The Cost of Convenience: Can Your Business Afford Free Delivery?

Written by
Steph Fenton
Published on
2/5/2018
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Consumer demands for delivery are blowing through the roof. Today’s online shoppers don’t just want hyper-convenient delivery and returns - they expect your business to provide them.

“The Amazon effect has raised everyone’s expectations about how fast products should arrive at our doorstep.” - PWC, Total Retail Survey 2017.

There’s no escaping it. eCommerce businesses have to nail delivery.

Better delivery options are now the second biggest factor why consumers choose one online retailer over their competitors (KPMG). And high delivery costs are now the single biggest cause of basket abandonment at over 50% (MetaPack).

What was once accepted as ordinary delivery times, now seems like a lifetime of unbearable delays.

But there’s a flipside. With convenient delivery in such high demand, getting it right can be a potent way to attract and convert consumers.

Fortunately, offering outstanding delivery isn’t as hard as it sounds.

Find your loophole

Too many e-tailers end up seeing decisions on delivery policy as a Catch-22 - either you burn your margins trying to keep up with Amazon, or you refuse to play the game and lose all your sales to speedier competitors. It’s a tough one.

But there is a middle ground.

Instead of committing to funding free delivery no matter the cost, smart retailers need to remember that details, partners and sheer work ethic go a very long way in this industry.

So here are 3 surprisingly simple strategies that will help you offer truly competitive delivery options, all while reducing costs and protecting margins:

1. Pick your partners

Outstanding delivery starts with the right partners.

Invest the time to take a hard look at your current suppliers. Are you really getting the best rates? Are you using their different service categories to full effect?

The key is to negotiate.

Remember, better rates from your courier usually comes down to the volume of shipments you’re processing. So if you’ve enjoyed recent revenue growth - and hence more shipments - pick up the phone, and check out the deals your current partners can offer.

If there’s nothing they can do, then it’s time to shop around and weigh up your options. Spending time and effort hunting for suppliers may feel like a distraction, but it’ll replay itself over and over if you can nail a better deal.

That said, we always recommend the Goldilocks principle in negotiations: look for a reasonable deal, not extremes. After all, the goal is getting a long-term partner.

The goal is getting a long term partner.

2. Watch those margins

Don’t lose yourself in what other businesses are doing.

Amazon may be leading lights in consumers’ eyes, but the E-Commerce goliath also lost a colossal $7.2 billion on shipping in 2016, according to GeekWire analysis. Amazon, of course, have done their maths and know they can lean on their other services to make up the difference.

The example for other retailers is easy to spot. Get your calculations right, and if your business can’t afford to offer free delivery, don’t. Simple as that.

For example, we did work with Saltrock Surfwear to provide free standard delivery and Collect+ for their customers - but only after making a serious and ongoing commitment to track and monitor their volumes and margins.

While the approach has drawn in major sales for their business, there are tightly specific cut off points: huge effort went into calculating margins and the right threshold for consumer spending before orders qualify.

The trick is once again commitment. First up, to getting your margin calculations right from the off. Second, putting aside time to keep tracking and adjusting on an ongoing basis.

Focus on what your business can offer, and you might just be surprised at how achievable some of those demanding delivery times may be.

3. Keep one eye on the clock

Offering a late cut off point for free next day delivery is simpler than most retailers expect.

The reality is many distribution centres are happy to take stock right up until 10pm or later if you take the time to ask them. You just have to make sure your staff can get down there and hand the stock over.

Instead of staffing your warehouse 8am till 2pm, staff it 4pm till 10pm. Recruiting staff for a later shift could equal a major customer convenience, helping to keep those demanding customers coming back.

Final thoughts

Commit to convenience. Providing convenient delivery isn’t always exciting. Putting in tougher hours, keeping an eye on the margins, and spending time building smart relationships with suppliers all take time, effort and investment.

But get it right, and the rewards are yours to reap.

When consumers crave better delivery, handing it over is a sure fire way to beat out competitors and keep customers coming back for more.

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