Consumer expectations of delivery continue their relentless march: speed of fulfilment is now rated by 8% of US consumers as the most important factor in e-commerce decisions, up from 2% in 2017, according to Kibo.
Unfortunately, consumers have been conditioned to expect their delivery for free. But as with lunch, so with delivery: there’s no such thing as free. So who has been paying for it? And who will in the future?
Initially, retailers paid: the first movers drove conversion with free delivery. Then retailers used free delivery to drive basket size. But now it is ubiquitous, the costs of offering it are starting to really hurt retailer profits.
The other party who paid for free delivery was, perversely, the delivery driver, despite the boom in parcel delivery. Labor accounts for 3/4 of delivery cost, so the squeeze was inevitable, especially as legacy unionized workforces allowed new entrants to undercut on price. But more recent labor cost reduction has been achieved by a significant worsening in working conditions, including the rise of self-employment, some of which have been found to be exploitative. We don’t think costs can go lower, and they may even increase as labor regulations tighten. So until the drones take off, further cost efficiencies in delivery aren’t going to support free.
What next then for free delivery? Retailers and logistics companies are battling to find new sustainable models:
Free delivery won’t disappear completely, but it’s clear the retailer and the logistics worker can’t subsidise it any further. Which ultimately leaves us: consumers.
Socio
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