Deliver when it matters most: Retention and revenue this peak season
We're a little over a month away from Cyber Weekend and peak retail season. For an Australian retail industry that has again had to contend with volatility and uncertainty this year, the sales phenomenon - which can now lay claim to being the pinnacle event in the retail calendar - will be warmly welcomed. That's because retail spending has again been largely subdued in 2024, according to Australian Bureau of Statistics data.
Despite softened spending, at Shippit we've noticed a common trend in recent years. When consumer spending is subdued for long periods, pent up demand builds, and is then released in a surge of spending during peak sales events. Indeed, almost two thirds (60%) of Australians delay purchases until key events like Black Friday and Cyber Monday.
But could this year be even more important than usual? And how can retailers best drive retention and revenue when it matters most?
Peak season 2025: An inflection point?
Inflation recently hit a three-year low, with Federal Treasurer Jim Chalmers hailing the news as "very welcome and encouraging". It comes as cautious optimism about a retail recovery slowly gathers momentum. FY25 is shaping up as a potential inflection point for the industry in Australia, whereby focus will shift to share of eyeballs, online penetration will accelerate and CAPEX priorities will shift. If, indeed, that does transpire, November will be critical.
Many shoppers now make their festive purchases during the Cyber Weekend bonanza, rather than during the traditional pre-Christmas rush. Based on tens of millions of orders placed at thousands of retailers through Shippit during Cyber Weekend in the last five years, both the volume and value of orders is increasing YoY while the sales period starts earlier and lasts longer, as both retailers and shoppers seek to capitalise on the supply of and demand for deals.
It's a trend we anticipate will continue this year, with November forecast to be as big as any on record. For the retailers who master the opportunity, it will be a springboard into 2025. For those who don't, however, the gap to the market leaders will grow. To capitalise, retailers must understand what has the greatest impact on both customer experience and customer loyalty. Today, that is delivery.
Deliver when it matters most
While online penetration remains lower in Australia than other developed markets like the US, UK and Korea, it is going to steadily re-accelerate in the coming years. As it does, as global competitors increase their investment, and as consumer expectations around post-purchase experience rise, delivery could become the defining issue over the coming years.
Today, 50% of shoppers would not return to a brand after a poor delivery experience, with price the only factor - and only marginally - more impactful in our choice of brands than post-purchase experience. Consumers want reliable, convenient and quick delivery and will reward the brands who offer it with their loyalty.
According to Shippit's State of Shipping Report, there's a long way to go for some retailers, though. In 2024, the average retailer-advertised delivery estimate is 5.6 days - considerably higher than the 2.2 days that deliveries are actually taking today. Retailers recognise their customers' expectations are rising, so they're under-promising so they can over-deliver.
This strategy creates a number of issues, though. If delivery estimates are too inflated, shoppers will look elsewhere - which hurts conversion rates and bottom lines. And if a shopper does complete a purchase, and the delivery arrives when they're not home - because they'd accounted for it being there at the 5.6-day estimate rather than the 2.2-day actual delivery time - it immediately falls short of their need for convenient delivery.
Retailers should be leveraging real-time data, such as those provided by Shippit Insights, to provide accurate, real-time delivery estimates at checkout to maximise conversions and live up to the promises they make to their customers. When delivery is treated as an investment, not a cost centre, and the start of customer retention rather than the end of customer acquisition, the impact on a retailer's bottom line can be significant.
Our research also found that only nine per cent of Aussie retailers offer same-day shipping - despite 60% of consumers being happy to pay for it. Such a disparity in the supply and demand of same-day shipping is exacerbated by Amazon launching same-day in Sydney. It's reasonable to expect that it will soon offer that service in other areas too. Retailers must tap into agnostic delivery platforms that provide ultimate delivery optionality, whether their shoppers want the fastest or most environmentally-friendly delivery.
If the months ahead are to be an inflection period for retailers, greater investment in the post-purchase experience is critical. When retailers can deliver reliably and consistently, their shoppers will stop considering other brands. That's the case all-year round, but particularly so during peak season, when the stakes are higher. The extended sale period of Cyber Week - and the peak season it kicks off - provides a significant opportunity. The retailers who can deliver when it matters most will boost their short-term profit and long-term loyalty.
