- Consumers want home delivery within 3.5 days and -- if they don't get it from a retailer -- around 25% will shop elsewhere
- 47% of executives can't meet that timetable, putting their revenue at risk; 72% of executives don't believe home delivery is accretive to their profitability
- Delayed orders affect 92% of shoppers' next purchase decision and they expect compensation beyond the standard communication offered by shippers
- Nearly 80% of executives report rising delivery costs, prompting several tactics to reduce expenses including: optimizing delivery networks, positioning inventory, and shifting away from the use of a single national parcel delivery provider
- Home delivery increased as a share of shopper's spending activity for all product categories – groceries, cleaning products and health supplies led way
NEW YORK (July 24, 2024) – Expectations for free, fast shipments and convenient product returns steadily increased among online shoppers in 2024 – pressuring companies to respond amid a murky e-commerce profit performance and an inability to curtail costs, according to study published by AlixPartners, the global consulting firm.
AlixPartners' 2024 U.S. Consumer & Executive Home Delivery Survey, conducted most years since 2012, analyzes evolving expectations for the cost and duration of moving from clicking-to-buy to product arrival. The survey also tracks changes in the way executives meet those evolving demands while protecting the bottom line.
"Thriving in e-commerce requires companies to pull off a complex balancing act as they seek to satisfy customers who increasingly take for granted free, fast, and convenient home delivery and product returns," said Marc Iamperi, global co-leader of AlixPartners' Logistics & Transportation practice. "The definition of home delivery success is rapidly evolving because it is no longer enough to simply help customers avoid going to the store. Winning now requires a combination of operational improvements and continuous adjustments by executives."
The survey, conducted in the second quarter, polled 1,100 U.S. consumers aged 18 and above and 110 North American transportation, logistics and supply chain executives at companies with more than $100 million in revenue.
Home Deliveries Increase...So Do Expectations
Each of nearly two dozen product categories studied saw an increase in consumers purchasing them online in 2024, with an average of 5.7% higher purchase-for-delivery rate across the categories compared to 2023. Among the categories seeing the biggest increase are food (10%); health and medical supplies (10%); and cleaning products (11%).
Speed is also increasingly important, with e-shoppers expecting orders to hit their doorstep in 3.5 days in 2024, which is two full days faster than the period that respondents cited when AlixPartners first surveyed these trends in 2012. More than 9 of every 10 respondents (92%) say offers of free shipping impact purchase decisions, up from 83% in 2023. A decisive majority of shoppers take action if service levels fail to meet expectations, with a quarter taking their business elsewhere if a retailer can't satisfy delivery-time demands.
"Customers are sending a crystal clear message: if retailers can't deliver for free within 3.5 days, customers are increasingly likely to find somewhere else to shop," said Chris Considine, a partner in AlixPartners' Retail Supply Chain practice.
Product-return demands are also evolving. The top (42%) preferred method for sending back a product is dropping off at a store within a 30-minute drive of home. The No.2 preference (35%) is free drop-off at a delivery service.
Cost of Fulfilling Expectations Continues to Grow
Executives aren't settling as comfortably into the e-commerce era as their customers, according to the study. Nearly 80% of executives said per-package delivery costs increased in 2024 vs. 2023 levels. Just 28% of executives said home delivery is accretive to profitability compared with in-store shopping.
"The pressure is clearly on retailers to offer compelling e-commerce experiences – from simplified online shopping to fast and free delivery," Considine said. "Unfortunately, executives haven't made the business case for home delivery nearly as clear."
While 50% of executives reported a free-shipping service goal of 3 days or less and 59% said delivery performance has increased year-over-year, 47% of respondents say they cannot meet the 3.5-day threshold. The need for speed, however, is overshadowed by a desire to tighten the belt: 85% said reducing total cost per order is top priority for last-mile delivery, the survey found.
Among the methods shippers are using to improve performance:
- 40% shifted volume away from UPS and FedEx to other providers in the last year
- 49% increased the spending threshold for free shipping over past 12 months
- An increasing number of merchants are tightening return policies
- Growing number of executives are utilizing artificial intelligence to optimize performance
- Investment in certain tech-enabled cures, however, has dipped as shippers focus on more fundamental tactics with only 7% of respondents spending on robotics or delivery equipment like drones and unmanned delivery bots, compared to 16% in 2023.
The study found there is a disconnect between buyer expectations for communication, compensation, and contrition and executives' willingness to give it. More than a quarter of respondents said waved shipping costs or refunded delivery fees represent fair compensation for a shipment that is a day or two late; nearly as many said free delivery on the next order would make them whole. Only 18% are satisfied with 'we're sorry.'
More than three-quarters of executives said a notification and apology are all they offer when deliveries are late.
"Home delivery is an old concept that has rapidly accelerated amid technological innovation, changing consumer preferences and societal shifts," Iamperi said. "We're left with a gap between shopper expectations and the capability to deliver. Bridging the gap requires an increased level of performance and better management of customer expectations."
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