Gone are the days when two-day delivery was exciting. Customer expectations and shopping behaviors around delivery speed have shifted. People want everything delivered ASAP, a preference that has been accelerated by the COVID-19 pandemic and the disruptions that presented.
As a result, many more e-commerce businesses are building ‘speed’ into their DNA, cutting down on the wait time window by expanding into same-day and two-hour or less delivery coverage.
The playing field is jam-packed with marketplaces racing to deliver orders at an unbelievably fast speed, begging the question, just how much does delivery speed really matter? Here’s a round-up of various studies offering insights on the question.
The shift to e-commerce was already happening but has been accelerated by the pandemic
People ordered stuff online before the pandemic, but not near the rates we see today. So, what gives? The demand for instant delivery of groceries, food, and other convenience products increased when the coronavirus forced Americans to stay at home. Contactless delivery was a necessary evil that consumers have increasingly come to appreciate, even as the pandemic wanes. More people began shopping online with greater frequency in 2020 and 2021, accelerating the ongoing shift to e-commerce by more than five years, according to IBM’s US Retail Index.
Regardless, these events unfolded a new chapter in e-commerce, giving rise to instant commerce, also called quick commerce, kickstarting the delivery speed trend.
Expectations around delivery speed are higher than ever, thanks in large part to Amazon Prime
Amazon has always been ahead of the delivery speed curve and is known for having the fastest and most convenient delivery options. This e-commerce giant has subtly shifted consumer perceptions of delivery speed from a “nice-to-have” to a “must-have,” and continually pushes the envelope with faster and faster offerings such as its Prime two-hour delivery.
Prime first debuted in 2005, providing two-day delivery as part of its subscription-based membership. Then in 2009, when e-commerce was still in its infancy, Amazon became one of the only major retailers to introduce same-day delivery. Same-day delivery was initially offered across just seven cities and cost Prime members $6 and non-Prime members $15. And within the next five years, customers began embracing same-day delivery, ordering 10x the number of products using same-day delivery.
Amazon’s logistics clout has disrupted a decades-old market dominated by FedEx and United Parcel Service (UPS). Businesses like Amazon and Walmart have followed suit, throwing hundreds of millions of dollars into making same-day or two-hour delivery possible for their customers.
Online shoppers place a premium on convenience and speed.
Interestingly, a survey found that 96% of respondents equated “fast delivery” with same-day delivery, 61% wanted their orders to arrive within 3 hours after checkout, and 25% declared that they would outright abandon their carts if same-day delivery wasn’t an option.
Meanwhile, Instacart recently reported that 85% of shoppers in a survey by The Harris Poll said they prefer to receive grocery orders in two hours or less.
Shoppers are willing to pay more for faster deliveries
Time is money to many shoppers, particularly to hyper-busy segments such as parents or young professionals. This demographic is typically more willing to pay a premium for convenience. Here’s a rundown of several studies that shows the significance of delivery speed to these online shoppers.
- 53% of shoppers in the US showed a willingness to pay a premium price for a same-day delivery window. (McKinsey)
- In 2020, Amazon reported 200 million paying Prime members worldwide, up from 150 million paid Prime members worldwide at the end of 2019.
- In fact, according to Statista, millennials between the ages of 25 and 40 and Gen Z between the ages of 18 and 24 are more willing to pay for faster delivery than boomers or Gen X.
- According to Delivering on Demand: Consumer 2021 Insights Survey, 65% of consumers are willing to pay more for faster deliveries.
Call it the “Amazon Effect,” perhaps, but consumers now expect options for two-day, same-day, and even sub-two-hour delivery options at the checkout, and they are willing to pay for it.
Optimizing delivery speed promise can substantially affect a company’s sales
The recent study “Sooner or Later? Promising Delivery Speed in Online Retail” suggests that optimizing delivery speed promises can significantly impact a company’s sales. The research showed that when the retailer promised customers one day faster shipping, sales increased, profits increased, and customers spent more per order. The one-day faster promise increased sales by 0.73%, profits by 2.0%, and value per order by 3.5%.
Similarly, the research also illustrated that a slower delivery speed promise negatively affected the variables. For example, the data shows that a one-day slower delivery speed could result in a decrease in sales by 0.51%, profits by 2.7%, and value per order by 3.1%.
Repeat purchase rates associated with 2-hour delivery were even higher than same-day delivery
ROI data from Ohi, an instant commerce provider for DTC brands, shows a strong payoff for businesses that invest in delivery speed.
Ohi analyzed some of its large partner brands that use Ohi’s 2-hour and same-day delivery and found that orders with same-day delivery had 30% higher repeat purchase rates than standard UPS/FedEx. But interestingly, repeat purchase rates associated with Ohi’s 2-hour delivery were even higher: up to 24% higher than same-day delivery and 61% higher than standard UPS/FedEx.
Outcomes observed were similar for customer lifetime value (CLV). Customers who initially ordered with Ohi same-day had 23% higher CLV than orders fulfilled through UPS/FedEx. CLV for Ohi 2-hour delivery was up to 16% higher than same-day delivery and 43% higher than standard UPS/FedEx.
To sum up ‘delivery speed in e-commerce’
So is delivery speed essential to a great overall shopping experience? If your e-commerce business does not cut down on the gap between the checkout and the customer’s doorstep, your customers will seek an alternative brand or marketplace that satisfies their need for speed. Besides, building delivery speed into your e-commerce strategy can put your brand on the path to a frictionless buying journey for your customers, which will help increase your online conversion rates and improve customer loyalty.
At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.