[Updated post from February 16, 2021]
When Amazon Prime first started offering free 2-day shipping in 2004, it set a new competitive benchmark for the e-commerce sector. Fast forward to 2022, and 2-day shipping has gone from being a value-added extra to an expectation placed on all online sellers.
Industry commentators often refer to this as the ‘Amazon Prime Effect’. Prime has created a massive amount of pressure for digitally-native brands to compete with vast online marketplaces – or else risk becoming irrelevant.
Believe it or not, it’s entirely possible to offer 2-day shipping as a small to medium-sized e-commerce business. Read on to find out how.
Two-day shipping is a common delivery offering within e-commerce where consumers receive their purchase within two days of placing an order. Thanks to the so-called ‘Amazon prime effect’, many brands need to offer 2-day shipping to meet customer expectations for a speedy delivery time when they shop online.
There is a lot of confusion over what ‘2-day shipping’ actually means in practice. Does it refer just to shipping speed, or to delivery speed?
As with many things in logistics, it really depends on the brand or 3PL. But 2-day shipping doesn’t always mean that the package will arrive on the customer’s doorstep exactly 48 hours later.
Why? Because in most cases, the clock starts from the moment the order is shipped, rather than when the order is placed.
Moreover, 2-day shipping usually means two business days and doesn’t include weekends and public holidays. Consider that most businesses have a cutoff time on outbound shipments each day, and you could even be looking at longer than two business days before you receive your order.
For example, let’s say that a brand had a cutoff time of 2 pm each day due to the time it takes to process, pick, and pack each order. If a customer places an order in the morning, their order will be shipped that same day. It may even achieve same-day delivery if the customer is located close to the fulfillment center.
But if an order is placed after the cutoff time, it will be shipped the following day i.e. next day shipping. In sum, it could be a whole day until the order finally ships – and another two business days until it arrives.
Plus, if an order is placed on Friday evening, it will be Monday morning before the order can be processed and picked. In cases like this, it could be up to five days until an order arrives. Yet this would still qualify as two-day shipping.
So, why has 2-day shipping become a must-have for e-commerce brands?
As the e-commerce marketplace grows more competitive, it’s become challenging for merchants to gain more customers based on their product selection alone. In this climate, customer experience (CX) has become one of the biggest brand differentiators to separate you from the rest of the pack.
Let’s look at a few stats:
The verdict is clear; shipping is inseparable from your overall customer experience strategy. If you’re going to be competitive in the marketplace, fast shipping is not optional.
The decision to offer 2-day shipping offers direct-to-consumer brands a variety of benefits:
As we mentioned above, the simple truth is that consumers want their delivery fast, and they expect e-commerce brands to offer the same level of service as giant third-party marketplaces. Yet the standard for what constitutes ‘fast’ delivery is rapidly changing, with next-day delivery or even same-day delivery increasingly becoming the norm.
For this reason, anything less than two-day shipping as a standard shipping offer is unlikely to satisfy potential customers – and may even push them to shop elsewhere. The Shopify eCommerce Market Credibility Study found that 43% of brands surveyed are changing their shipping strategies to reduce the impact of global shipping delays.
But as turnaround times become faster, your brand needs to be in a position to offer even faster expedited shipping options to stay ahead of customer expectations. By putting the infrastructure in place to offer 2-day shipping from your fulfillment centers, faster delivery can follow.
In e-commerce, positive delivery experiences are now central to customer retention. According to Convey, a whopping 98% of customers say that delivery has an impact on their loyalty to a brand. Faced with growing customer acquisition costs, having a solid base of repeat customers has never been more important to ensure sustainable growth.
In short, if guaranteed two-day shipping doesn’t eventuate, you’re probably not going to see that customer again in a hurry. But if you deliver on this promise, they’ll be far more inclined to stick with your brand than to experiment with an unknown competitor.
Shopping cart abandonment is a major issue in e-commerce and adds up to a lot of revenue being lost. While there are many reasons for cart abandonment, high shipping costs are one of the biggest factors. According to Annex Cloud, 61% of consumers cite ‘extra costs’ as being the main reason for abandoning an online order. Slow delivery follows at 16% of consumers.
It’s not hard to understand why consumers a reluctant to purchase from brands that don’t offer fast (and preferably) free shipping. After careful consideration of the price of their order, they receive the shock of extra dollars being added at the checkout.
When a brand offers free standard shipping, this is an easy strategy to reduce cart abandonment and increase revenue.
Two-day shipping costs hinge on a lot of different factors, including:
If you’re partnering with a 3PL, you may also be able to leverage bulk discounts to lower the cost of shipping. But like any form of expedited shipping, two-day shipping is one of the more expensive options.
If you’re shipping orders long distances, you may have no choice but to use air shipping instead of cheaper ground shipping, which pushes up the price considerably. Moreover, other sales channels such as Amazon may have associated shipping fees to take into account.
However, there’s a widespread misconception that it simply isn’t possible for small or medium-sized e-commerce businesses to offer 2-day shipping without drastically reducing their profit margins. Because of concerns over the price of shipping, many merchants write it off as an option – and struggle to stay competitive.
It’s important to consider the ways that fast shipping can help to reinforce your bottom line. For all the reasons outlined above, it will help you to increase both your order volumes and average order values, allowing many merchants can offset this cost relatively easily.
Believe is not, the answer to this question is not ‘everyone’. Although many merchants are racing to catch up with Amazon Prime and Target, offering free two-day shipping as free standard shipping might not be in the best interests of your business.
