April 10, 2019 by Harshinii Rammesh

Over the past decade, the rise of online shopping and associated services such as free/next-day/express delivery has drastically changed the way consumers shop. This shift has pushed the run-of-the-mill eCommerce companies to re-assess their shipping policies. These companies are facing stiff competition from a host of digitally-native Direct to Consumer (DTC) brands like Dollar Shave Club, Warby Parker, Glossier, Casper, and others whose approach to shipping is relatively more sophisticated.

We compared the shipping policies of these generic eCommerce companies (Amazon accounts for 50% of US eCommerce. Therefore, by ‘generic’, we mean the non-Amazon eCommerce market) with the shipping policies of the Digitally Native DTC brands and found that the generic segment has a lot of catching up to do!

Per PipeCandy’s estimates, there are approximately 300,000 eCommerce companies that sell consumer products (excluding marketplaces) and about 2,000 Digitally Native DTC companies in the US.

The generic eCommerce segment

For the purpose of this analysis, we divided the 300,000 cohorts based on their GMV into…

  1. Long tail: <$5M
  2. Mid-Market: $5M-$100M
  3. Enterprise: $100M+

…and then did a deep-dive into their shipping policies. We found that ‘one-day’ shipping is popular in the Enterprise segment while the Mid-market is evenly split between ‘one-day’ shipping and a combination of ‘two-day’ and ‘three-day’ shipping. ‘Three-day’ shipping dominates in the Long-tail segment.

As far as Free Returns and Free Shipping go, across all three segments, on average, 28% of the companies provide Free Shipping and 9% provide Free Returns.
The DTC segment

We compared these numbers to what the DTC brands had to show and found that their policies are relatively similar except for Free shipping and Free returns, where DTC brands outperform the generic significantly. About 40% of DTC companies offer Free shipping and 14% offer Free returns. Also, they seem to be maturing faster by opening physical stores.

Are these numbers the norm?

A survey by WalkerSands shows that 79% of potential shoppers feel free shipping is an important factor to make them shop online. Yet, as we see, only 28% of the generic eCommerce market provides these policies. So, what’s this demand driven by?

Yes, Amazon.

Amazon provides free shipment, free returns, and one-day shipping. It provides same-day delivery with Prime, which has about 150 million subscribers (one-third the population of the US). When one-third of a country’s population is exposed to conveniences such as free shipping, free returns, and same-day delivery, it no longer becomes an option for the market. Rather, it becomes the new norm and DTC companies seem to be gradually positioning themselves at the forefront of this race.

Harshinii Rammesh

Content marketer @ PipeCandy