With the global pandemic as a backdrop in 2020, same-day delivery became a major differentiator for e-commerce brands and remained a priority throughout 2021. But with many more marketplaces now offering same-day and some expanding 2-hour delivery coverage, will same-day delivery continue to be a differentiator? New ROI data from Ohi, a world-class e-commerce fulfillment platform, shows a clear advantage for brands that offer sub-2-hour delivery, or “instant delivery.” Keep reading to see the data and understand how an ongoing fulfillment arms race has led us to this modern reality.
The Pandemic Has Accelerated the Shift to E-commerce by 5 Years (US Retail Index, IBM)
Worldwide lockdowns (in 2020, primarily), slowing economic activity, and changing customer behavior have done a number on traditional retail. As a result, department store sales in 2020 declined by 25% in Q1 and a nearly implausible 75% in Q2. According to IBM’s retail index, more people began shopping online and with more frequency in 2020, accelerating the ongoing shift to e-commerce by more than five years.
The expansion of e-commerce is here to stay, and things are only going to get more competitive.
Marketplaces and Big Retail Leverage Same-Day Shipping as a Differentiator
The nation’s biggest retailers — Amazon, Walmart, and Target, for starters — have seen the shift towards e-commerce coming from a mile away. Consequently, they’ve prioritized faster e-commerce fulfillment to unlevel the playing field.
In Q4 of 2020, for instance, Target increased its same-day e-commerce fulfillment by 273% over the previous quarter.
And Amazon is no stranger to the strategy of using delivery speed as a competitive advantage — having once succeeded in shifting consumer perceptions of Prime “2-day delivery” from a “nice-to-have” to a “must-have,” Amazon is poised to do it again with Prime same-day delivery.
Playing a Game of Catchup?
With the biggest retail marketplaces squarely behind the proliferation of same-day delivery, the trend has gained momentum industry-wide.
A 2021 global consumer insights survey conducted by PWC showed “fast/reliable delivery” as consumers’ #1 overall consideration when shopping online (ranked top three by 41% of respondents), beating out eleven others, including:
- In-stock availability of items I want (35%)
- Ability to quickly and conveniently navigate the website to find products I’m interested in (30%)
- Availability of online customer reviews (26%)
- A good return policy (31%)
As Amazon, Walmart, Target, and others work to increase their same-day delivery capabilities, the next crop of retailers and D2C brands are working furiously to stay close. Bed Bath & Beyond and Abercrombie & Fitch both have both added same-day shipping for online orders in many key product categories. Beauty brands Sephora and The Body Shop have similarly debuted same-day delivery as a means of staying competitive with the Amazons of this world.
But, if Amazon and other large retailers are already making same-day delivery pervasive, is offering same-day delivery enough to truly win?
As same-day delivery becomes more commonplace, it’s inevitable that forward-looking retailers and e-commerce-focused brands will be considering the next step up in delivery speed.
A New Threshold to Reach
“No one needed two-day delivery of anything when Amazon introduced Prime, but as soon as people could get everything delivered within two days, they wanted everything in two days,” said Ben Jones, CEO of Ohi. “It’s the same phenomenon again with sub-2-hour or ‘instant delivery,’ only we’re seeing it play out much faster due to the pandemic and the dramatic shift in consumer preferences it’s brought about.”
Many of the leading marketplace and large retail companies are looking beyond same-day shipping and pushing the envelope once more with sub 2-hour delivery.
Walmart already offers express delivery in two hours or less. Uber Eats, Instacart, and other instant delivery services are moving to provide sub 2-hour delivery in an increasingly diverse number of product categories. Amazon’s Prime Now service was merged into Amazon’s main app earlier in 2021, bringing two-hour delivery to the masses (on that marketplace).
Why Instant Delivery?
As the e-commerce market shifts towards instant commerce, the ROI of instant delivery (sub 2-hour) has become hard to ignore. Ohi is an instant commerce platform that provides sub 2-hour, same-day, and next-day delivery for D2C-focused brands via its micro-fulfillment network and proprietary smart warehousing and inventory system.
In an analysis of several of its large partner brands that offer both 2-hour delivery and same-day delivery, Ohi found that orders delivered with same-day delivery were associated with up to 30% higher repeat purchase rates than standard UPS/FedEx. But repeat purchase rates associated with Ohi’s 2-hour delivery were even higher: up to 24% higher than same-day delivery and 61% higher than standard UPS/FedEx.
Outcomes were similar for observed customer lifetime value (CLV). Customers who initially ordered with Ohi same-day had 23% higher CLV compared to those whose orders were fulfilled through UPS/FedEx. CLV for 2-hour delivery was up to 16% higher than same-day delivery and 43% higher than standard UPS/FedEx.
Ohi’s initial ROI analysis shows a clear benefit for brands to be ahead of the delivery speed curve, even without taking into account instant delivery’s impact on customer acquisition (i.e. getting new customers to try).
It’s not just about the dollars and cents, though, as attractive as that angle might be to e-commerce teams.
Instant delivery can also become a key part of a brand’s sustainability ethos. When inventory is kept hyperlocal to customers packaging and last-mile transport can become eco-friendly.
For example, many brands are now choosing to have their products delivered in custom-branded, eco-friendly/reusable totes, forgoing the cardboard boxes and packing materials needed for longer distance deliveries.
In densely populated urban areas like New York City, Ohi is able to provide instant delivery via e-bikes/bikes, further reducing their clients’ carbon footprint.
“We’re seeing multiple trends converging and creating a strong impetus for brands to adopt instant commerce. As compelling as the ROI already is, we continue to see the gap between instant and traditional e-commerce fulfillment expanding,” said Jones.
Ultimately, a brand’s motivation to enable instant commerce typically boils down to customer satisfaction. When customers can order directly from the brands they love, receive their orders within two hours, and know it’s all happening sustainably, it’s a big win for all parties involved.
This is a guest post written by James Hsu on behalf of Ohi, which has flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.