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Delivery costs and estimates balloon, but actual delivery times are getting faster - new Shippit report reveals
- Shippit’s State of Shipping Report sought to understand how retailers are approaching delivery in 2024; quantifying the impact on everything from cost to reliability
- Delivery costs and delivery estimates are increasing in 2024, but actual shipping and delivery speeds are faster than pre-COVID
- As economic pressures persist, fewer retailers are offering free delivery compared to 2018, minimum spend thresholds are surging, and returns are being disincentivised
Sydney, Australia, 13 August, 2024 - As ecommerce penetration continues to surge, both the cost of delivery and retailers’ delivery estimates are growing, according to a new report from Shippit, the industry-defining commerce delivery platform that powers hundreds of millions of deliveries for 4,000 retailers across ASEAN. Since 2018, retailer-advertised delivery costs and time estimates for standard shipping increased from $9 and 2 days, to $10.26 and 5.6 days respectively, while express delivery increased from $12 and 1.4 days, to $14.24 and 2.3 days.
Collating data from thousands of retailers and shoppers and millions of deliveries across Australia, the landmark, Australian-first State of Shipping Report sought to understand how fulfilment and consumer delivery is evolving and how retailers are adapting their ecommerce and logistics strategies as customer expectations for speed and reliability rise.
“Given the digital transformation, propelled by the pandemic and the macro economic trends it stimulated, delivery has evolved from an operational afterthought, to a defining feature for online retailers. Its impact on the customer experience, loyalty and, therefore, revenue for Australian retailers is significant - and will continue to grow as Amazon continues to train consumer expectations downunder,” said Rob Hango-Zada, Co-Founder and Co-CEO of Shippit. “Today, consumers want choice, convenience and reliability - they are gravitating towards the retailers who can offer that. The complexity for Aussie retailers has increased massively with more optionality and transparency than ever, the way retailers are balancing costs with all of these demands has been eye-opening.”
Delivery estimates up, actual times down
While delivery estimates are increasing, the report - which comes as global giants like Amazon and Temu are rapidly growing market share - shows that actual delivery speeds, based on data from hundreds of millions of transactions on the Shippit platform, are improving. The average delivery today takes 2.2 days, down from 2.6 days in 2023. The 2.2-day reality is significantly less than the retailer-advertised 5.6-day estimate. Retailers could be inflating their estimates to avoid falling short of customer expectations. Critically, when competing with newer retailers that provide free, next day shipping, this is an existential threat to incumbents.
Same-day delivery, free shipping
There has been a 136% increase in express shipping since 2018, as consumers, trained by emergent players like Uber Eats, Doordash and Amazon, favour getting their goods as fast as possible. However, there is a growing disparity in the supply and demand of an even quicker form of delivery: same day. Fewer than one in ten (9%) retailers currently offer same day shipping, yet two in three (61%) customers would happily pay for it. There has been a proliferation of choice for such services, like for example Uber Direct nationally.
For consumers contending with well-documented cost-of-living pressures, free delivery - a hallmark of Amazon - is table stakes today.. However, once a staple of ecommerce, free delivery has decreased significantly, falling from 81% of retailers in 2018 to 70% in 2024. What’s more, the average minimum spend threshold to qualify for free delivery has increased 20% in just six years. This indicates that the squeeze on margins is forcing retailers to implement cost recovery strategies, rather than finding greater efficiencies in the delivery process itself.
“For shoppers, it is certainly a mixed bag. Increasing delivery costs along with the need to spend more to access free shipping from a shrinking number of retailers, is cause for concern. Improving delivery speeds on the other hand is promising and the growing number of carrier options for next or same day delivery demonstrates the industry’s commitment to meeting today’s consumer expectations, it’s simply a matter of how quickly retailers can embrace them” continued Hango-Zada.
“Retailers are more in tune with becoming more reliable, however with so many retailers under promising in the hopes of overdelivering on their estimates this may be counterintuitive to winning market share in the long run. Despite rising costs, the trend towards faster delivery times suggests a focus on efficiency and speed in logistics, as retailers recognise the impact it has on consumer loyalty, and therefore, their bottom line. Our research has revealed that half of all online shoppers simply won’t return to a brand due to a bad delivery experience. With delivery now the second biggest influence behind price when it comes to choosing who we shop with, it has to be a significant focus for retailers.”
