Bridging the Gap: Meeting Rising Consumer Expectations for Shipping … Without Sacrificing Profits

The opportunities in e-commerce are endless, but the industry is also more demanding than ever. As prices rise and consumer expectations evolve, businesses need to stay agile and innovative without sacrificing their bottom line. However, research from ShipStation reveals an exciting trend: shipping experiences are becoming a key factor in e-commerce success. This presents a unique challenge and opportunity for retailers to not just meet but exceed customer expectations while ensuring sustainable growth.

Understanding the New Norm

Rising Delivery Costs: A Growing Concern

Delivery costs are skyrocketing. At the end of last year, we found that 34 percent of surveyed businesses plan to increase the price they charge consumers for delivery, up from 28 percent last year. This surge is driven by higher fuel prices, labor scale-backs, and softened retail sales. But beware: 67 percent of U.S. consumers are less likely to shop with a brand that has high shipping costs. Retailers must balance these costs without alienating consumers.

Demands for Faster Shipping

Consumers today also expect fast, low-cost shipping. Our research shows 60 percent of U.S. consumers expect free shipping to take two days or less. However, only one-quarter of surveyed retailers in the U.S. and Canada can meet this expectation. This gap is both a challenge and an opportunity. Those that can sustainably meet these shipping expectations can differentiate themselves in a competitive market.

Solutions for Retailers

Transparency: The Key to Customer Loyalty

Let’s start with what retailers can control: their communication with customers. Shoppers crave transparency in their delivery experiences. They want real-time updates, and according to our research, at least four notifications per order (fulfilled, shipped, en route, and delivered). Yet most retailers we surveyed only send a single "shipped" notification, often when the label is created but not when it’s left the warehouse. Retailers should step up with real-time transparency to win customer loyalty. If you can’t be the fastest or lowest-cost shipper, be the most transparent. The future of delivery lies in real-time tracking, live GPS, exact arrival times, and total clarity for the customer. We also recommend delivering updates directly to customers’ phones via text, directly at their fingertips, in addition to email or apps.

Out-of-Home Delivery: A Strategic Advantage

While most consumers prefer home deliveries, out-of-home options are gaining interest. In fact, shoppers in major cities are almost twice as likely to want an out-of-home delivery compared to those in rural areas so they have the freedom to pick up packages securely and on their schedule.

Retailers can benefit from out-of-home deliveries, too. By offering pickup at their store, or at centralized hubs vs. multiple residential addresses, they can benefit from lower shipping costs and streamlined fulfillment operations. These hubs don’t have to be owned facilities or large warehouses, either. Retailers can partner with local businesses in target locations to create micro fulfillment centers — increasing foot traffic for the partner and eliminating a real estate commitment for the retailer.

Premium Delivery: A Win-Win Solution

One way to bridge the fast and low-cost shipping gap is by offering premium delivery options for a small fee. Digital natives (shoppers under 45) are surprisingly willing to pay extra for faster delivery, especially in major cities. By targeting these shoppers with premium shipping experiences (e.g., same-day, overnight, two-day), retailers can boost their profits and meet the expectations of customers who are willing to pay up. Premium delivery options not only cater to demands for speed, but also create an additional revenue stream to offset rising costs for ground and economy shipping.

Meeting rising consumer expectations for delivery without sacrificing profits is a complex challenge, but it’s not insurmountable. By offering transparency with real-time tracking, leveraging out-of-home delivery solutions, and strategically offering premium delivery options, retailers can bridge the gap between consumer expectations and their own capabilities. This approach not only satisfies customers, but also protects and potentially enhances profit margins. As the retail landscape continues to evolve, those that adapt and innovate will thrive.

Krish Iyer is the vice president of strategic partners and industry relations for Auctane, parent brand of companies like ShipStation, ShippingEasy, ShipEngine and Stamps.com.