Sia Partners' 2023 International Mobile Banking…
Providing outstanding delivery experiences is imperative for retailers. They must therefore redefine their marketing mix according to customer segmentation.
During the Covid years, 2019-2021, we saw the rise of new expectations related to delivery. Consumers developed new expectations and habits around shopping online, based on their personal situations. This change in demand necessitates structural changes around how retailers offer delivery in their shopping journeys.
Even if inflation in 2022-2023 has led to a temporary break in the development of new delivery expectations (with price being the predominant criterion), we expect a new acceleration in demand, and the opportunity for retailers to add value in the shopping journey.
A growth of 11.6% in the volume of parcels and small packages was observed in the EU in 2021, caused by the pandemic and successive lockdowns. While people needed to continue feeding, educating, and entertaining themselves, e-commerce appeared as the solution to non-essential needs. This evolution in consumer behavior generated higher expectations regarding delivery, including speed, precision, flexibility, and eco-friendly options.
Because of this boom in e-commerce, different categories of consumers emerged, each with unique needs and frustrations when it comes to delivery.
The year 2022 faced multiple crises (post-Covid, inflation, ecology, Ukraine), which caused an increase of 1.5% in value of the general price in the EU. This inflation is the second reason for the recent change in consumers’ delivery habits.
Indeed, it has put a temporary break on the development of new delivery expectations, shifting consumers’ priorities and conveying new consumption habits such as spending less on high-end brands, targeting low cost-retailers and comparing prices before buying. Another consequence was the increased awareness around environmental issues and promotion of green delivery.
To face the diversity in demand, and to cater to all those requirements, delivery offers from retailers need to be upgraded to respond to the evolution of consumer needs.
Thanks to a robust experience in both e-commerce and Last Mile delivery, Sia Partners has created a comprehensive e-commerce delivery offer, identifying key features and designing a thorough methodology helping to support retailers in reinforcing their customer knowledge.
We strongly believe that retailers must design their delivery offers as they would any other product. The delivery services available today are sufficient for retailers to adapt their offerings to the demands of consumers’ personal habits (rapidity, tracking, flexibility, sustainability, notifications etc.) Especially since customers are increasingly aware of these new solutions. A sophisticated and tailored approach is key to guaranteeing and maintaining a high level of customer satisfaction.
The following data points illustrate these trends: 84% of consumers expect deliveries to be completed the same day or within 24 hours, 76% of consumers wish to have deliveries completed within a pre-defined two-hour time slot, and 72% of consumers are looking for the ability to change a delivery time window with no extra charges.
In the meantime, because of inflation, 5% more consumers consider price to be the main criterion in benchmarking delivery offers, and 4% fewer are willing to pay for returns.
In response to these trends, retailers and carriers all over the world have had to adapt and develop new delivery options, to enhance their performance in terms of speed, precision, and flexibility.
Based on an analysis of 21 industry players, we observed that all actors have at least a 2–3-day delivery offer. Belgium and Germany are the most advanced markets; their two major operators offer delivery within 2 days. On the contrary, in Spain and the US, the process can take up to more than 5 days (30% and 60% of actors, respectively). All countries have at least one actor offering an express delivery option, which is present in 87% of the market in the US and 55% in the UK.
Almost all major operators offer delivery on Saturday, except in Italy. In Germany and the UK, all major operators also deliver on Sunday morning, without the need to book or pay extra.
On average, all the actors have a delivery timeframe running from 8 am to 6 pm Some countries offer a wider range of delivery hours, such as France (up to 10 pm), the UK or Belgium (up to 8 pm), while the major operator in Spain (13.6% of national market shares) and the UK (40.7%) only deliver until 4 pm.
In France, a reminder the day before, and day of, delivery is offered by all major transporters. Their German and British counterparts send a reminder on the day of delivery. In Italy, while parcel tracking is available, no such reminders are sent.
A complete and detailed overview of the market situation in seven countries (France, Italy, UK, Belgium, Spain and USA) is available in our comprehensive E-commerce delivery offer.
Our team of E-commerce and Last Mile delivery experts identified a real demand for better customer knowledge from carriers. Indeed, because of inflation, 73% of consumers anticipate potential economic issues, and have subsequently changed their consumption habits in 2023: 10% now look for more value-for-money, 23% are postponing purchases and 40% are adjusting their budget.
Offering our expertise in the design of customer/delivery paths, we led an e-commerce consumer study to identify the expectations and obstacles that retailers could face during the delivery process.
