Let’s face it – it’s a tricky time to be running an e-commerce business. Inflation and economic uncertainty are causing consumers to tighten their belts and prioritize price in their purchase decisions.
At the same time, retailers and carriers face rising operational and last-mile expenses. In 2023, last-mile delivery accounted for a staggering 53% of total e-commerce shipping expenses – a 12% increase from 2018.
As the demand for e-commerce continues to rise, controlling last-mile delivery costs amid economic turbulence and delivery challenges is the key to profitability for online retailers, especially as customers become more price sensitive. So how can e-commerce merchants navigate this changing landscape and keep shipping costs under control? The answer lies in encouraging out-of-home (OOH) delivery options at checkout.
By promoting out-of-home delivery, online retailers can reduce their shipping costs by an average of 10% while simultaneously improving the overall delivery experience for customers.
Read on to discover how to reduce shipping costs for your e-commerce business:
- E-commerce delivery is more expensive than ever
- Out-of-home delivery is a cheaper shipping option
- Reduce shipping costs without sacrificing experience
- How Wehkamp maximized earnings with out-of-home
- Lower shipping costs with out of home delivery
- Why retailers that offer out-of-home delivery will win
E-commerce delivery is more expensive than ever
With last-mile delivery eating up over half of total e-commerce shipping spend, both carriers and merchants are under pressure to invest in more cost-effective shipping solutions while adapting to customers’ evolving delivery needs.
Market disruption and economic uncertainty have changed the way people spend their money. Cost sensitivity is high in all markets, but customers still seek value in their experience over simply paying the lowest price.
Our 2024 Out-of-Home Delivery Survey shows the cost of shipping is still the most important factor for 85% of online shoppers when making a purchase decision. But past delivery experience can influence 77% of shoppers to purchase a product somewhere else.
For retailers this means that choosing carriers based on price alone can come with unexpected costs, like losing repeat customers over poor delivery experiences.
Out-of-home delivery helps retailers control shipping costs in two ways:
- Cheaper shipping rates and higher conversion – Carriers typically offer cheaper rates for OOH delivery options. Merchants can use these cost-savings to convert more customers by offering low-cost shipping at checkout.
- Reduce failed and repeated delivery attempts – With a near 100% delivery success rate, OOH options help merchants avoid unnecessary surcharges by reducing the number of repeated attempts and failed deliveries. This also improves the customer experience.
Out-of-home is the cheapest shipping option
Out-of-home delivery options help carriers operate more efficiently by consolidating the number of deliveries they need to make. Because out-of-home is more efficient than home delivery, many carriers are investing heavily in expanding their out-of-home delivery networks, with the number of parcel lockers in Europe up by 29% and service points up by 6% in 2023 alone.
“It’s our job to build the most efficient network and make sure that we can keep on delivering all these parcels in the future. And at the same time, we also have to account for tight labor markets, rising costs, and the aim for more sustainability. A parcel locker can really help to solve these challenges because in the end, delivery to parcel lockers is more efficient than home delivery.” – Matthijs Pluimers, Lead Parcel Lockers at PostNL
Since it’s more cost-efficient than delivering to individual homes, carriers will typically offer out-of-home delivery at lower rates. This gives retailers the flexibility to reduce their shipping expenses while enticing customers with low-cost shipping options. According to our recent survey, over half of customers (51%) would opt for out-of-home delivery if it means paying less for shipping.
Out-of-home delivery costs 10% less than home delivery
While shipping costs vary by market and carrier, according to our data online retailers can save an average of 10¢ on every €1 euro when customers choose out-of-home delivery at checkout. In high-adoption countries like France, where 77% of shoppers have used out-of-home delivery at least once, online retailers can save up to 30¢ per €1.
That might not sound like much at first, but if you’re shipping 1000 parcels per week, that adds up to €5,200 in savings annually. And that’s before you factor in the additional savings out-of-home offers, such as reducing surcharges from repeated and failed deliveries.
Convert more customers by offering cheaper shipping at checkout
With cheaper upfront costs, retailers can use out-of-home options to lower their shipping rates at checkout. According to our most recent data, the cost of shipping is the most important factor for 85% of online shoppers when making a purchase decision.
And while the data shows that 78% of shoppers would opt for home delivery if all costs are the same, 71% of customers switch their preference to out-of-home delivery if it means paying significantly less than home delivery.
And while the data shows that 78% of shoppers would opt for home delivery if all costs are the same, 71% of customers switch their preference to out-of-home delivery if it means paying significantly less than home delivery.
Online retailers who promote out-of-home delivery at checkout can entice customers with affordable shipping rates, leading to a boost in site sales:
“We conducted an A/B test where we changed the order of delivery options. Surprisingly, we observed an improvement in the conversion rate when we made out-of-home delivery the primary option.” – Jordy Holthuijsen, CCO at XXL Nutrition
Reduce shipping costs without sacrificing delivery experience
The cost of shipping may be the first factor customers consider at checkout, but our data shows that 77% of online shoppers say past delivery experience is an important factor in their decision to buy. Poor delivery experiences cost retailers more than just profits, they also cost repeat customers.
Up to 20% of e-commerce packages aren’t delivered on the first attempt. In 2022 alone, these failed deliveries cost UK retailers £68,084 and German retailers €144,354. This makes reducing repeated delivery attempts a key way to maximize last-mile profitability.
“It’s never beneficial for any party if we don’t deliver on the first attempt. It costs more for us, it’s a more hassle for the receiver, and it’s more pressing on the environment. So if we can deliver the first time right, it’s always better.” – Sem Geurten, Account Manager Strategic Partners DHL
Out-of-home cuts the cost of failed deliveries
Parcel lockers and service points have a nearly 100% first time delivery success rate thanks to the flexibility and convenience they offer customers. Instead of worrying about missing the delivery driver, customers can pick up their parcels from an OOH delivery point whenever it suits their schedule.