Disincentivising returns
Returns are an occupational hazard in retail, but an expensive and inconvenient one. In 2018, 97% of retailers offered easy returns, but this figure has decreased to 84%. In 2018, 49% of retailers provided free returns, but that number has now dropped below 20%. As the associated cost and the environmental impact increase, more retailers are expected to disincentivise returns in future - especially as they focus on implementing cost-recovery strategies.
This could be in response to growing consumer trends such as ‘wardrobing’ - also known as ‘wear and return’ or ‘free renting’ - in which customers would purchase items with the intention of wearing them only once, before returning them.
Forward-thinking retailers
In 2024, 78% of surveyed retailers are actively enhancing or intend to invest in their last mile delivery capabilities. However, a further 22% have no plans to make additional investments in their last mile delivery capabilities. Real-time data analysis ranked first, with AI/automation and personalisation frequently in the top three.
Operational efficiency is also crucial, with 23% of retailers prioritising inventory accuracy and visibility, and supply chain optimisation; clear recognition of the need to meet customer expectations, whilst simultaneously optimising fulfilment processes and improving profitability.
For many, the short- and medium-term threat posed by Amazon and Temu is too big to ignore. Over half (54%) of retailers are at least moderately concerned about the threat these global giants pose. Other key concerns include inflation and cost-of-living pressures, and their subsequent impact on consumer spending which by all accounts has taken a hit over the last 12 months.
As traditional marketing strategies have come under pressure and the threat of competition has risen, the current focus on cutting edge technologies like AI and personalisation highlights a shift towards the future of growing ecommerce more efficiently.
“At Freedom, nothing is more important than ensuring our customers have an exceptional experience, whether they’re speaking to a sales associate on the shop floor, or receiving an online delivery. As consumer habits change, and online penetration increases, ensuring we’re delivering on delivery is a key operational focus,” said Joshua Rich, eCommerce Operations Lead at Freedom. “We strive to provide our customers with optionality. Irrespective of whether they want to buy in store, online for delivery or click & collect, we want to ensure it’s accurate, reliable and convenient every time. The impact that has on our retention rates is noticeable, and so we’ll continue to invest in our last mile, because ultimately, that’s an investment in our customers and our bottom line.”
To read the report in full, including retailers views on everything from sustainability and ESG reporting, the impact of AI and the existing and future role of delivery, visit: https://www.shippit.com/whitepapers-and-webinars/the-state-of-shipping-report-2024
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About Shippit
Shippit is the industry-defining commerce delivery platform that powers +100M deliveries annually across Australia, New Zealand and South East Asia. Since its launch in 2014, Shippit has fulfilled nearly $30bn worth of ecommerce orders. Shippit’s award-winning software and services are trusted by thousands of companies - like Kmart, Myer, Big W, Baby Bunting and R.M.Williams - in stores, warehouses and vehicles to solve complex logistics challenges, streamline operations, optimise the post-purchase experience and surpass customer expectation. The result is a higher net promoter score (NPS), increased customer lifetime value, and reduced operating costs. Today, only price has a greater influence on customer loyalty than delivery. For more information about how you can turn delivery into a driver of loyalty, visit www.shippit.com
Methodology
In order to compile this report, we sought data from multiple sources, including:
- State of Omni-Channel Retail Shipping Research, 2024: Data collected from 1,593 retailers, to benchmark against the same recorded data points from 1,480 retailers in 2018.
- State of Shipping Survey: Data collected from 91 retailers, with a combined 1,126 store locations, who submitted responses to the State of Shipping survey in June 2024.
- Shippit platform data: Data based on 200+ million orders at 3,500+ retailers using the Shippit platform, from July 2018 to July 2024. Data comparison timeframe based on financial years. Prices are based on the amount paid at the point of delivery booking. Transit time is based on the number of business days to complete a delivery.
- Shippit and Jarden report: Shippit/Jarden whitepaper, ‘Courting the consumer via the last-mile’, March 2024.
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