Why Shipping is Your Secret Weapon for E-Commerce Growth

Originally posted in Total Retail, September 2nd, 2024

In the fast-paced world of e-commerce, where brands need to regularly adapt their strategy to remain relevant and thrive, every decision counts. Yet I've seen too many brands make a critical mistake: treating one of their largest P&L items — shipping — as merely a cost center. This mistake is costing them a lot. Brands leave substantial cash on the table because they don’t evaluate the return on investment of shipping across all business functions.

This oversight not only misses a massive e-commerce growth opportunity, but also risks alienating customers in an increasingly competitive market.

Return on Shipping

Traditionally, shipping has been seen by most brands as a necessary evil, a logistical hurdle to overcome. They focused on minimizing shipping costs, which often came at the expense of the customer experience. But while many brands focus narrowly on direct costs paid to carriers, they overlook the fully landed cost of shipping, meaning the holistic impact of shipping on their entire P&L. They may be able to save a few cents on a package by negotiating cheap shipping rates, but in reality, a poor shipping experience is costing them more. It increases expenditures across the organization related to customer service time spent handling complaints, refunds and credits, and even worse, it drives up customer churn and hurts their brand’s reputation.

For example, did you know 77 percent of shoppers are less likely to buy from a brand again after a negative delivery experience? This means that a single shipping mishap can cost you not just one sale, but a lifetime of potential revenue.

On the other hand, in today's hyperconnected world, where consumers have more choices than ever before, a seamless and delightful delivery experience can be the key differentiator that drives topline revenue via repeat purchases and customer loyalty.

Therefore, what matters most is not just the cost of shipping, but the returns on shipping spend (ROS).

As we look to peak season, optimizing last-mile delivery is not just about convenience; it's a strategic advantage for e-commerce businesses. Research shows that an optimized delivery experience can boost conversion rates by 8.9 percent, increase average order value by 10.6 percent, and improve net promoter scores by 15.3 percent. Additionally, 82 percent of brands see increased customer loyalty and repurchase rates after improving their last-mile experience, and 92 percent have reduced operational costs through efficient last-mile strategies. This highlights the immense potential of the last mile to drive revenue growth, repeat business, and increase customer lifetime value.

The Last Mile: Where Customer Loyalty is Won or Lost

The last mile (i.e., the final leg of the delivery journey) is a critical touchpoint that can make or break the customer experience. It's the moment when your brand's promise is put to the test, and where you have the opportunity to exceed expectations.

To truly capitalize on the last mile, e-commerce brands need to shift their mindset from "shipping as a cost center" to "shipping as a ROI center." This means investing in technology, data and partnerships to create a delivery experience that's not only efficient, but also personalized and enjoyable for the customer.

Offering customers real-time tracking, flexible delivery options, personalized two-way communication, and seamless returns not only enhances the customer experience but also provides valuable data and insights that can be used to further optimize operations and drive sales.

Takeaways for E-Commerce Leaders

1. Invest in technology. Leverage technology to streamline your shipping and delivery processes, from order management to route optimization and real-time tracking. This will not only improve efficiency, but also enhance transparency for your customers.
2. Personalize the experience. Offer flexible delivery options, such as scheduled delivery windows, in-store pickup, or alternative delivery locations. Communicate proactively with customers throughout the delivery process to keep them informed and engaged.
3. Partner with experts. Consider partnering with last-mile delivery specialists who can provide the expertise, technology and network to elevate your delivery experience.
4. Measure and optimize. Track key metrics like on-time delivery rates, customer satisfaction scores, and return rates. Use this data to identify areas for improvement and continuously optimize your shipping and delivery operations.
5. Evaluate holistically. Assess the full cost and impact of shipping investments across your organization, not just direct costs.

It’s time to think beyond the obvious and unlock value across functions. Shipping is no longer just a cost of doing business; it's a strategic investment that can drive significant growth for e-commerce brands. By shifting your mindset and embracing shipping as a ROI center, you can transform the last mile into a powerful differentiator that delights customers, builds loyalty, and ultimately boosts your bottom line.

Itamar Zur is the CEO of Veho, a company revolutionizing package delivery and returns for the modern economy.