Augustus 12, 2020
Last-mile deliveries are not a new invention of the internet age. People have received home deliveries of everything from fresh farm products to sunglasses and electronic gadgets for generations. But, access to the internet has rapidly accelerated innovations in how individuals order and receive the goods they purchase. Our more connected world is a faster-paced one and consumers expect retailers to keep up.
When consumers can order almost anything they want with a single click instead of filling out a form or calling a toll free number, is it any wonder that they expect the things they order to be delivered within days or even hours instead of a week?
In 2014, consumer orders took an average of 6.3 days to reach their final destination. By 2016, the average delivery interval had shortened to 3.4 days as a result of continual improvements in last-mile shipping speeds.1 In 2019, 48% of online shoppers said their packages arrived in 2 to 3 days and 5% got their deliveries in just a day.2
It isn’t just technological developments that have influenced consumer expectations, though. Much of what consumers expect when it comes to how, when, and where their packages are delivered has been shaped by the industry-players making those deliveries happen. Ecommerce and logistics giant Amazon, in particular, is a major shaper of consumer expectations.
With access to massive amounts of data about consumer purchasing habits and the ability to leverage economies of scale, Amazon sets the pace for other retailers online and off. The company has rapidly raised the bar by investing heavily to gain market share and focusing on customer service.
What effect has Amazon had on consumers’ expectations?
Today’s shoppers expect fast delivery at a low cost and favor retailers that meet or exceed their expectations. Customers expect maximum convenience for a minimum price. While some customers are willing to pay a premium for same-day delivery, most are no longer willing to pay the high fees once associated with overnight or express shipping.
Here’s the story of how the Amazon Effect changed last-mile delivery logistics and what that means for retailers and delivery services.
Amazon’s oversized influence over last-mile shipping
Nearly every online shopper in the US has purchased something from Amazon. So, when Amazon offers a new level of service, it quickly becomes the expected level of service.
85% of US consumers purchased something from the Amazon platform in 20193
Altogether, US online shoppers spent 42% of their dollars on Amazon in 2019.4 In 2020, Amazon is projected to account for 38% of all US ecommerce sales, it’s market share dipping slightly due to changes in consumer spending habits in response to the COVID-19 pandemic.5
Amazon continues to gain ground in European markets as well. The company’s share of the UK’s ecommerce market grew to 30% in 2019.6 In January of 2020, the brand’s Vice President of EU Expansion, Alex Ootes, announced plans to expand Amazon.nl, opening the door for more Dutch businesses to offer products on the global ecommerce platform.7 By the end of 2020, more than 20% of consumers in Germany are expected to have Amazon Prime memberships.8
Amazon is no longer just an online seller of goods, it is also a major shipper of packages. The company has invested heavily in building its own shipping network, spending 9.95 billion in 2019 on transportation.9 It now owns a fleet of delivery vehicles and also coordinates last-mile deliveries using an army of subcontractors.
Half of the 4.5 billion Amazon packages delivered to US consumers were handled through its own logistics network in 201910
Most competing businesses don’t have Amazon’s ability to negotiate lower shipping fees or purchase additional warehouse capacity during periods of peak demand. Nonetheless, consumers familiar with Amazon’s performance expect other retailers to match it. What are those expectations? We share three of the leading shifts in consumer expectations caused by Amazon below.
3 consumer delivery expectations driven by the Amazon Effect
1. Consumers expect fast shipping because they’ve seen that Amazon can deliver
In 2000, it took an average of 7 to 10 days for a package to arrive at the customer’s home after they made a purchase. In 2005, Amazon introduced its Prime membership program. Among other benefits, Prime members paid a yearly fee in exchange for 2-day shipping on most orders. While shipping under the Prime program wasn’t free, Amazon’s subscription model meant that consumers no longer considered shipping costs when making each purchase and their shipping costs didn’t go up regardless of how often they placed orders.
94.6% of shoppers expect retailers to deliver their purchases within 1-2 days of their purchase11
Amazon’s move to guaranteed two-day delivery marked a major milestone for ecommerce supply chain management. Large retail brands, including Walmart and Target, had to improve their distribution systems to match Amazon’s fast and cheap delivery service.
As 2-day deliveries became the competitive standard, average shipping times shortened.
Amazon upped the ante again in 2019, offering Prime members guaranteed 1-day delivery. In 2020, the company announced that it would begin offering same-day delivery to shoppers located near several of its urban distribution or mini-fulfillment centers.12 Some customers could order an item by 8 a.m. and have it delivered before 1 p.m. on the same day.
The scramble to meet rising demands during the pandemic slowed Amazon’s delivery roll during the first half of 2020. However, despite this setback, analysts predict that online shoppers’ need for speed will remain and retailers will be expected to expand their capacity to keep up with growing demands.
How can retailers and the logistics industry keep pace?
