Amazon’s launch of free one-day shipping in 2019 rocked the retail boat. We first wondered how it would work (answer: further doubling-down on their fulfillment network), then how it would affect profit margins (answer: minimal), and finally how accretive it would be for Prime membership (answer: quite significant. Piper Jaffray expects 30% higher usage of Prime as a result). Walmart soon followed suit with their own one-day shipping program.
But with these questions answered in 2019, there’s a new one to answer in 2020: How will consumers rationalize their dependency on fast shipping with their stated sustainability goals?
Photo by INA FASSBENDER/AFP via Getty Images
At the National Retail Federation’s Big Show in New York last week, a major theme was sustainability. Consumers say it’s important to them, particularly younger generations, and brands are adapting. It was a talking point for Monica Turner, senior vice president of sales, North America at Procter & Gamble, which is accelerating the sustainability and social-good aspects of many of their brands. P&G’s Secret brand is tackling the gender wage-gap issue, and Tide has changed its formulation to be more ecofriendly. Tide also recently changed its Amazon packaging to be e-commerce-ready, which had the added benefit of making its packaging more environmentally friendly.
Consumers want to be sustainable...
A study by Future Commerce released last week found that 7% of respondents with Prime members are unsure if they will renew their membership, with some going on to say that they can wait an extra day for shipping.
The report also found that consumers increasingly care more about sustainable business practices, with 42% having browsed or purchased from physical second-hand, thrift or consignment shops, and 47% saying they actively focus on buying fewer, better things.
But they also want fast shipping
Future Commerce also found in its consumer survey that the top three requirements for e-commerce websites are free shipping (58%), free returns (46.75%) and two-day delivery (30.39%).
Amazon downplays the impact of one-day shipping on the environment, but supply chain experts disagree. Amazon has said in the past that, according to its own research, delivering a typical order to a customer is more environmentally friendly than that customer driving to a store. But many factors can throw this math out—including when individual items are being shipped separately.
Vox reported in October how free one-day shipping was being offered even on products under $5.
Anne Goodchild, a University of Washington professor of civil and environmental engineering, told The Goods that “as we move towards faster delivery, it gets harder to consolidate. When we’re not paying some sort of personal cost for the trip, I think it’s easy to overlook how much travel we’re adding.”
In February last year, Amazon rolled out its “Amazon Day” option, where users could place orders throughout the week and have them all delivered on a pre-arranged day. The program’s benefits are multiple: It reduces parcel theft and, theoretically, items could ship together. But customers aren’t always seeing parcel consolidation as part of this effort (see the tweet below).
The human toll
In addition to the environmental stress that ever-faster shipping creates, is the potential human impact. Amazon in particular has come under fire for in recent years around its expectations of employees and contractors involved in warehouse fulfillment and last-mile delivery.
The cost of competition
As the large incumbents push forward with faster delivery, competitors are driven to keep up. Future Commerce’s Phillip Jackson says that this includes newer marketplaces like Verishop, which are funded by venture firms that are sometimes in turn funded from public pensions. “That sounds scary,” Jackson says. “Some retirement accounts are effectively fueling our need to have items delivered faster.”
Who calls the shots?
Amazon and Walmart are not making its decisions in a vacuum. Consumer demand for one-day shipping would have to be apparent to execs in order to justify the huge investment required to get from two-day to one-day shipping. And it’s unknown which demographics are using one-day shipping. Are the younger generations who are self-reporting a tendency toward sustainability actually following through with this logic in their daily purchases?
Either way, shoppers are calling the shots. And unless we start putting our money where our mouth is, we’ll all be dealing with more boxes, more delivery trucks, and the long-term environmental effects of our decisions today.
