[Updated post from June 1, 2022]
When Amazon Prime first started offering free two-day shipping in 2004, it set a new competitive benchmark for the e-commerce sector. Fast forward just a handful of years and two-day shipping has gone from a value-added extra to an expectation for all online sellers.
Industry commentators refer to this as the ‘Amazon Effect'. Amazon and other e-commerce marketplaces have created a massive amount of pressure for digitally-native brands to compete on speed, or else risk becoming irrelevant.
Believe it or not, it's entirely possible to offer two-day shipping as a small to medium-sized e-commerce business without breaking the bank. Read on to find out how.
Two-day shipping is a delivery option within e-commerce where online shoppers receive their purchase within two business days of placing the order. Thanks to the so-called ‘Amazon effect', many brands need to offer two-day shipping to meet customer expectations for speedy delivery timeframes.
To provide two-day shipping, e-commerce businesses require a mix of rapid shipping services, strategically-placed fulfilment centers, and logistics technologies to ensure that orders are processed and shipped efficiently for fast transit times.
There's a lot of confusion over what ‘two-day shipping' actually means in practice. Does it refer to the shipping speed or the delivery speed?
As with many things in e-commerce logistics, it really depends on the brand or 3PL. But two-day shipping doesn't always mean that the package will arrive on the customer's doorstep exactly 48 hours later.
Why? Because in most cases, the clock starts from the moment the order is shipped, not when the order is placed.
Moreover, two-day shipping usually means two business days, so doesn't include weekends and public holidays. Moreover, most businesses have a cutoff time on outbound shipments each day, so you could be looking at longer than two business days before you receive your order.
For example, let's say that a brand had a cutoff time of 2 pm each day due to the time it takes to process, pick, and pack each order. If a customer places an order in the morning, their order will be shipped that same day. It may even achieve same-day delivery if the customer is located close to the fulfillment center.
But if an order is placed after the cutoff time, it will be shipped the following day i.e. next-day shipping. In sum, it could be a whole day until the order finally ships – and another two business days until it arrives.
Plus, if an order is placed on Friday evening, it will be Monday morning before the order can be processed and picked up. In cases like this, it could be up to five days until an order arrives. Yet this would still qualify as two-day shipping.
So, why has two-day shipping become a must-have for e-commerce brands?
As the e-commerce marketplace grows more competitive, it's become challenging for merchants to gain more customers based on their product selection alone. In this climate, customer experience (CX) has become one of the biggest brand differentiators to separate you from the rest of the pack.
Let's look at a few stats:
The verdict is clear; shipping is inseparable from your overall customer experience strategy. If you're going to be competitive in the marketplace, fast shipping is not optional.
As we mentioned above, the simple truth is that consumers want their delivery fast, and they expect e-commerce brands to offer the same level of service as giant third-party marketplaces. Yet the standard for what constitutes ‘fast' delivery is rapidly changing, with next-day delivery or even same-day delivery increasingly becoming the norm.
For this reason, anything less than two-day shipping as a standard shipping offer is unlikely to satisfy potential customers – and may even push them to shop elsewhere. The Shopify eCommerce Market Credibility Study found that 43% of brands surveyed are changing their shipping strategies to reduce the impact of global shipping delays.
But as turnaround times become faster, your brand needs to be in a position to offer even faster expedited shipping options to stay ahead of customer expectations. By putting the infrastructure in place to offer two-day shipping from your fulfillment centers, faster delivery options can follow.
In e-commerce, positive delivery experiences are now central to customer retention. According to Convey, a whopping 98% of customers say that delivery has an impact on their loyalty to a brand. Faced with growing customer acquisition costs, having a solid base of repeat customers has never been more important to ensure sustainable growth.
In short, if guaranteed two-day shipping doesn't eventuate, you're probably not going to see that customer again in a hurry. But if you deliver on this promise, they'll be far more inclined to stick with your brand than to experiment with an unknown competitor.
Shopping cart abandonment is a major issue in e-commerce and adds up to a lot of revenue being lost. While there are many reasons for cart abandonment, high shipping costs are one of the biggest factors. According to Annex Cloud, 61% of consumers cite ‘extra costs' as being the main reason for abandoning an online order. Slow delivery follows with 16% of consumers.