Local businesses and couriers may not be able to achieve Amazon’s economies of scale, but they have an advantage when it comes to offering fast, same-day delivery. Retailers such as Walmart, Target, and Best Buy have been quick to dual-purpose their retail locations as mini-fulfillment centers.
76% of consumers said they would be more likely to order from a local business if they could get same-day delivery of household goods13
These near-to-their-customers sources of inventory allow these stores to fulfill some online orders in 24-hours or less. Small and medium businesses also benefit from a growing field of independent couriers who use apps, such as Postmates and Instacart, to receive real-time notifications of local delivery requests.
2. Consumers expect free or low-cost shipping on every order
One of Amazon’s most effective growth strategies has been its Amazon Prime program. Amazon’s 150 million Prime members each spend an average of $1,400 on the ecommerce platform annually and the free shipping that is included with membership is one of the reasons.14
75% of consumers expect free shipping even for orders of $50 or less and 65% of consumers investigate the costs of shipping before they add items to their cart15
But, if members have to pay for Prime, why is shipping perceived to be free?
It’s all in the presentation.
Before the Prime free shipping perk, consumers could select from various shipping options but would see the costs associated with each one--include a fee for speedy delivery. This visible reminder that their purchase carried added costs was a point of friction in the buyer’s journey.
50% of the respondents to a survey which asked their reason for cart abandonment at checkout (excluding those who were just browsing), said that the cost of shipping played a role16
Amazon avoids bringing shipping costs to mind when its Prime customers are checking out by frontloading those fees. Additionally, Prime membership comes with other benefits that the customer may value more than shipping. For these members, shipping is just an extra perk of the membership.
Finally, not all of Amazon’s free shipping costs a membership fee. Non-Prime members can choose from several shipping options, including free shipping with a minimum purchase. This too leverages the positive psychological effect of free and encourages shoppers to buy more in each transaction.
How can retailers and the logistics industry keep pace?
According to Rakuten Intelligence, 92% of online orders in 2018 included free shipping.17 So keeping pace means finding a way to match this offer while still maintaining a healthy margin. Many retailers offer free shipping with a minimum purchase to gain customers without losing money. Retailers and their last-mile logistic partners are also working together using innovative technologies such as inventory management and route optimization tools to streamline delivery processes and reduce fuel and labor costs.
3. Consumers want accurate information about where their package is and when it will arrive
The latest buzzword for customer service in the digital age is transparency. Customers expect businesses to communicate with them and keep them in the loop. Shoppers ordering from online retailers or local stores want to know what is happening to their packages at every step in the delivery journey.18
78% of local consumers say having an accurate ETA for their orders is extremely or somewhat important19
Customers who order products from Amazon can check the status of their purchase from payment to delivery on Amazon’s website. Amazon customers can also sign up for its Text Trace service and receive SMS text messages updating them on the progress of their package’s travels. In addition to tracking the progress of packages in transit, Amazon’s interface allows consumers to view when and where their packages were delivered. Customers can use this information to investigate a missing shipment or rescue freshly delivered packages before they fall prey to porch pirates.
How can retailers and the logistics industry keep pace?
With the help of technology, local businesses and couriers can easily keep up with Amazon’s customer service when it comes to delivery tracking. Businesses should also be careful not to make delivery promises they can’t keep.
45% of consumers say companies that deliver packages late will lose their business20
For businesses that have not yet adopted real-time delivery tracking, a simple phone call to alert a customer to an upcoming delivery or a delay can go a long way toward ensuring their loyalty.
Delivering on customer expectations
At the end of the day, most customers want the same thing: convenience. They want to be able to order what they want, when they want it and have confidence that it will arrive intact and on time.
Amazon’s size and influence may allow it to set the pace, but businesses of any size can deliver what consumers want by prioritizing customer service. Scaleable, cloud-based logistics technology now allows individuals and small- to medium-sized fleet owners to achieve the same efficiencies as top carriers like Amazon.
Routetitan makes that technology available to you. Our route optimization and tracking app enables couriers to save time, fuel, and labor while increasing customer satisfaction. No large capital investments are needed, as we offer flexible monthly subscriptions. Click here to start your free trial today.
1.“An update on the shipping and handling wars,” April 25, 2018
2, 3.“How Consumer Hunger for Two-Day Delivery Impacts Small Businesses,” September 4, 2019
4.“Amazon Angles to Grab Back Customers”, May 22, 2020
6.“Amazon tightens its grip on UK ecommerce with 30% share,” December 11, 2019
7.“Amazon to expand Amazon.nl later this year,” January 14, 2020
8.“Will Big Ecommerce Players Be the Biggest Winners in Germany?,” July 6, 2020
13.“The Amazon Effect: How Amazon is Impacting Consumer Delivery Expectations,” November 12, 2019
15.“NRF Study Finds 75% of U.S. Consumers Expect Free Shipping,” January 22, 2019
17.“The future of e-Commerce fulfillment: locally sourced inventory,” March 15, 2019
18.“Delivery economy becoming core of customer experience,” August 12, 2019
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