Wednesday, March 6

STUDY: Online Customers Prefer FREE Over FAST When It Comes To Delivery

Are you worrying about the recent trend to same-day delivery? Think it will cut into your business? Read on to see how your 24 hour shipping turnaround will stay competitive.
As several major retailers experiment with same-day delivery initiatives, a new study suggests that consumers are more interested in delivery price than speed.

The Boston Consulting Group (BCG) surveyed 1,500 U.S. consumers and found just 9 percent of the sample group said same-day delivery is a top factor that would improve their online shopping experience, while 74 percent cited free delivery and 50 percent cited lower prices.

EBay, Nordstrom, Wal-Mart,  and many other retailers are beginning to offer the same-day delivery option to consumers in selected markets. These retailers face growing pressure from, which has been offering same-day delivery of selected items in certain cities since 2009.

The survey did find that “affluent millennials”—ages 18 to 34 and with a household income exceeding $150,000—who live in urban areas might be an attractive market for same-day delivery. While these consumers make up only 2 percent of the market, their online spending is about two times more than that of the average U.S. consumer.

BCG suggests that retailers should offer same-day delivery for only a select number of products that are small and light and that carry high margins. Electronics, office supplies, and apparel are likely candidates.

“Same-day delivery will be a niche service in the near future,” Rob Souza, a partner at BCG, said in a release. “Retailers may choose to offer it to build customer loyalty, enhance brand awareness, or keep up with the competition. But it is unlikely to generate significant revenues for either retailers or carriers.”

Affluent millennials are willing to pay up to $10 to receive a delivery the same day, according to the survey, while other consumers are likely to pay up to $6, less than the fee charged by most retailers today. At those rates, same-day delivery would generate between $425 million and $850 million annually in delivery revenues if—as the consumer survey data suggest—up to 2 percent of online orders are fulfilled on the day of purchase.

Despite the relatively modest levels of anticipated revenue, several startups, such as Shutl, Zipments, Instacart, and Postmates, have flocked to the space, and established carriers, such as the U.S. Postal Service and Federal Express, are also running tests.

New York and San Francisco, densely populated cities, are the sites of many of these tests. BCG’s analysis suggests that Boston and Washington, which have large shares of affluent millennials and population densities similar to other U.S. cities, would be more promising places to test national acceptance of same-day delivery.

BCG fielded the survey in November, eliciting a sample that was representative of the U.S. population in terms of gender, ethnicity, age, and household income.

BCG is a global management consulting firm.