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Inside Logistics: Analyzing the Delivery Promise Gap

01.30.2018 | By Peter Frys | 2 min. read

What are the key desires that customers want filled by a retailer? Most business owners would claim quality always comes first, followed by great prices and fast delivery. The delivery promise gap illustrates that while retailers may be hitting the mark on features one and two, they’re not always exceeding expectations on delivery. Why? The problem lies with the customer and retailer having different expectations regarding the delivery process.

The Delivery Promise: Fast or Free Shipping?

Customers always want what is in their best interests. They want the products they need, when they need them, and they don’t want to pay too much. The e-commerce world has created a new shopping experience for customers. Before, they were limited on what they could purchase based on the location and proximity of a brick-and-mortar store. Now, consumers can order from any online store, worldwide.

E-commerce also changed delivery expectations. While it used to be common to wait a week or more for a product to ship and arrive at your home, that’s no longer the case. Now, customers can choose two-day, next-day, and in some cases even same-day shipping. Before Amazon arrived on the scene, many retailers offered these options, but at a high cost.

Now, with the Amazon Effect taking hold, customers can get fast, free shipping on thousands of products. Recent data shows that 74% of customers expect free shipping for most of their purchases. Additionally, 56% of shoppers are willing to abandon making a purchase if shipping costs for expedited delivery are too high.

Retailers Stuck in a Bind With Delivery Costs

Despite all these consumer demands, shipping hasn’t gotten any cheaper. In fact, prices have gone up over the past several years. That means retailers are falling into a delivery promise gap. Business owners are trying to please customers without being overwhelmed by the high shipping costs they have to absorb. Retailers can offer free shipping by raising product prices, but that means they risk losing customers to lower-priced competitors. Currently, about 60% of retailers do not offer fast or free shipping due to high prices and narrow profit margins.

How to Solve the Delivery Gap Dilemma

In many cases, the solution lies with business owners evaluating costs further up the supply chain. Using competitive LTL companies to ship freight from warehouses to distribution centers can be an excellent way to cut costs. Doing so can help alleviate delivery gap pricing woes further down the line. Streamlining warehouse operations and reducing waste are two other key methods to improve overall performance and save money.

Attempting to meet customer expectations without destroying profit margins is an issue that needs to be addressed. By gathering supply chain data and analyzing processes, businesses can identify areas where they can lower costs by adopting more efficient systems. This gives retailers the opportunity to think critically, close the delivery promise gap, and better serve their customers.

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