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Delivery That Consumers Like

The Covid 19 pandemic proved to be an enormous boon to the development of retail ecommerce and also helped to reshape how deliveries were made. Some changes stuck even after consumers flooded back into brick and mortar stores as lockdown restrictions eased.

Recently, the international management consulting firm of AlixPartners [CQ] thought this was the perfect time to take a deep dive into how consumer attitudes have changed when it comes to preferred shipping times and methods. Some of what their research uncovered turned out to be surprising.

They found that consumers appear to be settling at expecting just over three days of wait time on deliveries with free shipping – around the same amount of time they cited last year, according to available research  In 2012, the acceptable delivery time was five-and-a-half days, and it has been on a downward trajectory ever since.

“For a typical shipper with a multi-node regional network, one-day fulfillment plus two-day ground shipping is very achievable and, in many instances, potentially even cost-effective,” AlixPartners says.

“As things stand, however, anything below three days exceeds the capability of most delivery networks to make free shipping economically viable even after raising the minimum spend threshold. This year’s result, then, is good news.”

There are possible explanations for why expected delivery times did not drop this year, including the revival of in-person shopping. Consumer expectations also may have been modulated by news coverage about congested supply chains and ports and poor performance by some overburdened delivery providers.

More than 40% of the consumers surveyed also said they consider waiting four days or longer to be an unacceptable option.

The availability of free shipping remains critical when making the purchase decision (although in reality there is no such thing as free shipping – the consumer ends up paying for it one way or another). For example, almost three-fourths of the consumers surveyed by AlixPartners said free shipping has a great impact, while only 4% claimed that it was not a consideration.

“Consumers seemed to have been more willing to pay for delivery last year, but that deference to the difficulties of the pandemic seem to be over,” AlixPartners explains.

In addition, having grown to expect free returns, consumer also have learned to take for granted same-day delivery as well. The demand for same-day deliveries has increased to 5.2% from 2.7% only five years ago, the firm notes.

“This growth over the years shows that this is a service that consumers have come to expect, even though they are typically charged for it. Nowhere is this more obvious than in grocery orders. We found that consumers’ willingness to pay for same-day grocery delivery has edged up even from last year.”

One-third of consumers surveyed this year would pay $5 or $10 for same-day grocery delivery. A fifth would pay even for next-day delivery. On the other hand, the firm points out that on average over the last three years, increasing the same-day grocery delivery fee from $5 to $10 resulted in demand falling by approximately 50%.

While all categories saw a dip in delivery from last year as consumers became increasingly comfortable with shopping in person, food retailers continue to benefit from habits developed during the height of pandemic lockdowns. For the second straight year, fresh and frozen groceries turned out to be the most popular product for home delivery.

BOPIS to the Rescue?

Slightly fewer consumers are using the Buy-Online- Pick-Up-In-Store (BOPIS) option than last year — 6.9% versus 7.6%, but it still remains popular.  Consumers use this pickup option in cases of immediate need or because of shipping costs.

AlixPartners observes. “BOPIS, which often presents impulse-purchase opportunities for retailers, seems to be leveling off into a consistent use rate after having seen an initial uptick during Covid 19 store shutdowns.”

Retailers want to grow BOPIS because it boosts sales at the same time it slashes delivery costs.

The challenge of goods returns also impacts delivery options. The National Retail Federation says that when all the numbers are in, it expects $761 billion in products sold last year were returned by customers, which at 16.6%, is more than double 2019 returns levels as a percent of total retail sales.

“As shippers begin to make returns policies tougher in the face of escalating costs and dwindling warehouse space, the era of returns that would get shipped back for free with no questions asked may be ending,” AlixPartners says.

“And consumers largely seem to be amenable. We found that as many as 60% of consumers are willing to drive to return an item in store, particularly if the alternative is paying for return shipping.”

Although BOPIS usage growth may have flattened, it also may be the next foot traffic and profit driver for retailers because of the supplemental sales it generates during the same store visit. “The challenge for retailers is still how to reprocess returns profitably once they do get back to the store,” the researchers stress.

The global BOPIS market was $243.89 billion in 2021 and is expected to reach $703.18 billion by 2027, expanding with a double-digit compound annual growth rate (CAGR) of 19.3% from 2021 to 2027, says, the international market research firm. That company is more upbeat about the future prospects of BOPIS than are the consultants at AlixPartners.

“Besides no added shipping charges, no waiting for a long time for items to be delivered, quick services, in-stock insurance, and ease to tackle delivery errors that often arise with order fulfilment are paving the way for the market,” says. It also holds that an efficient BOPIS system will increase sales and customer loyalty while helping retailers stay competitive with other brick-and-mortar stores and online merchants

“Overall, as per our analysis, it’s clear that BOPIS isn’t just a passing trend,” ResearchAndMarkets predicts. “Globally, shoppers love it; most use it and intend to continue.”

Dr. Michael Ketzenberg of Texas A&M University and Dr. M. Serkan Akturk of Clemson University wrote in the Harvard Business Review last year that “BOPIS in particular can help retailers boost in-store sales while still providing the experience that today’s (and tomorrow’s) customers want.”

They say this is because unlike other digital channels, BOPIS combines the advantages of digital shopping with encouraging customers to continue engaging with brick-and-mortar store.

“Our research suggests that the BOPIS approach may be the key to helping retailers engage their customers – both online and in stores. Customers are accustomed to online and omnichannel shopping experiences, and they are not going to go back. The good news is, leveraging digital solutions does not have to mean foregoing the advantages (both to the customer and to the retailer) of in-store shopping.”

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