Does Fast Shipping Make or Break a Marketplace?

For better or worse, we live in a time of instant gratification. And in many ways, ecommerce, particularly Amazon, has worked to capitalize on that instant gratification. Many items on Amazon can be shipped within a day, or, depending on the item, even within one-two hours. Amazon also has Amazon fulfillment services to quicken the process.

Walmart has also made efforts to increase its shipping time with services like Walmart Fulfillment Services, and marketplaces like JD.com in China have 6-hour shipping. Almost three years ago, it appeared that eBay was going to get on board the customer gratification train as well, announcing guaranteed delivery, with nearly 20 million items offering three-day delivery.

Now, according to an article by Juozas “Joe” Kaziukenas on Marketplace Pulse, just four million eBay items offer three-day delivery. Last summer, the company also announced a plan to launch a fulfillment service similar to Amazon’s, but due to recent negative sales growth and other speculative factors, Marketplace Pulse predicts we won’t be seeing that anytime soon. So, what happened? And in the long run, does it matter?

The fast shipping flywheel

The trend or behavior of using fast shipping as a seller incentive is known as the fast shipping flywheel. Typically, this means that sellers will use fast shipping as a customer incentive, leading to an increase in sales; as sales grow, sellers add more products with fast shipping and the cycle continues. Often products that offer fast shipping will rank higher in search engines, resulting in even more sales.

So why hasn’t eBay engaged the fast shipping flywheel? Well, Joe explains, fast shipping doesn’t actually increase sales on eBay. This also explains why eBay hasn’t launched a fulfillment service. Before it can create a fulfillment service, there needs to be an incentive for eBay sellers to use one, and that incentive would be that shoppers are more likely to buy their products if they offer fast shipping. Because there is currently no incentive in place for sellers on eBay to offer fast shipping, Joe suggests it’s unlikely we’ll see the launch of a fulfillment center anytime soon.

How much do fast shipping times matter?

As for whether or not fast shipping really matters, there are two main schools of thought. On the one hand, demands for faster shipping will only increase and possibly change what meeting the demand looks like. Forbes wrote last year that the demand for faster shipping will force supply chains to change their strategies, likely leading to a world of ecommerce where it’s possible that production is no longer centralized; rather, production will be autonomous and localized to immediately meet customer demand.

On the other hand, several surveys suggest that fast shipping isn’t what matters most to consumers, i.e., it’s not the main factor in purchasing decisions. IDS, a fulfillment service company, published a blog last year on what matters most to consumers, citing several surveys that found 5% or less of consumers expect same-day or next-day shipping. In fact, the thing that may motivate shoppers more than fast shipping is free shipping.

Free shipping vs. fast shipping

The 2018 UPS Pulse of the Online Shopper report found 55% of shoppers prefer to purchase from a marketplace over a traditional retailer because of free shipping. Another survey by Alix Partners found that 75% of online shoppers said free shipping greatly impacts their ordering decisions. But at the end of the day, a close read of the Alix Partners survey will ultimately reveal that consumers want both. Which makes sense, right? If you can have something quickly, AND with free shipping, obviously that’s what consumers will choose.

So the decision lies with marketplaces on how to address those two consumer desires. Include shipping price in product price? Create an order minimum to get free shipping? Forgo fast shipping to offer free shipping, but with a longer wait time? There are several strategies to be explored, and there is no one-size-fits-all answer. At the end of the day, it’s all about providing the best customer experience, and at least for now, consumers still want the most bang for their buck, which mostly still means free shipping—but in the next few years, as fast shipping becomes more and more normal and therefore competitive, that balance may shift.