Vaggelis Giannikas' research explores the consumer demand for fast deliveries, in light of Covid-19. Here he explains that the pandemic's impact on the production and shipping of goods has forced customers to adapt to slower delivery times, and that some consumers will happily accept financial incentives in place of receiving their products swiftly. He also explores the business and environmental benefits of this change.
In less than a decade, the logistics industry has developed the necessary infrastructure and systems that are capable of delivering items for orders placed online in a matter of days, or even hours. The whole process – from placing an order on a website, platform or app, to a package’s arrival at the doorstep – has become so effective that a parcel not delivered within a few days can cause some customers to frantically seek out information on tracking systems of the status of their orders. As a result, the customer demand for fast deliveries has been increasing rapidly, and several studies conducted both by academia and industry place speed among the top-two factors for e-commerce delivery, along with cost.
The appetite for fast deliveries has brought significant investments to programmes aiming to decrease the lead time of order fulfilment by the retail and logistics industry alike. As a result, there are certain industries, such as online groceries, where next-day delivery is a given. At the same time big players like Amazon push for same-day or even two-hour deliveries, such as the “Ultra Fast Fresh” delivery service aiming to offer same-day grocery delivery to 40% of UK households by 2021. This trend has created a spiral where delivering faster and faster has been a key priority for online retailers, order fulfilment warehouses and courier companies.
Even though there are certain instances where speed is imperative, one cannot but wonder: how fast is fast enough? If we consider our own experience, how many times are parcels left at our front door because it arrived faster than we anticipated? How many times was an order delivered so fast that the parcel was left unopened for days? Or – even if opened – how long did we wait before using the item inside? These behaviours reveal a very interesting phenomenon: the provision of fast and cheap delivery might once have satisfied a real need. Today, however, is often a matter of having the opportunity to receive something quickly or feeling privileged to do so because of pre-paid subscription delivery programmes.
The ongoing pandemic has hindered delivery times, calling into question the need for such speed. Some fashion retailers are struggling to deliver online orders in less than a week. Equally, some grocery retailers are asking their customers to pre-book a delivery slot, which are then difficult to amend. In general, most online retailers have dedicated COVID-19 webpages to explain the reasons why deliveries might be slower than usual.
As a result, customers have partially adapted to slower deliveries and perhaps realised that speed is not always as important as they might have thought. Instead, reliability and access to delivery services emerged as not only preferable, but often imperative factors. Our recent research shows that the COVID-19 experience has made consumers more willing to wait a few extra days for the delivery of their online orders. Along with colleagues Mrs Yi Liu and Dr Fotios Petropoulos at Bath’s Centre for Smart Warehousing and Logistics Systems, we have been investigating how customers respond to different monetary incentives in return for accepting slower deliveries for their online shopping.
Even though the majority of customers still value speedy deliveries and are not willing to sacrifice this service for a discount, there seems to be a substantial part of the market interested in receiving their online shopping with a (potentially lengthy) delay for the right monetary incentives. Perhaps more importantly, our latest results collected after the pandemic indicate that there are now more people willing to accept slower deliveries and that they are happy to do so for smaller discounts in return. This might as well indicate a slow shift of behaviour patterns and priorities. The pandemic aside, academics in Europe and the US have started finding evidence that factors such as flexibility can be equally important (if not more) for certain customers and types of orders.
Having more time to prepare and deliver an online order can lead to numerous benefits for logistics providers. First and foremost, more time will be available to plan and manage operations thus offering more flexibility to deal with disruptions but also more time to create optimal plans. Moreover, the cost of service can potentially be reduced as slower deliveries are often cheaper to set up and run. A side effect is that more time can be given to customers to amend their orders thus reducing the number of missed deliveries and returns. Finally, investments for fast and ultra-fast initiatives can be diverted towards other programmes of greater benefit to retailers, logistics providers and customers alike.
Besides benefits for retailers and logistics providers, a change in consumer behaviour towards slower deliveries can be beneficial for the environment too. Amending orders and thus reducing the number of missed deliveries and returns can help reduce unnecessary trips and their CO2 emissions. Having fewer parcels containing only a small number of items can increase available truck capacity (as less air or empty space will be transported by them) and therefore reduce the number of trucks required to satisfy demand. At the same time, plastic bags and paper used to fill empty space inside parcels will be required in smaller volumes thus reducing waste.
Fast and ultra-fast delivery is important, and it is here to stay. Last minute anniversary gifts, outfits for important interviews or parties, takeaway pizza and beer for the big game will always be in demand. But how fast does the average consumer really need their online shopping? What sort of incentives –monetary or not– might be required so that they adapt their behaviour, and reap the environmental benefits? In a world where adaptability and convenience become increasingly important, is it time to re-prioritise our focus of online shopping fulfilment?
If consumers on a website such as Amazon were able to accrue credits for every order they made with flexible / long term delivery, which could then be used to purchase more long term delivery items, would this provide enough of an incentive to draw those consumers who want but don't NEED a product quickly away from speedy delivery? Could you quantify the value of each marginal hour of faster delivery to the consumer to work out the point at which a monetary incentive will change their behaviour?