Free, not fast preferred by shoppers

delivery1Free shipping and flexible delivery options are the most critical aspects for online shoppers as opposed to receiving the speediest deliveries, potentially nullifying the much vaunted effects of ‘the last mile’, according to a global report.

This is one of the findings of Pitney Bowes’ recent annual global online shopping study, which showed Australians notably turning to online shopping after disappointing experiences at bricks-and-mortar stores. According to the study, 72 per cent of Australian shoppers were unable to find a product while shopping in-store, with 19 per cent of shoppers then ordering the item online at home and 21 per cent turning to an alternative retailer or online retailer.

However, the strong influence of shipping and delivery options is now changing the way Australians make online purchases domestically and from retailers around the world. An overwhelming 82 per cent of Australian shoppers revealed they prefer free shipping with a longer delivery time, as opposed to paying for shipping with a shorter delivery time (18 per cent).

The study identified the top three reasons for Australians shopping online cross-border were price (64 per cent), selection (42 per cent) and quality (24 per cent). Only equal to Hong Kong, 88 per cent of Australians purchased products from retailers in a different country within the last year; almost double the percentage of American shoppers (47 per cent).

Jeremy Crooks Pitney Bowes ANZ managing director for global e-commerce said this year’s study shows that shoppers around the world consider price to be very influential when deciding to buy online.

“In all twelve countries in our study, we are saw that shoppers will choose lower shipping costs over speed of delivery,” he told Inside Retail.

“In Australia, cross-border shoppers polled said their number one criteria when considering an online, cross-border purchase is competitive pricing (64 per cent.) Similarly, the cost of shipping is the top deterrent to cross-border shopping.”

When asked if the emphasis on ‘speed’ in the last mile is overblown, Crooks said although the study did not look at speed in last-mile deliveries, every aspect of customer service and delivery becomes important during the holiday season.

“We found that 40 per cent of Australians polled had challenges with their online orders during the holidays with shipping and tracking inaccuracies topping that list,” he said.

The study found 12 per cent reported shipping and tracking issues, up from 7 per cent last year.

“The next most common issue reported was having items shipped to the wrong address or lost in the mail which doubled to 8 per cent, from 4 per cent last year. Retailers need to double-down on consumer experience elements this holiday season including delivery, returns, tracking and customer service,” he said.

With Amazon’s full scale launch imminent, Crooks affirmed Australia is very much ahead of the curve in cross-border shopping, with a high percentage of Australians who buy online from overseas retailers (88 per cent) higher than the global average (70 per cent.)

“In many countries, marketplaces dominate with online shoppers but in Australia, domestic retailers still dominate,” he said, pointing to 55 per cent of purchases being made directly from retailers and 45 per cent from marketplaces.

“But marketplaces are growing in popularity with a 3 percentage point increase for marketplaces over last year.  Next year it will be interesting to see if that number continues to grow.”

Last mile delivery

Is speed or price more important when it comes to delivery?

Shipping flexibility key

While the majority of shoppers said they prefer free shipping to fast delivery, 64 per cent of Australian online shoppers are using click-and-collect and nearly half of Australians (48 per cent) have their purchases shipped to a location other than their home, such as a workplace or parcel locker. Even during cross-border transactions, Australians are encouraged to buy from retailers who offer tracking of purchases and packages (42 per cent) and local delivery options (32 per cent).

All of this shopping is fuelling a boom in global parcel volumes according to the latest Pitney Bowes Parcel Shipping Index. Parcel volumes in Australia grew by 13 per cent from 2015-2016 YOY and it is projected that the Australian parcel market will grow to more than 1 billion parcels a year in 2021. That’s estimated growth of between 9 per cent and 12 per cent from 2017 to 2021 (CAGR).

“Australian retailers need to go global. The opportunity is here and now, and so are the increasingly valuable shipping solutions needed to be successful,” commented Paul Greenberg, founder of the NORA Network and strategic advisor to Pitney Bowes Global Ecommerce in Australia

With the imminent launch of Amazon dominating the news, Hianyang Chan, senior research analyst at Euromonitor International said Aussie shopping habits are evolving and retailers need to ready themselves for the new retail frontier.

“Gone are the days where solely having a bricks and mortar retail strategy is enough to be profitable,” explained Chan to Inside Retail.

“Millennials are more digitally empowered, connected and demanding than ever before and it is crucial for retailers to offer a seamless omnichannel approach that will help to build a sense of familiarity and identity within their target market.”

Chan said the entry of Amazon has put many retailers on edge and that the e-commerce giant’s imminent presence has resonated across Australia.

“While e-commerce will not completely eliminate physical stores, its continued pervasiveness will rapidly reshape the economic model of retail.

“It is expected from day one, Amazon will set a new gold standard in the online shopping experience and it is exciting to see the various strategies employed by existing retailers to prepare themselves for the tech giant’s onslaught. Faced with the one-two punch of the savvy smartphone-carrying millennials that are price sensitive and increasingly make purchases on-the-go, retailers are under pressure to reinvent themselves to better target these consumers.”

Amazon’s entry  into Australia, according to Chan, is the catalyst that will pave the wave for a new breed of online retailers and new strategies from existing merchants “to better utilise technology to increase efficiency and transform the offline retail experience to reach further than ever before.”  

“It will be vital for retailers to embrace the changing dynamics, step out of their comfort zone and chart their own way forward or risk being left behind.”

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