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Fast and Free: Shipping’s Impact on Retail Sales in an Omni-Channel Commerce World

August 23 2016 | By Louis Georgakakis

Instant gratification. That's what more and more consumers are expecting from their purchase experience and retailers are scrambling to provide it, lest they lose out on the battle of the consumer's dollar. Approximately 43% of major retailers in the U.S. now offer in-store pickup for online orders, with omni-channel options and infrastructures continually growing and improving.

Having moved beyond showrooming – where a customer peruses products in store and later researches them and compares prices online – the ubiquity of mobile devices including smartphones and tablets now allows shoppers to instantly look for and buy products no matter where they are, be it at the retailer or on the couch watching TV. Gartner estimates that mobile engagement will drive 50% of all digital commerce revenue in the United States by 2017.

But what is considered fast? A Deloitte study confirms that 96% of U.S. consumers consider same or next day delivery to be fast, while 63% consider 3-4 day shipping to be fast. In fact, over a third of consumers consider timely delivery to have an impact on customer satisfaction according to UPS' Pulse of the Online Shopper. And how significant is free shipping? 4 out of 5 consumers consider free shipping to be an important factor when making online purchases. With numbers like these, it's no wonder supply chains are evolving to capitalize on this trend of fast and free.

Free shipping used to be something only a few retailers could or wanted to offer. However, the expectation of fast and free shipping has shifted online commerce policies. Deloitte reports that above and beyond free shipping, consumers expect even more perks and are unwilling to pay more to expedite delivery. As such, retailers are spending big on infrastructure changes to accommodate for this demand, whether its order fulfilment software to improve efficiencies or, where possible, an omni-channel approach for online purchases and in-store pick-ups.

Home Depot has implemented a "dynamic ETA" process whereby its website instantly displays a delivery schedule based on the customer's zip or postal code. It also shows the closest in-store pick-up location, along with the aisle and bay number for consumers who prefer a hands-on inspection before completing their purchase. This tight integration of brick and mortar with ecommerce operations allows customers to shop how they want, where and when they want.

A recent Business Insider ecommerce briefing reports that transportation and logistics could soon be a billion dollar industry. Amazon, Alibaba and Walmart are all increasingly focusing on the “first-mile” of the shipping chain to further reduce delivery times. Target is also focusing its technology efforts to enhance the in-store and online purchase experience, indicating that indeed, the supply chain is the new battleground for retail. The end goal? Winning the hearts and wallets of consumers increasingly accustomed to the norm of fast and free shipping.

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