JULY 2022
Delivering on demand: HOW MANY DAYS IS TOO MANY? ANNUAL U.S. HOME DELIVERY
CONSUMER REPORT
Demanding consumers who want everything exactly when and how they desire may finally be telling us that a three-day wait to get an item delivered is perfectly acceptable. Shippers that have been calibrating their home delivery operations over the last few years should find this goal attainable. For those still finetuning things, it’s time to make some decisions or risk falling behind on consumer expectations. The availability of free shipping is still incredibly important when making the purchase decision. A majority of the more than 1,000 consumers AlixPartners asked about their home delivery preferences and expectations said they were willing to return the item in store if it meant being able to do so for free. And shoppers continue to be interested in the option to get their items delivered same day, giving shippers a puzzle to solve on how to pay for this service most effectively.
Delivering on demand: How many days is too many?
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As e-commerce became ubiquitous over the last few years, consumers consistently kept lowering what they considered an acceptable delivery wait time for free shipping further and further. This trend may now be stabilizing.
Consumers appear to be settling at just over three days of wait time on deliveries with free shipping, around the same as in 2021 (figure 1). In 2012 the acceptable delivery time was five-and-a-half days, and it had been on a downward trajectory ever since. For a typical shipper with a multi-node regional network, one-day fulfillment plus two-day ground shipping is very achievable and, in many instances, potentially even cost-effective. As things stand, however, anything below three days exceeds the capability of most delivery networks to make free shipping economically viable even after raising the minimum spend threshold. This year’s result, then, is good news. There are several possible explanations for expected delivery time to not have dropped this year, including the revival of in-person shopping as recovery from the pandemic continues. Consumer expectations may also have been modulated by rampant news coverage of congested supply chains and ports as well as overburdened delivery providers. However, more than 40% of surveyed consumers consider waiting four days or longer unacceptable.
FIGURE 1: CONSUMERS’ WILLINGNESS TO WAIT FOR ONLINE DELIVERIES WAS ON A DOWNWARD TREND
5.5
5.0
4.8
4.3
4.1
3.8
3.5
3.4
2012
2014
2016
2018
2019
2020
2021
2022
Note: Weighted average of maximum acceptable delivery time for free shipping, in number of days
The availability of free shipping remains critical when making the purchase decision for delivery.
Slightly fewer number of consumers are using the buy- online-pick-up-in-store (BOPIS) option than last year.
74% of the consumers surveyed by AlixPartners said it has a great impact, with only 4% saying it was not a consideration. Consumers had been more willing to pay for delivery last year, but that deference to the difficulties of the pandemic seems to be over.
6.9% vs. 7.6% Consumers most utilize pickup options in cases of immediate need or due to shipping costs. BOPIS, which often presents impulse-purchase opportunities for retailers, seems to be leveling off into a consistent use rate after having seen an initial uptick during COVID-19 store shutdowns.
Delivering on demand: How many days is too many?
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CHANGING RETURNS NORMS
As shippers begin to make returns policies tougher in the face of escalating costs and dwindling warehouse space, the era of returns that would get shipped back for free with no questions asked may be ending. And consumers largely seem to be amenable.We found that as many as 60% of consumers are willing to drive to return an item in store, particularly if the alternative is paying for return shipping (figure 2). As BOPIS flattens, this may be the next foot traffic and profit driver for retailers through supplemental sales during the same visit. FIGURE 2: NEARLY 60% OF CONSUMERS PREFER TO RETURN ITEMS FOR FREE IN STORE When you return an item purchased online, which of these would be your preferred method of return?
8%
11%
22%
59%
The challenge for retailers is still how to reprocess returns profitably once they do get back to the store. But there are definite opportunities to streamline returns logistics. The National Retail Foundation expects $761 billion in products sold in the U.S. last year to be returned, which, at 16.6%, is more than double 2019 returns levels as a percent of total retail sales.
Free in store when the location is less than 30-minute drive away
Drop off for a small fee ($2 to $5) at a nearby delivery provider location such as a dropbox or a USPS, UPS, or FedEx store
Paid collected return from home for a fee ($5 to $10)
Drop off for a small fee ($2 to $5) at a nearby grocery store (e.g., Whole Foods)
Delivering on demand: How many days is too many?
