You can’t deny the Amazon effect and it’s impact on eCommerce.
Recent estimates show between 60 and 80 percent of U.S. households have access to an Amazon Prime membership, which gives members access to free two-day shipping for a yearly fee.
Customers are beginning to compare all eCommerce sites against their Amazon experience, particularly when it comes to shipping. When it’s time to check out and customers view shipping options, they expect fast delivery with same-day, one-day and two-day shipping options readily available.
Unsurprisingly, this quick turnaround makes it impossible for a customer not to liken their experience to Amazon’s.
That leaves one big question out in the open: What are you going to do to catch up?
It’s time to say goodbye to one-size-fits all shipping experiences and reevaluate your shipping strategy to focus on innovation, choice and convenience.
But how can you meet customers expectations and still turn a profit? We’re breaking down our top smart shipping strategies to stay competitive with Amazon.
How Amazon Changed Customers’ Shipping Expectations
The biggest shift in customer’s shipping expectations is a reluctance to pay for shipping. Nearly one-third of consumers say they’ll make an online purchase only if there is a free shipping option.
Amazon shoppers are used to getting free shipping – no matter the size of their order. You don’t realize how spoiled you are with free shipping until you see a shipping charge on your order. There’s nothing worse than spending 30 minutes filling your cart only to leave it behind because you don’t want to pay for shipping. Most of us have been there, and your customers certainly have. In survey after survey, shipping charges are frequently cited as the top reason people abandon their carts.
The second shipping expectation that Amazon has changed is shipping speed. Consumers expect fast delivery. FedEx reports that 64 percent of US consumers say they expect an order to qualify for next day delivery if they place their order before 5 p.m. Even Amazon is feeling the pressure to increase delivery speed. The company recently announced plans to move the default delivery for Prime members from two to one-day.
Amazon has conditioned consumers to expect deliveries quickly and customers aren’t patient about it. One-third of online shoppers say they’d contact customer service if a non-urgent order arrives just one day late. The number was double for urgent items.
Making Shipping A Competitive Advantage
So how can you compete? The answer is to deploy smart shipping strategies that meet customer’s needs.
Amazon excels at offering fast and free shipping, but it comes at a cost. Amazon’s shipping and fulfillment costs as a percentage of net sales continue to increase. Their combined shipping and fulfillment costs have gone from $1 billion to $46 billion in the past 10 years. For context, Amazon is expected to earn about $12 billion from Prime memberships this year.
Amazon is clearly subsidizing Prime shipping. Most merchants don’t have the cash to subsidize shipping at the rate Amazon is but don’t fear, you can still compete. You don’t need to build your own delivery network, launch a Prime-style program, or offer free shipping on every order. Just be strategic and nimble about shipping so you can create a better customer experience to differentiate yourself.
Tips for Competing Against Amazon’s Shipping
To meet your customer’s increasing need for speedy and free delivery, consider utilizing these strategies:
1. Be Smart When Offering Free Shipping
Many retailers, including Walmart and Target, compete with Amazon by offering free two-day shipping on orders of $35 or more. Even Amazon’s free expedited same-day shipping requires a $35 minimum.
Before introducing the free shipping program, Walmart also tried creating its own membership program called ShippingPass. The service provided free two-day shipping for $49.95 a year, about half the cost of a Prime membership at the time. The program wasn’t a hit with consumers and Walmart eventually canned the program and issued refunds.
Most sellers will have better luck offering free shipping with a minimum order than trying to sell shipping memberships. Amazon Prime memberships include access to the company’s wide library of streaming videos and music, as well as additional perks such as free unlimited cloud storage for photos.
Most other ecommerce sites can’t offer the wide variety of perks. One exception is cosmetics retailer Sephora, which offers a flash shipping subscription for $15 per year. Members get free shipping on an unlimited number of orders with no minimum.
Sephora’s flash shipping assumes customers will make several small orders throughout the year as they run out of cosmetics. Amazon built the Prime membership around the idea that you’ll order as much as possible from Amazon if the shipping is free. For more niche retailers, customers may only make a purchase a couple of times a year. Free shipping with a minimum order is a better fit for more specialized retailers.
2. Find the Right Carriers and Negotiate
Delivering items quickly and at the lowest cost will require finding the right carriers. The days of using exclusively one carrier have passed. Smart merchants will shop around and negotiate to get the best deals. Fortunately, at ShipperHQ, we’ve done the legwork for you. With our new ShipperHQ Marketplace you can easily integrate with our large network of the top carrier services, including cross-border and LTL options.
3. Simplify Shipping Options at Checkout
Consumers don’t care who is delivering their package. They just want it to arrive quickly. Don’t overwhelm customers at checkout with every shipping option imaginable. Take a look at this shipping option section of a real checkout page:
Now compare it to the shipping option inside the Amazon app for a Prime member:
Amazon doesn’t tell you who is going to deliver the package. They just ask you how quickly you need it. Simplifying the shipping experience at checkout is one of the core benefits of ShipperHQ. Our platform enables you to only display the relevant options based on what’s in the cart and where it’s going.
Amazon thrives on convenience. Shoppers can find what they want, check out quickly and feel confident it will arrive in two days. Your checkout experience needs to be just as smooth. Your customers shouldn’t need to do algebra to figure out which shipping option is the quickest and cheapest for their order.
4. Offer Upgraded Fast Shipping
When improving the options you display at check out, consider adding an option to upgrade for faster delivery. Shoppers say they willing to pay up to $18 for same-day delivery and $19 for international shipping. Furthermore, 65% of consumers say they would spend more to qualify for free premium shipping.
5. Utilize In-Store Pickup
In-store pickup is a great way to offer fast, even same-day, delivery with minimal costs. While click and collect has been popular in the United Kingdom for a while, it’s finally starting to take off in the United States. About half of US consumers have used ship to store in the past year. So naturally, smart retailers are taking advantage of this trend.
In the past five years, Walmart has expanded its grocery pickup service to more than 2000 stores. Analysts estimate about 11-13% of Walmart customers are utilizing the service. CEO Doug McMillon recently said the company’s investment in grocery pickup, is driving more sales. Grocery sales this year are the best they’ve been in nine years for the retail giant.
But what about online-only retailers without stores? You can consider shipping to alternative locations such as UPS Access Points. Consumers get the advantage of a quick and secure pickup, while you pay less for shipping. Access points are treated a business delivery instead of a more expensive residential delivery.
6. Provide a Top-Notch Shipping Experience
Our last tip isn’t really about competing with speed, but more about how to distinguish yourself from Amazon. Shipping is an overall part of the customer experience. Set yourself apart by offering a premium experience that includes:
- Estimated delivery dates
- Frequent delivery updates along the way
- Elegant packaging
Amazon can deliver packages fast and cheap, but sometimes at the expense of the overall packaging experience. Checkout our top tips for improving your packaging to upgrade your customer experience.
Consumers may expect their packages to come quickly and with free shipping, but with the proper planning and promotions even niche retailers can compete against Amazon. If you’d like more help developing your shipping strategy, sign up for a 30-day free trial of ShipperHQ.