A friend of mine who manages logistics for multi-billion eCommerce retailer in Europe asked me recently:
-Do you know any study showing the relation between delivery time and conversion? I need to understand if investment in new fulfillment center will be justified. Commercial expectations are great but truthfully speaking I am not so sure.
It’s a very serious question. Especially taking into account that investment in own fulfillment center can easily mean dozens million of Euros in CAPEX and 2-3 years project time. For reference check the Zalando Investors Factbook.
Funny enough it’s the same question I have been asked several times already by various eCommerce industry professionals. Including some at VP level in businesses spanning several geographies.
It seems there is some uncertainty on this topic. Even though the quick and straightfoward answer on relation between delivery time and conversion is clear. The faster the delivery the higher the conversion.
However, how fast is fast nowadays?
Delivery Times Expectations
The expected delivery time depend on the geography or country under consideration. The best publicly available study I know is Post Nord eCommerce in Europe report.
It’s being published on a yearly basis since 2014. Therefore it enables observation on trends over the long time (7 years as I write this post).
Today, consumers in most European countries have higher expectations regarding delivery time than couple of years ago. A large group, usually 20-30% of customers in all surveyed countries think that the maximum delivery time should be 1-2 days. We can attribute it to the Amazon effect.
However, versus the short term (3 years), the last report shows that demand for fast delivery is getting lower. Probably since eCommerce as well as courier companies came under heavy pressure during Covid. Reason which many consumers can understand.
Large group, in most countries around 60% of customers, can even accept 3-5 days delivery time. This is certainly not the qCommerce speed we are all talking about. Then what’s the pressure?
Shipping is not Delivery
First of all, when talking about delivery time and conversion, we need to understand that shipping is not the same as actual delivery. It might seem this is very basic concept. However, some companies are still unable to understand or implement the differentiation between those two.
When shopping for ‘V for Vendetta’ I compared 4 most prominent stores in my home country. By prominent I mean – having the widest offering in comic books category. Without relation to other quantified measures like monthly unique number of visitors or other.
Source: Own reseach on Friday, June 17th, 2022.
Allegro and Amazon were clearly showing the predicted delivery time. On the other hand Empik and Merlin were showing just expected shipping time. With Merlin having the shipping time longer than total expected delivery time of Allegro (sic!) and Empik being out of stock on this specific item…
Guess by youself where I bought this time.
Delivery time and conversion – marketplaces
Knowing the distinction between shipping time and delivery time it should be clear that relation to conversion is measurable only on the latter. In other words on the Click to Delivery (C2D) metric.
In case you are not measuring C2D you will not be able to calculate the relation. As usual everything starts with data and data published by largest marketplaces in Europe clearly show that correlation between delivery time and conversion is strong.
Amazon stated 73% sales increase in it’s Amazon Prime program. Meanwhile eBay claimed sellers who offer 1-2 days delivery can expect 46% sales increease versus sellers with 3+ days delivery times. Those numbers are astonishing and at least partially confirmed by Harvard Capstone Project.
Therefore it’s not a suprise large online retailers invest in their own last mile capabilities:
- Ahold acquired a majority stake in FreshDirect
- Allegro bought X-Press Couriers
- Target acquired Shipt
Perhaps I should have added this to eCommerce Logistics Trends I have written not so long ago.
Delivery time and conversion – D2C brands
You could stop reading here. However, I advise you to take into account one more thing when considering delivery time and conversion relation. All those studies mentioned up till now are based only on marketplaces customer behaviours.
What happens when customer shops on a brand store?
Franly speaking the results are less astonishing. At least that what we can assume from Chassis – Deliverr Case Study.
Chassis is “Man Care Down There” Direct to Consumer Brand selling on marketplaces and it’s own Shopify store. After implementing 2-day delivery it reported “double digit” growth on Shopify. A moderate increase versus 53% sales increase it experienced on marketplaces.
The study doesn’t disclaim exactly what was the double digit increase. Making me think it was low double digit growth which would be also in line with research published by Lund University (Sweden).
Even though the Lund study also mentioned the effect differs strongly between big cities and rural areas.
Brand you fool!
Coming back to the beginning – what’s the relation between delivery time and conversion rate? I know various studies showing various results. The answer depeneds on who is asking the question.
In case you are online retailer (or a marketplace seller) the relation is strong. You should definetely invest in your own logistics or consider using a 3PL service in order to increase overall delivery time. I will write in more detail on sensible reasons to use 3rd Party Logistics soon.
In case you are a Direct to Consumer brand the relation between delivery time and conversion is less obvious. Especially if you are selling mainly via your own store. I would say because your customers are already decided for your products.
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