Retail

Will Rising Delivery Costs Push Consumers Offline?

It’s been written before (including by us) that the continued rise of eCommerce is unlikely to ever wipe physical retail stores off the face of the earth. (If such a thing does happen, it will be the result of President Donald “I’m going to reserve judgment on the KKK because they might vote for me be a bunch of swell folks” Trump, and all signs of human civilization — not just shopping locations — will be reduced to smoldering husks.)

On the contrary (for the time being), both digital and brick-and-mortar retail are expanding their capabilities to serve different but equally important — in some instances, symbiotic — functions on the omnichannel chain. The online-to-offline world exists in a delicate but — if handled properly — cross-functional balance.

At least, it did, anyway … until Amazon went and jacked up its delivery prices. Now, industry analysts are wondering if the eCommerce titan — along with any online retailers that follow suit — is going to end up driving digital customers offline and into stores.

While the prevailing belief regarding Amazon’s motivation in increasing the minimum cost per order for non-Prime members to qualify for free shipping from $35 to $49 (save for books, in which case the minimum order cost is $25 because Reading is Fun-damental) is to get more people to pay $99 a year for Prime membership, that dog might not hunt for a lot of consumers, especially those who are disinclined to essentially be forced into paying for something they didn’t want in order to avoid paying for something that used to be free. Slippery slope, that one.

A recent story by Mad Mobile News points out that Amazon’s decision to increase its free shipping threshold speaks to a larger reality that affects all eRetailers, not just the granddaddy of the channel: The desire for more frequent and faster shipping of retail items has raised costs for delivery companies, which, in turn, has compelled them to charge retailers more for their services (the outlet notes that USPS, for one, recently raised its going rates for retailers throughout the country).

This changing paradigm, posits Mad Mobile News, presents traditional brick-and-mortar retailers with an interesting opportunity, one that comes with two possible outcomes.

On the one hand, consumers fed up with having to pay more for the shipping of online orders might simply cut out the middleman — yes, even Amazon — and make their way to physical stores to do their shopping. It’s highly unlikely for most people that driving to the mall and back will cost them $49 in gas, never mind $99. (Again, that circumstance will only arise after President Donald “I’ve openly considered dating my own daughter” Trump has taken office, and then, everybody will be driving their War Rigs and Gigahorses along Fury Road to get to the Thunderdome. Not a lot of time for shopping.)

The other possibility that Mad Mobile News puts forth is a more nuanced outcome, albeit one that is arguably more likely than the first, as well as far less damaging to digital retailers: Rather than counting on online shoppers to completely bail on eCommerce and return to the pre-Internet, analog-only days of commerce, physical retailers could address the consumer problem of rising delivery costs by increasing their efforts to facilitate online-to-offline — or enter the space for the first time, if they haven’t done so already.

Not only does offering customers the ability to order an item online (be it via a desktop or laptop computer or a mobile device) and pick it up in a physical store improve the efficiency of in-store shopping, as the outlet notes, because it eliminates the worry of an item not being in stock, the process also — by its very nature — keeps eCommerce as very much a part of the loop.

No doubt that’s the preferred solution to the rising shipping costs problem of most any retailer with a dedicated online presence, as it maintains online and offline elements as equally important aspects of the O2O chain, which is the way that it’s supposed to work these days, offering a beneficial experience to consumers and merchants alike.

It’s nice to think that some things can still work the way that they’re supposed to. Once upon a time, for example, a plutocrat who mocked, in a televised public forum, a disabled person for being disabled wasn’t supposed to be a viable candidate for U.S. president.

But … Y’know.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 edition of the FI Innovation Readiness Playbook examines how the innovation playing field is leveling as small FIs implement bolder strategies and larger banks adopt more measured approaches.

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