Looking at customer needs based on segmentation and generational biases, we established four main profiles of consumers, as well as their needs, frustrations, and expectations in terms of last-mile delivery. They were identified using the personae methodology and a hybrid approach, combining quantitative data and the affinity method, to allow carriers and retailers to tailor their offer to each customer journey.
Gen Z consumers, regrouping young people from 18 to 25 years of age, have an ultra-connected lifestyle, and therefore expect a smooth and fast e-commerce experience. Pricing can be decisive in their choice of carrier. They want immediacy, and are used to returning purchases when needed (and paying for it).
They are willing to pay for additional fees to ensure a rapid, reliable and flexible service. Gen Z expects an all-inclusive offer and not a model with options. They also expect digital engagement from the carrier, to benefit from interactive communication and accuracy in the tracking process. They are looking for eco-friendly options, particularly when the brand communicates their CSR commitments, and are willing to pay extra.
Young professionals from 25 to 35 years old, (millennials), have a modern and dynamic lifestyle. Their top criterion is price. At the same time, they expect, and are open to paying for speed and accuracy in delivery and tracking, and they look for flexible options such as reprogramming the time or place of delivery, to fit with around their schedules. When available, they tend to favor eco-friendly options, but it is not the dominant criteria and they are reluctant to pay for it.
The upper socio-professional category, which has a comfortable financial situation, is more willing to pay extra fees for additional services, particularly for precision and flexibility. They are reluctant to take advantage of OOH (Out Of Home) delivery such as PUDO (Pick up and drop off) or lockers. The senior part of this category tends to be cautious when ordering online and will prioritize a well-known carrier or one they’ve previously used and can thus be interested in loyalty programs. They need clear and intuitive navigation, as well as easily accessible information.
Finally, the profile of the “rural family” has different habits of consuming since their mobility is constrained to using a vehicle. Grocery shopping can be done at the supermarket in the city, but having the possibility to order online, directly to their home, for other categories of products - such as clothing or leisure items - is one of their needs. Because of their family life and organization, they need transparency about delivery times and are looking for at-home return options. The main pain-point for them is the longer delivery time compared to urban areas.
Based on these four profiles, our study provides an in-depth view of the needs, frustrations, and opportunities, and presents several ideas for carriers to implement and for retailers to design a comprehensive delivery offer.
Because of the visibly growing demand for delivery, consumers tend to be more and more aware of their environmental impact. In this regard, one of the opportunities identified in our study is improving the eco-responsibility aspect of delivery products offered by carriers. Enhanced transparency about the environmental and CO2 impact of delivery services is a particular point of attention. The explosion in online orders and inflation has made the consumer very conscious of the environmental impact of e-commerce.
According to a study by LSA Conso in 2022, 32% of consumers are willing to pay more for eco-responsible deliveries, and 87% of consumers expect greener delivery choices.
In June 2023, Sia Partners conducted a study of 450 e-commerce users located in France, Spain and Italy, to find out more about their delivery expectations. 83% of respondents are willing to pay more for carbon-neutral delivery, especially in Spain, where social responsibility is the number one delivery preference among consumers.
Sia Partners has developed a partnership with Greenly, a solution for carbon footprint measurement. This tool leverages an exhaustive computation of e-commerce delivery CO2 emissions, using a thorough methodology to measure carbon footprint in three categories of emissions. This assessment is an initial step towards the elaboration of an action plan for reducing a company’s environmental impact.
The e-commerce delivery market will continue growing in the coming years, for the years 2023-2026, a growth in volume from 2% to 3.5% per year is expected, as well as more sophisticated consumer expectations, as they use new delivery services, depending on their lifestyles.
In response to this, we also expect carriers to enrich their offers with the features mentioned above (speed, flexibility, tracking, sustainability). This will expand the choice of possibilities for retailers' online shopping journeys, with a growing gap between the value-added services included in the delivery. On one hand, to respond to low price expectations, we are already seeing the expansion of OOH solutions in the EU. On the other hand, same day deliveries are becoming a must.
This can represent a challenge for retailers that need to capitalize on their data management to optimize the consumer delivery experience, one of the sensitive points being the management of the courier location data.
Another track to explore is the valuation of brand image, and the implementation or reinforcement of sustainability considerations in the delivery process. This can be achieved thanks to the use of soft and electric delivery vehicles over the last mile, which are more and more appreciated by the consumer.