The 2-Day Delivery Dilemma

2-day delivery has been available for a long time, albeit a very expensive option historically. Amazon is probably responsible for popularizing 2-day delivery at a reasonable cost, but it was only a matter of time before somebody provided this service at an affordable price point. Other carriers have been quick to respond, businesses and consumers now find themselves with more options than ever before. This is important because the availability of 2-day shipping can be a make or break decision for online shoppers.

When shopping for common, widely available items, customers will generally pick the lowest cost retailer, who can also get it to them fastest. For most consumers, there is a price point that justifies a longer wait, but that price point varies by consumer and by product. If you can’t sell it cheap, you need to ship it fast. If you can’t do either, ecommerce consumers will avoid you.

But what about specialty items? Items that are not widely available and are often only available to purchase from the manufacturer. The customer has already decided they want that item, and despite their desire to have the item as quickly as possible, slower shipping services are generally not a deal breaker for them. These customers are more likely to pay to upgrade the shipping speed, or to spend more in order to get free or upgraded shipping.

Some conclude that premium items should be shipped via premium services, but does it diminish the customer’s experience if it takes longer than 2 days to receive? Contrary to conventional logic, research suggests that a prolonged anticipation period increases enjoyment of the experience. Despite the fact that nobody would prefer to wait longer than necessary, marinating in that feeling of excitement increases the probability of purchase satisfaction. Conversely, the same waiting period that increases anticipation, will also amplify dissatisfaction if the product fails to meet their expectations.

For many companies, the cost of scratching this 2-day delivery itch is prohibitive. However, if you are in a highly competitive industry, the lost opportunity cost of not having an affordable 2-day option may exceed the actual cost. Partnering with the right 3PL is a great way to reduce your shipping rates by pooling your volume with the combined volumes of all 3PL clients.

Now that you have decided your company is going to offer 2-day shipping, you will want to take some time to thoughtfully consider how to present this to your customers. Carefully detailing the limitations of your shipping program will certainly help you avoid unexpected expenses and angry customers. While most consumers do live in an area where 2-day shipping is readily available, there are consumers that live in areas that make 2-day shipping impossible or cost prohibitive. Claiming “Free 2 Day Shipping” on all orders without disclaiming exceptions exposes you to risks that are beyond your control.

Your strategy for implementing your company’s 2-day shipping program should consider several different variables when determining eligibility:

1. Shipment Size and Weight – What is the typical size and weight of your most common shipments? Most small parcels do not pose an issue. However, if you have large products that will incur oversized fees or special delivery requirements, you may also consider exempting these items from the 2-day guarantee.
2. Shipment Destination – Customers living in the lower 48 states generally do not pose a problem for 2-day shipping. While customers living in Alaska, Hawaii and other US territories do have 2- day shipping options available, they generally cost far more than those of the lower 48 states. Shipments to overseas military or diplomatic addresses are another area to consider when disclaiming exceptions. Military addresses are not particularly expensive to ship to, however the time in transit is generally not favorable to a time-bound Service Level Agreement. For 2-day commitments, most carriers require shipments be shipped using a time-bound service for delivery to be guaranteed. Carriers such as USPS don’t offer guaranteed service options even though most of their services do deliver within 2-3 days. As such, shipments to USPS PO Boxes will also generally not qualify for a 2-day guarantee.
3. Margin – How much does the customer need to spend in order to cover the cost of 2-day shipping? If your items are priced such that providing a 2-day delivery option will add a significant percentage mark-up for shipping, it may not make financial sense for your business. Determining what your gross margin per product is and how a 2-day delivery option impacts that margin can be a good way to determine if offering 2-day delivery is financially worthwhile. Remember to account for the opportunity cost of not providing 2-day shipping as you work through your options.
4. Processing Time – Do you sell products that are customized after the sale is transacted? Examples of this include embroidery, engraving, custom fittings and applying protective coatings. If you have products that require additional processing time, these exceptions should also be disclaimed so your customers understand how additional processing will impact their delivery time.
5. Dangerous Goods – Do any of your products contain chemicals that are prohibited from being shipped using air services? Shipments that must be transported on the ground will generally not qualify for a 2-day guarantee. Usually, consumers understand if they are ordering something that is classified as a dangerous or hazardous good, but it doesn’t hurt to make this clear as part of your shipping options.
6. Situations Beyond Your Control – In 2020 all shipping carriers have been pushed to the brink by consumers that are now ordering common household items they used to purchase in store. This increase in volume has been beyond what carriers typically see, even during the busy holiday season. Due to capacity constraints, virtually all carriers have abandoned their guaranteed service commitments. Most shipments still meet the commitment, however if a shipment does not meet the time-bound commitment, the carrier will not provide a service refund as they have previously done. If the carrier’s can disclaim this liability, it would be in your best interest to do the same.

Partnering with a reputable 3PL, like Enlinx, will give you the tools and guidance you need to design a successful shipping program while also helping mitigate potential risks. From time to time, your program should be reviewed and modified accordingly. When changes need to be made, you should be able
to rely on your 3PL to provide the tools and expertise to assess the impacts and identify any gaps that may exist.