Online Shoppers Don’t Always Care About Faster Delivery

Analyzing online customer data may reveal that other delivery attributes matter more than how quickly an order is received.

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Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
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The COVID-19 pandemic changed how we shop. Soon after the onset of the global pandemic, retailers reported a rapid shift from in-store to online purchases. Online buying accounted for 18% of worldwide retail sales in 2020, up from about half that in 2018. Grocery shoppers stampeded to the web: As of May 2020, 41% of U.S. online grocery shoppers were first-time users of such services. The expectation is that the online shift will persist well beyond the pandemic across most retail subsectors.

Adapting to these changes is no small feat, and doing so profitably — well, that’s even harder. In response to the shift in consumer purchasing behavior since the beginning of the pandemic, many of the retail executives with whom we work are rethinking their existing omnichannel strategies. Our conversations with the e-commerce director of a leading European grocery retailer offered evidence of how difficult it is to shift operations to support the online shopper. This director was reexamining where to locate inventory and whether to own or outsource home-delivery capabilities in order to minimize the time between the placement of an online order and its receipt by the customer at home. Each of the proposed changes aimed at shortening the time between order and delivery was going to require investment. He wanted to make the appropriate choice.

We asked this director to question his long-held assumption that speed was the most important online delivery factor. How important is it for a customer to receive the goods fast? Isn’t it plausible that some customers prioritize being able to choose the delivery day over speed, and that others might be willing to forgo speed in return for a precise delivery-time window?

Obtaining the answers to these questions is an essential first step toward designing the optimal delivery network for online orders. To succeed, this director needed to know more about customers’ delivery preferences. Our research into retailers that offer attended home deliveries (in which a customer is present to receive their goods) suggests that focusing on speed alone may cause a company to overlook opportunities to acquire and retain online customers who prefer delivery attributes other than speed. In fact, we found that customers exhibit differences in their willingness to pay for delivery speed, delivery precision, and delivery day choice.

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Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
More in this series

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