming the truth that, when it comes to eCommerce shipping, cost trumps speed. 

eCommerce Preferences: Digging Deeper

These cost vs speed findings, however, do not mean that 25-day delivery windows are acceptable.  Respondents in the studies above actually want to receive their products within a reasonable period of time; they just don’t want to spend extra to receive them super-fast.  So, what then, is a reasonable period of time to consumers? 

The 2016 A.T. Kearney Achieving Excellence in Retail Operations (AERO®) study sought to find the answer to this.  When asked “what do you believe to be an acceptable e-commerce order shipping time for a non-urgent purchase?” the most common answer was “three days” (24%), with 68% of respondents answering between “two” and “five” days.  The extremes of “same day” and “more than 5 days” only accounted for 20% of responses when combined. 

And, now that we’ve further clarified the concept of speed a bit, let’s look at some of the other eCommerce shipping factors that live in the grey area of the cost vs speed equation. 

• Meeting Expectations: When it comes to shipping speed, customers also have a seemingly simple – but vitally important - request for eCommerce companies: do what you say you are going to do.  The AERO study found that “consumers say they are more interested in retailers fulfilling their promises—getting their products when they were told they would—rather than on getting the product immediately.”  In fact, exactly twice the number of respondents (42% vs 21%) said that “delivery during the promised window” is more important than “fast shipping.”
• Age: The shipping cost vs speed debate is also perceived differently among people of different age groups.  While shipping cost is more important than speed for customers of every age, the Bizrate study shows it is significantly more important among seniors and baby boomers (80% and 77%, respectively) than millennials (69%). 
• Industry: The Bizrate study also found that shipping speed is of particular importance to consumers when it comes to products within certain industries.  Same-day shipping is important to 34%, 31%, and 26% of automotive, gifts + flowers, and office supplies customers, respectively.  So, for eTailers in these industries, it is important to keep a close watch on changing customer preferences. 

eCommerce Shipping for Your Company

So, what do these findings mean to you, the eCommerce company? 

• Follow the big dogs? First and foremost, the fact that Amazon can offer super-fast and even same-day shipping doesn’t mean that you must follow suit.  For most consumers, the costs associated with these expedited eCommerce shipping options are simply not worth it.  And, the cost of overhauling your company’s operations to meet same-day demands is likely not worth it to you, either.  So, for now at least, you can hold off on that drone-delivery investment. 
• Set up a national distribution capability. While super-fast speed isn’t an absolute necessity, reasonable speed still is.  You want to get your products to your consumers quickly without breaking their bank – or yours.  To accomplish this, you’ll need nationwide distribution. That doesn’t mean that you need to have your own warehouses strategically placed throughout the country – you can partner with a company that already does.

Many third-party logistics (3PL) logistics providers offer nationwide eCommerce order fulfillment and have the infrastructure to ensure that your products arrive at their destinations quickly and at a low cost.  As an example, Staci Americas Logistics has a nationwide fulfillment warehouse network that provides 1-to-3-day ground delivery to 98% of the U.S.

• Consider parcel consolidation. Speaking of low cost, a great way to minimize the cost of shipping for your company is parcel consolidation.  Also called “zone skipping,” this method enables you to consolidate your packages with those of other companies going to the same region. These products travel via lower-cost, full truckload shipments to the region, where they are fed into USPS system for final delivery. Small and mid-sized shippers often partner with a 3PL provider to manage such a consolidation strategy, as they would have to wait too long for their outbound volume to fill a trailer. By leveraging the 3PL’s aggregate volume, the strategy can cut as much as 20% off your hefty parcel costs. 

Bottom Line: Consumers Want Faster AND Cheaper

Shipping cost is more important to eCommerce customers than shipping speed, but both are still of vital importance.  If your company is unable to satisfy your customers in either area, then you’re in trouble. 

So, ask yourself this: “Can my business provide cost-friendly shipping within a reasonable period of time, 100% of the time?”  If not, it may be time to redesign your own fulfillment network, or partner with a 3PL that already has the scalable infrastructure you need.