Dive Brief:

• Free shipping, fast delivery times and easy return policies were the most important factors consumers considered when choosing among online retailers, according to a new survey from Hanover Research and LaserShip, a Northeast regional shipping firm.
• Of the more than 1,000 consumers surveyed, 50% reported leaving behind an online shopping cart due to high delivery fees. Millennial and Generation Z consumers, however, "are willing to pay a premium" for fast shipping.
• The majority of survey respondents said they expect items purchased online to be delivered in an average of three days or fewer, and free returns are a key factor in deciding where to shop.

Dive Insight:

E-commerce accounted for nearly 10% of all retail sales in 2018, a figure that has steadily increased each year. As online sales continue to grow, with new startups entering the market and heritage brands branching out into web sales, companies seeking to capitalize on this growth are experiencing "the Amazon effect" on consumer tastes.

"People have specific expectations from retailers about shipping costs and delivery times," the report said. This is due in large part, the report claims, to the effect that the Amazon Prime model has had on the market. With over 101 million members in Q4 2018, a significant portion of online shoppers have become accustomed to a largely seamless digital shopping experience and expect the same of other retailers.

"Sometimes Amazon scares [other] retailers," Oisin Hanrahan, CEO of Handy, an online platform that connects customers with household service providers, said in a recent interview with DigiDay. "Retailers are figuring out what they need to do to get the best possible experience, increase conversion rates, sell more products — the order value goes up and customers are generally happier."

The report highlighted the "need for speed" trend is driven by the Millennial and Gen Z demographics who will make up 70% of the workforce by 2020. As these demographics gain purchasing power, online retailers, Amazon included, are taking advantage of the fact that they are three times more likely to pay more for fast delivery relative to their older peers. Companies often funnel this additional revenue back into logistics to help handle the expense of last-mile deliveries. 

However, in spite of the younger generations’ willingness to pay for fast delivery, LaserShip and Hanover Research caution that across all age demographics, "...retailers must always have an option for free shipping. It’s no longer acceptable not to give consumers that choice." But the challenge remains of how well retailers can keep business profitable without leaving their fast-paced customers behind.