This commentary was written by Mitchell Nikitin, founder and CEO of Via.Delivery. The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Online shoppers in the U.S. are paying noticeably higher prices for their purchases as a result of inflation. January marked 20 consecutive months of year-over-year online inflation. As consumers watch prices continue to climb, many are becoming increasingly concerned about the rising cost of everyday items. Online merchants are watching closely to see how shoppers’ buying habits are changing during this inflationary period. As companies study shifts in consumer trends, they can attempt to help reduce sticker shock by optimizing shipping experiences.
When surveyed about their 2022 spending plans, nearly six in ten U.S. consumers admitted that they will proceed with caution. And 22% are planning to significantly tighten their budgets. Worries about inflation are causing shoppers to think more carefully about spending. Nearly nine in ten U.S. consumers are at least “somewhat” concerned about inflation, and six in ten admit they are “very” concerned, according to a New York Times report.
Despite having concerns about inflation, consumers are still shopping and spending money online. The pandemic drove more shoppers online than ever before, and consumers aren’t looking back. In 2022, the U.S. e-commerce market is projected to surpass $875 billion.
Consumers who are worried about inflation are hopeful they will be able to find deals online. Online shopping tends to offer more buying options—plus consumers can easily compare prices online and pick the best deals. However, the discounts consumers expect to find online may not be as widely available as in the past, and the bargains may not offer as large of savings. Shipping is a prime example.
Online retailers know that consumers love free shipping, and that discounted shipping can help drive sales conversions. However, some online retailers are cutting back on offering shipping discounts to remain profitable. Extending offers for free shipping has always been difficult for merchants, particularly where margins are tight. Labor shortages, rising fuel costs, and increased demand haven’t helped the situation. After crunching the numbers, many businesses simply aren’t able to meet consumers’ expectations for free shipping.
Higher prices may impact shoppers’ behaviors
As prices rise and deals and discounts disappear, online retailers may notice some of the following changes (depending on the products they sell and the price points they offer):
Higher cart abandonment. The cost of shipping is a leading factor in cart abandonment. According to The Checkout Benchmark report, checkout completion rates average 56% on desktop and 45% on mobile devices when shipping is free. Cart abandonment increases when consumers are asked to pay more for shipping. A 10% increase in the cost of shipping results in checkout completion rates decreasing 6% on desktop and nearly 4% on mobile. Even if businesses don’t raise their shipping fees, shoppers may still be more likely to abandon their carts. A $9.99 shipping fee that consumers may have tolerated before could end up being a dealbreaker for consumers who are paying more for their purchases and anxious about inflation and rising costs.
Decreased willingness to spend more to meet discounted shipping thresholds. Oftentimes shoppers will spend more money—adding items to their online cart—so they can meet the threshold for free or reduced shipping. In short, they’ll buy more to save on shipping. However, that could change if shoppers stick to purchasing only the items they need. Some consumers say they are planning to cut discretionary spending as inflation rises. More than a third (36%) will cut back on spending with slight inflation, and nearly half (49%) will cut down on discretionary spending with significant inflation.
This is a trend e-commerce brands need to watch. Online retailers should pay close attention to cart abandonment rates and test different shipping offers to learn whether shoppers are more or less likely to add on purchases.
Shoppers choosing slower, less expensive shipping options. Whether shoppers value cost or speed of delivery most is a long-standing debate. In reality, Amazon conditioned consumers to expect shipping that is both fast and free. But as consumers are burdened with inflation and look for ways to cut costs, some may choose to wait longer for deliveries so they can save money.
Brands can offer options to help ease inflation’s strain
Retailers can offer customers some relief, and help their own cause, by optimizing shipping experiences. In the current environment, offering shoppers a variety of affordable shipping options at checkout is a smart first step. And it can help satisfy the wants of consumers with a range of cost and speed preferences.
Online retailers with brick-and-mortar locations can offer BOPIS or curbside pickup. These are significantly cheaper fulfillment options than residential shipping. Another option is to offer BOPA (buy online, pickup anywhere), which is also cheaper and can be used by e-commerce brands that don’t have physical stores. BOPA enables shipping to commercial locations such as pharmacies and grocery stores. Consumers select the location where they want to pick up their order—making BOPA not only a cost-saving option, but also one that is convenient. In most cases, BOPA is around 30% cheaper than residential delivery.
Inflation is becoming a bigger concern for online shoppers, and in some cases a barrier to purchase. When customers click the checkout button, it is important that they see at least one delivery option at a price point that is attractive to them. Giving customers options helps them feel more comfortable with shipping costs and confident enough to complete their purchases.
About the Author
Mitchell Nikitin is on a mission to transform the shipping and delivery markets. He is the founder and CEO at Via.Delivery, the company enabling pure play and direct to consumer online merchants to compete with giants, such as Amazon, by offering Buy Online, Pickup Anywhere (BOPA) experiences. Drawing on executive leadership experience in logistics, e-commerce, retail and IT, Nikitin is leading Via.Delivery’s efforts to build the world’s largest alternative delivery network. In addition to being an advocate for logistics efficiency, he’s passionate about helping startups monetize and he serves as a mentor for Alchemist Accelerator. He’s also an ex-race car driver. Connect with him on LinkedIn.