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SAME DAY STICKS
The demand for same-day deliveries has increased to 5.2% from 2.7% only five years ago ( igure 3).
This growth over the years shows that this is a service that consumers have come to expect, even though they are typically charged for it. Nowhere is this more obvious than in grocery orders. We found that consumers’ willingness to pay for same-day grocery delivery has edged up even from last year. A third of consumers in this year’s survey would pay $5 or $10 for same-day grocery delivery. A fifth would pay even for next-day delivery. It is worth noting, however, that on average over the last three years, increasing the same-day grocery delivery fee from $5 to $10 results in demand falling by approximately 50%.
FIGURE 3: SAME-DAY DELIVERY PREFERENCE CONTINUES TO GROW What percentage of your online orders have been delivered same day?
5.4%
5.2%
4.4%
4.1%
3.9%
2.7%
2016
2017
2018
2019
2020
2021
2022
Note: Consumers did not include delivery of restaurant food in their responses
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While all categories have expectedly seen a dip in delivery from last year as consumers get increasingly comfortable with shopping in person, some continue to benefit from habits developed during the height of pandemic lockdowns. For the second straight year, fresh and frozen groceries are the most popular product for home delivery (figure 4). Since 2014, demand for grocery delivery has more than doubled. The new normal appears to be settling higher than pre-pandemic figures. As things get back to usual, however, demand for delivery of products for pets, and health and medical supplies are back to 2019 levels.
FIGURE 4: DELIVERY DEMAND HAS FALLEN OVER LAST YEAR, BUT GROCERY HABITS MAY FIND A NEW NORMAL
Please select product categories you have purchased for delivery in the last 12 months
Food (groceries, frozen food)
Apparel/footwear (clothing/shoes)
Cleaning supplies
Pet supplies
Health/medical supplies
Note: Results are normalized to apparel/footwear segment; ‘Delivery restaurant food’ was added into the list only in 2021
Delivering on demand: How many days is too many?
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Three-fourths of surveyed consumers said they do not mind if their order arrives in multiple packages over multiple days. This provides shippers opportunities to combine orders, ship between distribution centers, and use other similar tactics to both keep shipping and fulfillment costs low and help reduce their environmental impact. Of those who do not mind multiple packages as long as shipping was free for the extra deliveries, 60% would be willing to wait between a few days and a week (figure 5). CONSCIOUS CONSUMERS?
When buying multiple items online, how long would you be willing to wait to receive all the items in one delivery if there was no extra shipping for any extra deliveries? FIGURE 5: CONSUMERS DON’T MIND MULTIPLE DELIVERIES FOR ITEMS IN THE SAME ORDER
50% 49%
45% 45%
30%
25%
23% 24%
17%
15%
14%
11% 11%
9% 9% 10%
4% 5%
4%
2%
A day
A few days
A week
More than a week
No, I am not willing to wait at all
2018
2019
2020
2022
Administered in April 2022, this year’s survey was completed online by 1,021 consumers aged 18 years and older in the U.S. As with previous years’ surveys, the goal was to gain insight into consumers’ behaviors and preferences in ordering products online for home delivery. Respondents were evenly divided in terms of gender, marital status, and household income levels and most were living in households that had more than one resident. ABOUT OUR RESEARCH
Delivering on demand: How many days is too many?
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CONTACT THE AUTHORS: Chris Considine Director cconsidine@alixpartners.com
CONTACT THE AUTHOR(S): Full name [in alphabetical order] Title +00 000 00 00 00 00 name@alixpartners.com FOR MORE INFORMATION CONTACT: Full name Managing Director +00 000 00 00 00 00 name@alixpartners.com ABOUT US Bryan Eshelman Managing Director beshelman@alixpartners.com Marc Iampieri Managing Director miampieri@alixpartners.com Raj Konanahalli Managing Director rkonanahalli@alixpartners.com Brian Nemeth Managing Director bnemeth@alixpartners.com Jim Trankina Senior Vice President jtrankina@alixpartners.com
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