It's not hard to understand why consumers a reluctant to purchase from brands that don't offer fast (and preferably) free shipping. After careful consideration of the price of their order, they receive the shock of extra dollars being added at the checkout.
When a brand offers free standard shipping, this is an easy strategy to reduce cart abandonment and increase revenue.
Two-day shipping has been available for a long time, albeit as a very expensive delivery option for consumers. Amazon was responsible for popularizing two-day delivery at a reasonable price point, but other e-commerce brands were quick to respond and helped to bring two-day shipping into the mainstream. This is why the availability of free two-day shipping can be a make or break for online shoppers.
When shopping online for widely-available items, customers will usually opt for the cheapest retailer who can also get it to them the fastest. However, most consumers will have a price point that justifies a longer wait, such as if they qualify for free shipping. So, if you can’t sell products cheaply, you need to ship them fast and affordably. If you can’t do either, e--commerce consumers will avoid you.
And therein lies the two-day delivery dilemma: If brands in highly competitive markets cannot offer their customers fast, cheap shipping, their conversion rates will suffer. At the same time, the cost of doing so can undermine profitability - more so than if they paid for faster shipping.
Two-day shipping costs hinge on a lot of different factors, including:
DIM weight. What is the typical size and weight of your most common shipments? Most small parcels do not pose an issue. However, if you have large products that will incur oversized parcel surcharges or special delivery requirements, this will push up the cost of two-day shipping.
Origin/destination. Customers living in the lower 48 states generally don't pose a problem with two-day shipping. However, customers living in Alaska, Hawaii, and other U.S. territories do not usually have two-day shipping options available, and because they rely on air shipping, this will cost online retailers far more than ground shipping methods in the lower 48 states. Moreover,
Shipping carrier. It's worth noting that some carriers, such as USPS, don’t offer guaranteed time-bound service options even though most of their services do deliver within 2-3 days. This might cost you less than official two-day delivery services, but there's a higher risk of late delivery.
Additional handling. Do any of your products contain chemicals that are prohibited from being shipped using air services? Shipments that must be transported on the ground will generally not qualify for a two-day guarantee. Usually, consumers understand if they are ordering something that is classified as a hazardous good, but it doesn’t hurt to make this clear as part of your shipping options.
Low or peak season. Thanks to peak season surcharges that are applied by carriers when parcel networks are under pressure, Shipping during the holiday season will always cost retailers more than during other times of the year. Most carriers will announce their upcoming peak season surcharges in September-October, so it's important to make yourself aware of this ahead of time and whether higher shipping costs will be offset by a higher volume of seasonal sales.
Whether you have a 3PL. Partnering with the right 3PL is a great way to reduce your shipping rates by pooling your volume with the combined volumes of all 3PL clients. You may also be able to leverage bulk discounts to lower the cost of shipping. But like any form of expedited shipping, two-day shipping is one of the more expensive options.
However, this doesn't mean small or medium-sized e-commerce businesses can't offer two-day shipping without losing their profit margins. Because of concerns over the price of shipping, many merchants write it off as an option – and struggle to stay competitive.
If you are planning on offering free two-day shipping, here are some ways you can lessen the impact on your bottom line:
Offering free two-day shipping or free next-day shipping for a minimum value ensures that your business doesn't make a loss on online orders that are lower in value. Moreover, minimum purchase thresholds also incentive customers to spend more; nearly two-thirds of consumers have placed extra items in their cart to qualify for free standard shipping.
However, you need to make sure that you're setting the correct minimum purchase threshold to avoid either increasing cart abandonment or lowering your Average Order Value. Check out our guide on how to set your free shipping threshold
If your business is planning on shouldering the total shipping cost of two-day shipping, predictable rates are essential to help you maintain a reasonable profit margin. Flat-rate shipping is when a shipping carrier has a standard rate based on the delivery timeframe chosen, regardless of how many zones the package is crossing. Be aware that this can end up being an expensive option if you're shipping only a short distance from your fulfillment center.
Instead of offering two-day shipping to as many customers as possible, being strategic about which customers receive free two-day shipping enables your brand to get more mileage from this expense. For example, making free two-day shipping, or perhaps free next-day shipping, valuable to members of a paid loyalty program or those in your highest program tier is a fantastic way to build brand loyalty by reserving the very best perks for your most valuable customers.