Free expedited shipping is most appropriate for brands that are in highly competitive product categories. This includes apparel, home decor, cosmetics, and other products that have a high rate of impulse purchasing.
If free two-day delivery is not on the table, it’s easy for consumers to find a similar item at a competing brand or online marketplace that offers free shipping. In this sector of e-commerce, a free two-day shipping option is essential to get a seat at the table.
If your business is selling a bespoke or customizable product, 2-day shipping of any kind is likely to be unrealistic due to the longer turnaround time. Moreover, there is a lot less pressure to sweeten the deal with offers like overnight shipping. When you have a totally unique product, consumers are generally more willing to wait longer to receive their purchase.
If you are planning on offering free two-day shipping, here are some ways you can lessen the impact on your bottom line:
Offering free 2-day shipping or free next-day shipping for a minimum value ensures that your business doesn’t make a loss on online orders that are lower in value. Moreover, minimum purchase thresholds also incentive customers to spend more; nearly two-thirds of consumers have placed extra items in their cart in order to qualify for free standard shipping.
However, you need to make sure that you’re setting the correct minimum purchase threshold to avoid either increasing cart abandonment or lowering your Average Order Value. Check out our guide on how to set your free shipping threshold.
If your business is planning on shouldering the total shipping cost of 2-day shipping, predictable rates are essential to help you maintain a reasonable profit margin. Flat-rate shipping is when a shipping carrier a standard rate based on the delivery timeframe chosen, regardless of how many zones the package is crossing. Be aware that this can end up being an expensive option if you’re shipping only a short distance from your fulfillment center.
Instead of offering 2-day shipping to as many customers as possible, being strategic about which customers receive free two-day shipping enables your brand to get more mileage from this expense. For example, making free two-day shipping, or perhaps free next-day shipping, valuable to members of a paid loyalty program or those in your highest program tier is a fantastic way to build brand loyalty by reserving the very best perks for your most valuable customers.
The biggest advantage of paid membership programs is that customers are effectively paying for shipping ahead of time in exchange for a small fee. By making this investment, they’re also more likely to make bigger and more frequent purchases; paid program members are 59% more likely to shop with your brand over competitors, and 62% more likely to spend more with each purchase.
The further it is to transport packages, the more expensive that 2-day shipping costs are generally going to be, especially if they involve air freight. For this reason, some brands choose to offer free two-day shipping based on the destination zip code to keep costs down. When a customer places an order, they will be told whether they qualify based on their delivery location.
For example, suppose your fulfillment center is based in Los Angeles. In that case, you may elect to offer same-day delivery, one-day shipping, and 2-day shipping to customers in Southern California, California state-wide, Arizona, and Nevada respectively while offering free standard shipping at 3 days or more to customers in the rest of the country (shown below):
The advantage of this approach is that you can ensure guaranteed two-day shipping to customers by only offering it to areas that give you plenty of wiggle room in the case of delays.
Partnering with an experienced e-commerce fulfillment provider like Ryder E-commerce By Whiplash is a major advantage for businesses who are looking for an efficient and cost-effective 2-day shipping strategy:
Partnering with a technology-led 3PL will assist you in comparing parcel carriers to find the optimum balance of speed versus cost. Locking in the very best rates across air and ground shipping requires a constant comparison between service levels and providers to ensure you aren’t paying over the odds, especially during peak season. By taking this off your plate, fulfillment providers ensure that you can focus on your business.
Thanks to our SmartRate Selection tool, Whiplash customers can compare rates for both domestic and international shipping in real-time between dozens of carriers. We analyze order history and customer information to create a tailored shipping strategy for your needs.
Two-day shipping of online orders is an expensive investment in the customer experience, and holds many merchants back from adopting a two-day shipping model.
However, 3PLs have a major advantage in this area over standalone businesses. Due to their high shipping volumes, fulfillment providers Like Ryder E-commerce By Whiplash can negotiate volume discounts, resulting in lower carrier rates than are available to merchants.
That last mile of delivery makes all the difference to whether an order meets that two-day shipping deadline. This is where most logistical issues occur, as the economy of scale present in order fulfillment doesn’t transfer over to individual home deliveries. This so-called ‘last-mile problem’ hampers a merchant’s two-day shipping capabilities and leads to unsatisfactory delivery timeframes.
With their superior infrastructure, well-resourced 3PLs that operates multiple fulfillment centers can increase a merchant’s two-day and even next-day shipping radius by shipping orders from one than one fulfillment center. This puts merchandise as close to the end customer as possible and lowers both shipping costs and transit times.
Even with an extremely efficient shipping strategy, you still need a well-coordinated fulfillment process if your brand is going to offer 2-day shipping. With such a tight turnaround from order processing to sending parcels out of your fulfillment centers, there’s very little room for error.
Unlike in-house fulfillment operations, 3PLs can invest in the latest technologies such as AI and automation further streamline the order fulfillment process – allowing you to meet and even exceed customer expectations.
The rise of 2-day shipping, as well as free next-day delivery and even free same-day delivery, is pushing merchants to streamline their shipping and order fulfillment strategies. There’s a lot to be gained by meeting consumer expectations in the intensely competitive e-commerce sector. It’s no secret that satisfied customers mean more sales – which means more revenue for your business.
If you’re interested in how Ryder E-commerce by Whiplash may be able to help you achieve that elusive 2-day shipping target, talk to us today!