2023 is set to be another tough year for the retail sector. Faced with high inflation, interest rate hikes and rising living costs, shoppers are re-evaluating their priorities and becoming more value-focused, putting brand loyalties to the test.
84% of consumers are concerned about the outlook for the economy and their personal finances for the year ahead, with inflation the top concern, according to the new ShipStation Ecommerce Delivery Benchmark Report.
On a global scale, inflation is tipped to have a whopping US$319 billion impact with the US impacted the most at US$219.4 billion and Australia the least impacted country at US$6.9 billion.
As a result of inflation, almost three-quarters (72%) of consumers plan to change their buying behaviour. Further, close to two-thirds (32%) will put delivery cost over speed and convenience – a 5% rise on last year – and 79% will consider sustainable delivery options, but only 7% are willing to pay more for them.
Value over speed and convenience
Online shopping priorities are changing rapidly as economic pressures mount with an increasing focus on value over convenience. During lockdowns, consumers were keen to ensure they got what they wanted, when they wanted it, be it super-fast delivery, contactless pick-up, or choosing specific delivery slots – with many willing to pay for the privilege. But with financial concerns, the cost of delivery is now the most important conversion factor, as speed and convenience become less of a priority.
While most retailers recognise the importance of keeping delivery costs low, over one-quarter (28%) plan to increase the cost of delivery in 2023, with only 18% planning no increases to the price of products, delivery, or returns.
As shoppers’ priorities shift towards value, consumers are generally more open to waiting longer for delivery, or compromising on location, than paying for delivery. In the current economic environment, free postage and a small wait for delivery is likely to trump paid-for expedited delivery.
Increasing expectations for free returns
Free online returns have become a consumer expectation and an industry standard, but this is set to become a less common proposition as retailers attempt to recoup associated costs here. Retail Economics research shows that the returns rate for online purchases can be as high as 30%, compared to less than 10% in-store.
More than three-quarters (76%) of shoppers surveyed believe returns should always be free and their willingness to pay for returns is dropping. However, younger generations are more accepting to the idea of returns charges with close to four in 10 (39%) Gen Z’s saying they would consider paying for online returns, compared to just 22% of Boomers.
Greener last mile
Over one-third (34%) of consumers would switch to parcel lockers or click and collect (‘BOPIS’– Buy Online Pick Up In Store) services for their online orders, compared to 25% when surveyed a year ago. Beyond providing a convenient and often free alternative to home delivery, consolidating deliveries from multiple online orders to just one ‘out of home’ location is also more environmentally friendly. It reduces emissions by cutting down the number of deliveries to individual homes.
Sustainability considerations are increasingly influencing purchasing decisions. Globally, almost four in five (79%) shoppers value having ‘green’ delivery options when ordering online, up from 74% a year earlier. Although three quarters of merchants recognise sustainability and lowering the environmental impact of deliveries as being important, less than one in five (18%) consider it to be a key strategic focus for their business.
When thinking about ‘going green’ regarding online deliveries, price sensitive shoppers are overwhelmingly in favour of accepting longer delivery times (38%) and switching to ‘out of home’ collection (34%), rather than paying extra to offset emissions (where only 7% would consider this).
Growing shift to buying second-hand
The process of re-selling, renting or thrifting previously owned products is rapidly gaining momentum as consumer perceptions regarding ‘second hand’ change. More than one-quarter (26%) of consumers plan to buy second-hand or use online resale marketplaces more often in 2023.
Resale platforms not only offer a more affordable option, but they also meet a growing desire to minimise environmental impact as consumers become more conscious of overconsumption. This is fuelling growth in online marketplaces such as eBay and Vinted, along with creating a new breed of circular-economy services designed to help consumers buy, recycle and re-use their goods.