As ecommerce penetration continues to surge, both the cost of delivery and retailers’ delivery estimates are growing, according to a new report from commerce delivery platform, Shippit.
Since 2018, retailer-advertised delivery costs and time estimates for standard shipping increased from $9 and two days to $10.26 and 5.6 days respectively, while express delivery increased from $12 and 1.4 days, to $14.24 and 2.3 days.
The Australian-first State of Shipping Report sought to understand how fulfilment and consumer delivery is evolving and how retailers are adapting their ecommerce and logistics strategies as customer expectations for speed and reliability rise.
“Given the digital transformation, propelled by the pandemic and the macro-economic trends it stimulated, delivery has evolved from an operational afterthought to a defining feature for online retailers,” Shippit co-founder and co-CEO, Rob Hango-Zada said.
“Its impact on the customer experience, loyalty and, therefore, revenue for Australian retailers is significant – and will continue to grow as Amazon continues to train consumer expectations down under. Today, consumers want choice, convenience and reliability – they are gravitating towards the retailers who can offer that. The complexity for Australian retailers has increased with more optionality and transparency, the way retailers are balancing costs with all of these demands has been eye-opening.”
Delivery estimates up – actual times down
While delivery estimates are increasing, the report shows that actual delivery speeds, based on data from hundreds of millions of transactions on the Shippit platform, are improving.
The average delivery takes 2.2 days, down from 2.6 days in 2023. The 2.2-day reality is significantly less than the retailer-advertised 5.6-day estimate. Retailers could be inflating their estimates to avoid falling short of customer expectations.
Same-day delivery
There has been a 136% increase in express shipping since 2018, as consumers favour getting their goods as fast as possible. However, there’s a growing disparity in the supply and demand of same day delivery. Fewer than one in 10 (9%) retailers currently offer same day shipping, yet two in three (61%) customers would happily pay for it.
However, once a staple of ecommerce, free delivery has decreased significantly, falling from 81% of retailers in 2018 to 70% in 2024. What’s more, the average minimum spend threshold to qualify for free delivery has increased 20% in just six years. This indicates that the squeeze on margins is forcing retailers to implement cost recovery strategies, rather than finding greater efficiencies in the delivery process itself.
“For shoppers, it is certainly a mixed bag. Increasing delivery costs along with the need to spend more to access free shipping from a shrinking number of retailers, is cause for concern,” Hango-Zada said.
“Improving delivery speeds on the other hand is promising and the growing number of carrier options for next or same day delivery demonstrates the industry’s commitment to meeting today’s consumer expectations, it’s simply a matter of how quickly retailers can embrace them.”
“Retailers are more in tune with becoming more reliable, however with so many retailers under promising in the hopes of overdelivering on their estimates this may be counterintuitive to winning market share in the long run.
“Despite rising costs, the trend towards faster delivery times suggests a focus on efficiency and speed in logistics, as retailers recognise the impact it has on consumer loyalty, and therefore, their bottom line. Our research has revealed that half of all online shoppers simply won’t return to a brand due to a bad delivery experience. With delivery now the second biggest influence behind price when it comes to choosing who we shop with, it has to be a significant focus for retailers.”
Disincentivising returns
Returns are expensive and inconvenient. In 2018, 97% of retailers offered easy returns, but this figure has decreased to 84%. In 2018, 49% of retailers provided free returns, but that number has now dropped below 20%.
As the associated cost and the environmental impact increase, more retailers are expected to disincentivise returns in future, which could be in response to growing consumer trends such as ‘wardrobing’ – also known as ‘wear and return’ or ‘free renting’ – in which customers would purchase items with the intention of wearing them only once, before returning them.
Forward-thinking retailers
In 2024, more than three-quarters (78%) of surveyed retailers are actively enhancing or intend to invest in their last mile delivery capabilities. However, a further 22% have no plans to make additional investments in their last mile delivery capabilities. Real-time data analysis ranked first, with AI/automation and personalisation frequently in the top three.
Operational efficiency is also crucial, with 23% of retailers prioritising inventory accuracy and visibility, and supply chain optimisation; clear recognition of the need to meet customer expectations, whilst simultaneously optimising fulfilment processes and improving profitability.
Over half (54%) of retailers are at least moderately concerned about the threat of global giants. Other key concerns include inflation and cost-of-living pressures, and their subsequent impact on consumer spending.
As traditional marketing strategies have come under pressure and the threat of competition has risen, the current focus on cutting edge technologies like AI and personalisation highlights a shift towards the future of growing ecommerce more efficiently.