How Fast Is Fast Enough for Online Shipping?

Amazon started the online shipping speed race with Amazon Prime’s two-day delivery. Today, Amazon Prime Now, available in 30 cities across the country, offers two-hour delivery. Now, other online retailers are following suit, with some even offering one-hour shipping. How can your small ecommerce business compete (and do you need to)? With the holiday online shopping season coming up, here's what you need to know about customers' expectations for online shipping.

First, what's considered fast shipping these days? The Wall Street Journal reports that in 2015, 63 percent of online shoppers considered three- to four-day delivery “fast.” In 2016, that percentage fell to 42 percent. In fact, 11 percent of online shoppers don't even consider two-day delivery "fast" anymore.

While that's still a small percentage of online shoppers, the number of shoppers expecting rush shipping is projected to grow. According to Brigg, by 2018 over $4 billion in merchandise will be shipped via same-day delivery. Already, 18 percent of consumers say fast delivery is the number-one factor in choosing their “favorite” online store, and more than one-fourth (26 percent) of online shoppers have abandoned a shopping cart because they discovered the shipping time was too long.

Still, fast shipping is not yet the default option for online shoppers. In UPS's 2016 Pulse of the Online Shopper study, only 3 percent of consumers say same-day shipping is option they usually choose. In a 2016 Deloitte survey, 71 percent of consumers said free shipping is the most desirable "perk" or promotion online retailers can offer. The same survey had some disturbing news: 80 percent of respondents don't think they should have to pay for three-day or four-day shipping, while the majority wouldn’t pay more than $5 for same-day shipping.

In certain markets and for certain products, however, some online retailers are offering one-hour or 90-minute shipping times, which beats even Amazon's same-day shipping guarantees. Such speedy shipping times are typically limited to certain markets with robust courier systems (such as New York City and San Francisco), or to luxury online retailers (such as Farfetch) whose upscale customers don’t mind paying $20 for one-hour shipping. But how long will it take until the concept trickles down?

To get a head start on the super-speedy-shipping trend, smart e-commerce retailers will start investigating their options now. Here are some factors to consider.

• You should charge more for faster shipping. In order to keep from losing money, you'll need to figure out how much to charge for different shipping options. To keep costs manageable, require orders to reach a certain dollar amount before same-day shipping is offered as an option.
• You don't have to offer fast shipping on every item. Look into your e-commerce website analytics to see which types of products customers most commonly request expedited shipping for, or which types of shoppers request expedited shipping. It's perfectly acceptable to offer expedited shipping only for certain items.
• You can offer expedited shipping in return for information. For instance, give customers who join your loyalty program or create an account to choose faster shipping. With their data in hand, you’ll be able to market to them more often and increase the overall amount they spend.
• You probably can’t offer fast shipping to every location. Same-day shipping is easier to pull off in urban areas or if you have a physical store in the same market from which you can take inventory. In these areas, nontraditional delivery options, such as courier services, can get packages delivered quickly. UberRUSH, Deliv, Postmates and ShipBob are four shipping services that cater to small businesses, although they’re available only in limited markets. If you need to serve a wider area, The Wall Street Journal reports that FedEx is piloting a service enabling small retailers and e-commerce companies to provide to-day ground shipping nearly nationwide.