Online shoppers overwhelmingly expect free shipping on a timetable that nearly half of companies can’t meet, according to a market study from the consulting firm AlixPartners.
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 AlixPartners’ “2024 U.S. Consumer & Executive Home Delivery Survey.”
“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,” Marc Iamperi, global co-leader of AlixPartners’ Logistics & Transportation practice, said in a release. “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.
Speed is 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.
But at the same time, the cost of fulfilling expectations continues to grow, the study found. Nearly 80% of executives said per-package delivery costs increased in 2024 vs. 2023 levels. And 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. Unfortunately, executives haven’t made the business case for home delivery nearly as clear,” Chris Considine, a partner in AlixPartners’ Retail Supply Chain practice, said in the release.
In search of solutions, the survey found that shippers are exploring new methods 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
- A growing number of executives are utilizing artificial intelligence to optimize performance, but investment in certain tech-enabled cures has dipped as shippers focus on more fundamental tactics; only 7% of respondents are spending on robotics or delivery equipment like drones and unmanned delivery bots, compared to 16% in 2023.
“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.”
