Consumers ordering online more focused on price and free shipping than speed
Like just about everyone else in the world, I order things online from Amazon, eBay, Best Buy and other online retailers. Personally, though, most of those things are not really so important to me that I need them right now. A new book, or DVD can wait a few days. In fact, if I desperately needed something, like the time my laptop charger decided it no longer wanted to live, I'd just run to a brick and mortar store to buy it, rather than pay the extra shipping fees that come with same day delivery.
Apparently, most people agree with me on this.
Free delivery, and overall lower prices, are much bigger motivators for online shopping than same day delivery, according to a survey conducted by The Boston Consulting Group (BCG).
When BCG asked 1,500 U.S. consumers which aspect of online shopping appealed to them the most, the results were overwhelming: a mere 9% said same-day delivery would improve their shopping experience, compared to 50% who said lower prices and 75% who said free delivery.
The groups that are more likely to embrace same-day shipping include, what BCG calls, “affluent millennials” or those aged 18 to 34, who have a household income that exceeds $150,00, and who live in urban areas. But this group only makes up 2% of the online shopping market (while spending double what the average consumer does.)
“Same-day delivery will be a niche service in the near future,” Rob Souza, a partner at BCG, said in a statement. “Retailers may choose to offer it to build customer loyalty, enhance brand awareness, or keep up with the competition. But it is unlikely to generate significant revenues for either retailers or carriers.”
It seems that what stops most people from choosing the same-day delivery option is, not surprisingly, the cost, which can be pretty steep.
The survey found that the majority of consumers would pay up to $6 for same-day delivery, while affluent millennials would pay up to $10. At those rates, BCG said, same-day delivery would generate between $425 million and $850 million annually if up to 2% of online orders are fulfilled on the day of purchase.
To give you some examples of what same-day delivery costs, right now Amazon charges $8.99 per shipment, and an additional 99 cents per item, for local same day delivery. Or users can sign up for Amazon Prime for $79 a year and pay only $3.99 per item.
Google, it was reported Monday, is going to be launching its own Amazon Prime competitor, which will cost between $64 and $69 a year, and will offer same-day delivery from stores like Target, Walmart, Walgreens and Safeway.
There are some services that offer lower same-day rates, like eBay, whose eBay Now, announced in October, which offers the rate of $5 on orders of at least $25. But the majority, as BCG points out, are higher than what the average consumer is willing to pay.
Same-day delivery is currently being tested out by other services, such as Shutl, a UK-based startup backed by United Parcel Service, that will be launching the service in the U.S. cities in a few weeks. It will be available in New York City, Chicago and San Francisco at first, followed by Atlanta, Boston, Denver, Detroit, Houston, Los Angeles, Miami, Minneapolis, Philadelphia, Phoenix, San Diego, Seattle, Washington, Montreal, Toronto and Tampa.
The U.S. Postal Service and Federal Express, are also running tests, also mostly in big cities like New York and San Francisco.
BCG suggests that the same-day delivery tests might do well in Boston and Washington, due to the large number of affluent millennials.
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