|Thu Sept 19 2013 12:38:08|
Shipping Costs and Alternate Realities
By: Ina Steiner
The rising cost of shipping is one of the most important but least discussed problems facing ecommerce. At the same time, large retailers and marketplaces are promoting the idea of same-day delivery, which is more costly. This move sets the bar higher for all sellers to meet rising expectations from customers who will expect near-instant delivery, just as large retailers have already reset expectations around free shipping.
Where buyers had always expected to pay for shipping for online orders, that's changing as retailers hungry for sales increasingly make some form of free shipping standard on their websites. Yet shipping costs increase each January - FedEx just announced it will increase shipping rates for FedEx Express by an average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 6, 2014, and UPS and the USPS will follow.
Experian came out with a report today that shows 70% of the 212 national marketing executives at major retailers whom it surveyed plan to use some sort of promotional offer this holiday shopping season, and 39% will offer free shipping.
It's clear how Amazon.com is moving toward fast and even same-day delivery - it's building warehouses all over the country to be closer to the customer. And it has the scale to negotiate favorable shipping rates with a host of carriers.
eBay's strategy is to have brick-and-mortar stores fulfill orders for customers wanting same-day delivery, but for that, customers (or retailers) will have to foot the bill for delivery. Some suspect eBay is already giving a boost in its search results to items from online sellers who are located near shoppers in an attempt to offer speedier delivery and lower shipping costs on its marketplace.
Just as they've done with free shipping expectations, the major players in ecommerce are resetting customer expectations around delivery speed. Compounding matters is Congress' failure to act on postal reform, impacting the smallest sellers who rely on the USPS as one of the most affordable options for low-volume shippers.
In what alternate realities can retailers cope with rising shipping costs while having to absorb more of those costs themselves, and how are you coping with changing buyer expectations?