The home delivery riddle: How to ship a shirt without losing your shirt

E-commerce enjoyed a considerable tailwind during the pandemic, as lockdowns and social distancing led buyers to expect shippers to meet them at their doorstep. Most did. In the initial days of this boom, companies disproportionately focused on getting goods delivered as soon as possible—regardless of cost. Profits were sacrificed for speed.

In 2023, with the pandemic largely in the rearview mirror and most of the population returning to life as usual, it’s clear the click-to-buy trend is here to stay. To be sure, shipment volumes dipped last year as buyers started consuming more in-person services and splurged on experiences. The bounce back raises plenty of challenges for those in the C-Suite.

Based on responses collected in May and June, AlixPartners’ annual Home Delivery Report shows e-commerce buying (across all 22 categories that we track) increased compared to the same period a year ago. This marks only the second across-the-board spike since the firm started fielding the survey in 2014.

Among the key trends to watch is a shift in the way shippers are approaching the home delivery imperative. While executives clearly feel the pressure to ramp up delivery options and improve click-to-porch times, they are increasingly focused on the bottom line. About one-third of those surveyed said it is accretive to profitability compared to in-store transactions. Importantly, 79% of shippers experienced a year-over-year cost increase on a per-package basis.

Customers we talked to, meanwhile, appear to have settled on three days as the amount of time they see as acceptable for free shipping fulfillment, down from five-and-a-half days a decade ago. If a seller wants the customer to consider a product being “in stock” then it must fit its delivery guarantee within this window. Even if a shipper is unable to meet this expectation—which nearly half can’t—they still must make it available since the “free shipping” option affects 96% of purchases.

Clearly, customers and the companies they buy from don’t always share the same goals. However, this year’s survey indicates that the two sides do share some common ground.

As executives feel pressure to make money on e-commerce activities, they are looking at several ways to trim shipping costs—especially when it comes to the last mile of delivery. Among the options on the table include scheduling delivery windows or adding in-store pickup. Customers appear willing to play ball. For instance, 40% of the buyers we surveyed said they are willing to accept $5 or less to collect an order from a pickup location within 15 minutes of their home.

We expect home-delivery demand to remain robust, and customers will be willing to adapt to certain changes if those changes are in their best interests. Executives, meanwhile, can employ a handful of initiatives to improve home delivery operations, including working on long-term strategic relationships with carriers and optimizing their outbound footprint.