Viewpoint: As inflation continues, now is the time to optimize e-commerce shipping
This review was written by Mitchell Nikitin, Founder and CEO of Via.Delivery. The views expressed herein are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Online shoppers in the United States pay significantly higher prices for their purchases due to inflation. January marked 20 consecutive months of year-over-year online inflation. As consumers watch prices continue to climb, many are increasingly concerned about the rising cost of everyday items. Online merchants are closely watching the changing buying habits of shoppers during this period of inflation. As companies study changing consumer trends, they can attempt to reduce sticker shock by optimizing shipping experiences.
Asked about their spending plans for 2022, nearly six in ten US consumers admitted they would proceed with caution. And 22% plan to significantly tighten their budget. Inflation concerns are causing buyers to think more carefully about their spending. Nearly nine in ten US consumers are at least “somewhat” concerned about inflation, and six in ten admit they are “very” concerned, according to a New York Times report.
Despite their worries about inflation, consumers continue to shop and spend money online. The pandemic has drawn more online shoppers than ever before, and consumers aren’t looking back. In 2022, the US e-commerce market is expected to exceed $875 billion.
Consumers worried about inflation hope to find deals online. Online shopping tends to offer more shopping options, and consumers can easily compare prices online and choose the best deals. However, the discounts that consumers expect to find online may not be as widely available as in the past, and bargains may not offer such significant savings. Maritime transport is an excellent example.
Online retailers know that consumers love free shipping and that discounted shipping can help drive sales conversions. However, some online retailers are reducing their shipping discount offers to stay profitable. Extending free shipping offers has always been difficult for merchants, especially when margins are tight. Labor shortages, rising fuel prices and increased demand have not improved the situation. After crunching the numbers, many companies simply can’t meet consumer expectations for free shipping.
Higher prices can impact buyer behavior
As prices rise and deals and discounts disappear, online retailers may notice some of the following changes (depending on the products they sell and the prices they offer):
Higher cart abandonment. The cost of shipping is a major driver of cart abandonment. According to The Checkout Benchmark report, payment completion rates average 56% on desktop and 45% on mobile when shipping is free. Cart abandonment increases when consumers are asked to pay more for shipping. A 10% increase in shipping costs lowers payment completion rates by 6% on desktop and nearly 4% on mobile. Even if companies don’t increase their shipping costs, shoppers may still be more likely to abandon their carts. A $9.99 shipping fee that consumers may have tolerated before could end up being a deal breaker for consumers paying more for their purchases and worried about inflation and rising costs .
Decreased willingness to spend more to reach reduced Expedition thresholds. Often, shoppers spend more money, adding items to their online shopping cart, in order to reach the free or reduced shipping threshold. In short, they will buy more to save on shipping costs. However, this could change if shoppers stick to buying only the items they need. Some consumers say they plan to cut discretionary spending as inflation rises. More than a third (36%) will reduce spending with mild inflation, and almost half (49%) will reduce discretionary spending with significant inflation.
It’s a trend that e-commerce brands need to watch. Online retailers should pay close attention to cart abandonment rates and test different shipping offers to find out if shoppers are more or less likely to add purchases.
Buyers choose slower and cheaper shipping options. Whether buyers place more importance on cost or on speed of delivery is a long-standing debate. In reality, Amazon has conditioned consumers to expect both fast and free delivery. But as consumers are burdened with inflation and look for ways to cut costs, some may choose to wait longer for deliveries to save money.
Brands can offer options to help ease the pressure of inflation
Retailers can offer some relief to customers and help their own cause by optimizing shipping experiences. In today’s environment, offering shoppers a variety of affordable shipping options at checkout is a smart first step. And it can help satisfy consumer desires with a range of cost and speed preferences.
Online retailers with physical locations may offer BOPIS or curbside pickup. These are significantly cheaper fulfillment options than residential shipping. Another option is to offer BOPA (buy online, collect anywhere), which is also cheaper and can be used by e-commerce brands that do not have physical stores. BOPA allows shipping to commercial locations such as pharmacies and grocery stores. Consumers select where they want to pick up their order, making BOPA not only a cost-effective option, but also a convenient one. In most cases, BOPA is around 30% cheaper than home delivery.
Inflation is becoming a major concern for online shoppers and, in some cases, a barrier to purchase. When customers click the checkout button, it’s important that they see at least one delivery option that’s attractively priced to them. Giving customers options helps them feel more comfortable with shipping costs and confident enough to shop.
About the Author
Mitchell Nikitin is on a mission to transform the shipping and delivery markets. He is the founder and CEO of Via.Delivery, the company enabling pure play and direct-to-consumer online merchants to compete with giants, such as Amazon, by offering Buy Online, Pickup Anywhere (BOPA) experiences. Leveraging his leadership experience in logistics, e-commerce, retail and IT, Nikitin leads Via.Delivery’s efforts to build the largest alternative delivery network in the world. In addition to being an advocate for logistics efficiency, he is passionate about helping startups monetize and serves as a mentor for Alchemist Accelerator. He is also a former racing driver. Connect with him on LinkedIn.