In the event of a failed home delivery, out-of-home options also provide a secure secondary location for parcel pickup. This enables carriers to drop off the parcel at a nearby pickup point, rather than reattempting delivery.
“Let’s say our driver tries to deliver a package at your door today. If there’s not a service point within a certain rate radius, we will come back the next day and try to deliver it again. If that doesn’t succeed, it gets returned back to the sender, which is very frustrating for the customer.’ – Sem Geurten, Account Manager Strategic Partners DHL
Not only do these options save retailers from unnecessary shipping surcharges, but they also improve the customer experience by increasing flexibility during delivery.
Keep customers happy with flexible delivery options
Offering out-of-home delivery choices at checkout puts customers in control of their experience from the moment they buy. This gives online retailers the upper hand when it comes to meeting customer expectations and ensuring more successful deliveries:
“Providing more delivery options is better for customer satisfaction. We see customers are happy if they can collect a parcel somewhere else, either on the way from work or when shopping at the supermarket.’ – Maarten Brondijk, Supply Chain Manager at Jimmy Joy
In fact, offering flexible delivery options seems to be a key way to attract more customers. We asked online shoppers what delivery factors have the most influence on their decision to purchase from one online store over another. The data revealed that 67% of online shoppers would like to be able to select a specific delivery day and time at checkout and 58% want the flexibility to adjust the delivery while their parcel is in transit.
Above all, 82% of online shoppers want the ability to redirect a parcel if the first delivery attempt fails. This points to a clear need for online retailers to give customers more power to arrange delivery on their terms.
How Wehkamp is using OOH delivery to maximize earnings
While out-of-home delivery is still an emerging trend, some merchants are already adapting their business model to leverage this cost-effective shipping method. In 2023, Dutch retailer Wehkamp started charging extra for home delivery, promoting out-of-home as a more attractive shipping option. Their goal was to reduce the amount of trips needed for delivery while improving financial performance. And guess what? They’re seeing great success.
“When Wehkamp made out-of-home delivery available and at-home delivery cost extra, the number of parcels shipped directly to service points rose significantly.” – Sem Geurten, Account Manager Strategic Partners DHL
Wehkamp began by introducing a €0.50 fee for home deliveries and returns, aiming to make out-of-home (OOH) delivery a more attractive option. After a few months, they increased that fee to €1. Within a short period, the impact was clear—half of all Wehkamp’s orders are now delivered to out-of-home points.
“It was a bold decision to start charging for returns and home delivery at a time when the economy was weak and our competitors were offering both services for free, but it has proven to be the right choice. This benefits our financial performance and also our environmental footprint. I would like to encourage all players in the market to take this necessary leap, and thus make our industry more sustainable.” – Graham Harris, CEO of WRG
By driving a shift toward out-of-home delivery, Wehkamp has been able to increase their earnings by 30% despite a tough few years for e-commerce. This strategy has helped them streamline operations, cut costs, and reduce the environmental impact of their deliveries while remaining competitive.
How to lower shipping costs with out-of-home delivery
The effectiveness of out-of-home delivery increases with adoption. The more customers that choose OOH delivery at checkout, the more cost-effective e-commerce delivery becomes. But increasing the use of out-of-home delivery depends on two critical factors: convenient pick-up point locations and availability of out-of-home options at checkout.
Make out-of-home delivery as convenient as possible
Proximity of pick-up points play a crucial role in driving out-of-home adoption among shoppers. Our survey revealed that 59% of customers would opt for out-of-home delivery more frequently if pickup points were closer to home. This data underscores a fundamental truth — in today’s world convenience drives behavior.
“If there is a financial reason for the consumer to pick OOH, then they will pick it more often. But human behavior changes slowly. I think eventually we will get to a point where out-of-home will be the delivery standard, especially when it’s so convenient that on every street corner there is a parcel locker or a service point.’ – Sem Geurten, Account Manager Strategic Partners DHL
Offer out-of-home delivery as an option at checkout
With carriers increasing the number of parcel lockers and service points, it’s up to the merchants to encourage adoption by making out-of-home delivery available at checkout.
“The biggest challenge in adopting out-of-home delivery is that retailers need to offer these options at checkout. Right now if you order online, only a few parties offer delivery direct to service point in the checkout. When more online stores do this, I think we will see increasing numbers of adoption.’ – Sem Geurten, Account Manager Strategic Partners DHL
Our research backs up this prediction, showing that 48% of shoppers would use out-of-home more frequently if online stores offered it as an option at checkout.
The opportunity for online retailers is clear – by integrating OOH delivery options with a compelling cost incentive, they can simultaneously meet customer preferences and optimize their shipping strategy. It’s a win-win scenario for both retailers and consumers.
Maximize e-commerce profits with out-of-home delivery
As e-commerce businesses look to the future, it’s important to know that ‘free & fast’ home delivery isn’t the only successful shipping strategy. Even retailers like Amazon (who conditioned customers to expect fast & free home delivery in the first place) are now encouraging the adoption of out-of-home delivery methods by paying customers $10 when they pick up their parcels at a service point rather than getting delivery at home.
By increasing the adoption of out-of-home delivery options, retailers can take advantage of cheaper shipping rates while reducing the cost of unsuccessful deliveries for themselves and their customers.
Companies like Wehkamp are proving that shoppers will adopt new delivery preferences when they see a chance to save on shipping. By offering out-of-home delivery as a low-cost shipping option at checkout, retailers can increase conversions while protecting their bottom line.
Out-of-home delivery isn’t just a trend, it’s a competitive edge to make the most of your online sales. Read more about how out-of-home delivery is shaping the future of e-commerce.
