Amazon Forcing Retailers to Speed Up Their Deliveries
In Total Retail's recent survey and subsequent report, The Amazon Effect: How Retailers Are Adapting Their Businesses to Better Compete With the Industry Leader, nearly 90 percent of retail executives said they “strongly" or “somewhat" agree that Amazon.com has changed consumers’ expectations for order delivery. Specifically, consumers’ expectations for delivery of their online purchases have changed on two fronts: one, the cost (or lack thereof) they're willing to pay for shipping and, two, the time they're willing to wait for their package to arrive. Simply put, in large part because of Amazon's Prime program, where members pay a $99 annual fee in exchange for free shipping and guaranteed two-day delivery, consumers are now demanding from all retailers that their online purchases get to their homes faster and for less cost.
Consider the below chart, which shows the impact retailers believe fast delivery (two days or less) has on consumers’ purchase decisions:
Eighty-six percent of respondents said that shoppers are either "significantly" or "somewhat" less likely to buy without shipping in two days or less. Clearly the pressure is on retailers to speed up the delivery of their online orders, which often means investments in order management technology as well as warehouse staff to pick, pack and ship orders as quickly as possible.
Offering customers expedited delivery is an expensive proposition for retailers, especially if it’s paired with free shipping. Retailers need to determine if the cost of expedited shipping (two days or less) is worth the potential margin hit. If it is, and this will largely depend on customer lifetime value (i.e., are you shipping to a one-time-only customer or a loyal shopper), retailers must make investments in infrastructure and operations to get packages shipped at Amazon speed.
Our coverage of The Amazon Effect report will continue on Thursday, when we'll look at how retailers have adjusted their spending on order fulfillment and delivery technology as a result of Amazon's influence in this area. In the meantime, make sure to download the full report here.