E-commerce News and Insights
Using Packaging to Boost Your Brand and Gain a Competitive Advantage
For the past five years, the Shippo team has published our annual State of Shipping Report to highlight how evolving industry norms and trends are shaping shipping strategies, fulfillment operations, and consumer expectations over time. Today, we’re excited to announce the release of our most recent report.
Shippo’s 2023 State of Shipping Report comes as rising inflation and a looming recession have consumers and merchants alike reconsidering how and where they spend, and offers fascinating insights covering both perspectives. From online purchasing trends to order tracking and return policies, this year’s report explores a variety of e-commerce topics and delivers concrete takeaways for merchants building and sustaining their businesses today. Here are three trends to keep in mind this year:
Concern about declining consumer spend grows
With increased economic uncertainty – the Consumer Price Index rose 6.5% year-over-year from December 2021 to 2022 and U.S. retail sales fell 1.1% month-over-month in December 2022 – consumers aren’t expected to spend quite as freely in 2023 as in years past.
Of those we surveyed, 11% of merchants said decreased consumer spending was the biggest challenge for their business in 2022, and that number rose to 20% for merchants who see it as their biggest challenge in 2023. In addition, 23% said consumers cutting out discretionary spending n is what keeps them up at night while they readied their business for 2023.
Even in increasingly difficult times, however, consumers are still doing most of their shopping online – 60% of consumers we surveyed said they do at least half their shopping online (compared with 41% the previous year) while 61% prefer to purchase online when given the choice. Because of this, it’s important for today’s merchants to understand that, despite the economic uncertainty, there are still plenty of opportunities to attract and retain customers who can help grow your e-commerce business.
In an economic downturn, there is an inherent need for merchants to be more cautious, resourceful, and flexible. The key to recession-proofing is to focus on driving operational efficiencies and optimizing costs wherever possible throughout the fulfillment journey, from pre- to post-purchase and beyond. At the same time, today’s e-commerce merchants must take consumer expectations and needs into account if they want to succeed in a world where belts are tightening.
E-commerce merchants feel the crunch to optimize fulfillment costs
According to a recent Shopify report, 82% of e-commerce businesses say high inflation is forcing them to cut costs. In the face of increasing costs and decreasing consumer activity, merchants are also looking at how they can better optimize their own spend, and driving down fulfillment costs will play a major role.
As it has been over the past several years, the #1 challenge for e-commerce merchants is the cost of shipping, and our 2023 survey showed that 44% now spend over 11% of an order’s total value on shipping. Our survey also showed that while 68% of e-commerce merchants are utilizing 2-4 carriers, just shy of one-third are only utilizing a single carrier for every shipping need, and only 5% are using five or more.
This showcases a broad opportunity for savings – by comparing more rates across more carriers and service-levels, businesses can ensure they’re choosing the most cost-effective option for every order. In addition, comparing multiple carriers and service levels allows you to choose options that provide more optimal time-in-transit reliability, which translates to a more delightful delivery experience for the end customer and more loyalty down the line. By helping optimize shipping costs and drive process efficiencies throughout the fulfillment journey, multi-carrier solutions such as Shippo enable merchants to refocus more of their business efforts on newly-looming challenges this year, such as meeting a more discerning consumer’s expectations in an evolving economic landscape.
Creative solutions help merchants delight customers without sacrificing profit margins
In order to meet evolving expectations such as those around free and fast shipping – which are especially difficult for smaller brands to offer cost-effectively across the board – merchants will need to get creative with how to deliver consumer-friendly experiences without breaking the bank.
Providing shipping options within your checkout experience – for instance via free or cheaper versus fast shipping, or offering free shipping in certain circumstances – can help drive more purchases and inspire ongoing customer loyalty by delivering great e-commerce experiences that meet a variety of consumer preferences.
Consumers want free shipping, but with shipping costs holding strong as the top challenge for merchants, few are able to offer it across the board without taking a huge hit to their profit margins. However, there is wiggle room for merchants who are willing to approach this consumer expectation creatively.
Merchants who aren’t able to provide free shipping for every order should consider offering it as a loyalty incentive, as 42% of consumers said they would join a loyalty or membership program in exchange for the perk. In addition, 47% said they would spend a minimum amount on a purchase in order to qualify for free shipping, opening more opportunities for merchants to both drive conversions and increase the average order value with the offering provided only after a certain threshold is met.
Beyond shipping costs, having a diverse carrier mix allows you to provide more delivery options at checkout. Different customers may have varying preferences on the service levels or carriers you have to offer. For example, some customers may want to receive their packages on a Sunday or want their international packages delivered a certain way. Giving them more of a say in the matter ensures they have a positive post-purchase experience and are more inclined to shop with you again.
To learn all of the insights from our most recent survey results – and find out what they mean for your business and fulfillment strategy – be sure to download our 2023 State of Shipping Report.