The biggest advantage of paid membership programs is that customers are effectively paying for shipping ahead of time in exchange for a small fee. By making this investment, they're also more likely to make bigger and more frequent purchases; paid program members are 59% more likely to shop with your brand over competitors, and 62% more likely to spend more with each purchase.
The further it is to transport packages, the more expensive two-day shipping costs are generally going to be, especially if they involve air freight. For this reason, some brands choose to offer free two-day shipping based on the destination zip code to keep costs down. When a customer places an order, they will be told whether they qualify based on their delivery location.
For example, suppose your fulfillment center is based in Los Angeles. In that case, you may elect to offer same-day delivery, one-day shipping, and two-day shipping to customers in Southern California, California state-wide, Arizona, and Nevada respectively while offering free standard shipping at 3 days or more to customers in the rest of the country (shown below):
The advantage of this approach is that you can ensure guaranteed two-day shipping to customers by only offering it to areas that give you plenty of wiggle room in the case of delays.
Partnering with an experienced e-commerce fulfillment provider like Ryder is a major advantage for businesses who are looking for an efficient and cost-effective two-day shipping strategy:
Partnering with a technology-led 3PL will assist you in comparing parcel carriers to find the optimum balance of speed versus cost. Locking in the very best rates across air and ground shipping requires a constant comparison between service levels and providers to ensure you aren't paying over the odds, especially during peak season. By taking this off your plate, fulfillment providers ensure that you can focus on your business.
Thanks to our SmartRate Selection tool, Ryder customers can compare rates for both domestic and international shipping in real time between dozens of carriers. We analyze order history and customer information to create a tailored shipping strategy for your needs.
Two-day shipping of online orders is an expensive investment in the customer experience, and holds many merchants back from adopting a two-day shipping model.
However, 3PLs have a major advantage in this area over standalone businesses. Due to their high shipping volumes, fulfillment providers Like Ryder can negotiate volume discounts, resulting in lower carrier rates than are available to merchants.
That last mile of delivery makes all the difference to whether an order meets that two-day shipping deadline. This is where most logistical issues occur, as the economy of scale present in order fulfillment doesn't transfer over to individual home deliveries. This so-called ‘last-mile problem' hampers a merchant's two-day shipping capabilities and leads to unsatisfactory delivery timeframes.
With their superior infrastructure, well-resourced 3PLs that operate multiple fulfillment centers can increase a merchant's two-day and even next-day shipping radius by shipping orders from more than one fulfillment center. This puts merchandise as close to the end customer as possible and lowers both shipping costs and transit times.
Even with an extremely efficient shipping strategy, you still need a well-coordinated fulfillment process if your brand is going to offer two-day shipping. With such a tight turnaround from order processing to sending parcels out of your fulfillment centers, there's very little room for error.
Unlike in-house fulfillment operations, 3PLs can invest in the latest technologies such as AI and automation further streamline the order fulfillment process – allowing you to meet and even exceed customer expectations.
Believe it or not, two-day shipping is not the best fit for every e-commerce business. Although many merchants are racing to catch up with Amazon Prime and Target, offering free two-day shipping as your free standard shipping option might not be in your best interests.
Expedited shipping is most appropriate for brands that are in highly competitive verticals. This includes apparel, home decor, cosmetics, and products that have a high rate of impulse purchasing.
This is because when two-day delivery is not on the table, it's very easy for consumers to find a similar or identical item at a competing brand or online marketplace that offers two-day shipping - and maybe even for free. In these scenarios, a two-day shipping option is essential to have a chance at a conversion.
But what about specialty items? If your business is selling a bespoke or customizable product, two-day shipping is likely to be unrealistic due to the longer turnaround time. Plus, the customer has already decided they want that specific item, so slower shipping services are unlikely to be a deal breaker for them. These customers are also more likely to pay to upgrade to services like overnight shipping or to spend more to qualify for free shipping.
The rise of two-day shipping, as well as free next-day delivery and even free same-day delivery, is pushing merchants to streamline their shipping and order fulfillment strategies. There's a lot to be gained by meeting consumer expectations in the intensely competitive e-commerce sector. It's no secret that satisfied customers mean more sales – which means more revenue for your business. But depending on your business model, two-day shipping may cost your business more than it's worth.
If you’re interested in how Ryder can be able to help you achieve that elusive two-day shipping target, talk to us today!
