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LISTEN TO YOUR CUSTOMER:

OVERCOMING FOUR THREATS TO ECOMMERCE BUSINESS PROFITABILITY This guide outlines four factors impacting ecommerce customer buying behavior and how ecommerce business leaders must respond to safeguard profitability.

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Intro: Four Threats

Four Threats to Ecommerce Business Profitability Every year, changes in the world and the home delivery industry affect consumers’ behavior when shopping online; those shifts, in turn, affect your ecommerce business’s profitability.

To understand the most pressing issues affecting ecommerce customers’ buying behavior, Descartes Systems Group recently conducted a consumer sentiment study entitled “Dear Consumer: How Do You Feel About Home Delivery Now?” (The Descartes Systems Group, Inc., 2023). Our ecommerce business experts analyzed the results of this study to discover shifts in consumer preferences, expectations, and behavior.

We identified four immediate threats to ecommerce business profitability:

By listening to ecommerce customers and studying these four threats, Descartes’ shipping and home delivery industry experts developed practical ways for you to respond, ensure customer satisfaction, and protect profit margins right now.

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Economic Downturn

Which Economic Threats Currently Impact Consumer Spending? Slower Economic Growth and Cautious Consumers In the wake of the COVID-19 pandemic, global markets continue to experience a dip in economic growth. Consumers are less optimistic and more protective of their purchases amidst financial worries. This year, Descartes’ Ecommerce Consumer Sentiment Study stated: “Security was the most important element of the home delivery process” to ecommerce consumers surveyed worldwide.

Rising Cost of Goods and Budget-Conscious Consumers The economic threat of high inflation remains a persistent problem worldwide. While many countries’ inflation rates have peaked, rates and cost of goods remain high. 37% of consumer participants in Descartes’ Consumer Sentiment Study reported that having less disposable income will prevent them from increasing the number of online purchases they make in the future (The Descartes Systems Group, Inc., 2023). As consumers look for ways to maximize their budgets and cut costs, Descartes’ Ecommerce Consumer Sentiment study finds: “Preference for low-cost delivery is twice as important as delivery speed.”

How to Keep Your Customers During Economic Downturn

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Economic Downturn

Four Ways Ecommerce Businesses Can Combat Economic Threats

To remain profitable amid slow economic growth and high cost of goods, the most impactful thing you can do is keep your existing customers happy and increase their sense of security, so they always choose your business first. Here are four ways to do it:

1. Take Measures to Increase Delivery Security y Work with highly rated carriers/couriers. Compare ratings on sites such as

Trust Pilot. y Use a shipping insurance provider. We recommend ShipRush Total Shipping

Protection for delivery security and painless claims. y Take advantage of carrier-specific services. I.e., “Signature required for delivery”

and courier notifications for exceptions.

2. Boost Customer Communications To ease fears and build trust in your brand, keep customers informed throughout the fulfillment lifecycle with branded email notifications and branded tracking pages instead of using generic carrier shipping notifications.

3. Make Live Customer Service a High Priority “In this year’s survey, 67% of consumers indicated they had a delivery problem” (The Descartes Systems Group, Inc., 2023). When ecommerce delivery problems occur, consumers are more likely to abandon a brand and shop elsewhere. Establish a live customer support channel to prevent churn and solve customer problems faster.

4. Offer Various Shipping Options While 39% of consumers prefer lowest-cost shipping, 22% prefer a precise delivery window, and 15% want the fastest shipping. Another 14% want both fast and precise shipping regardless of cost. The final 9% prefer environmentally friendly shipping above other factors (The Descartes Systems Group, Inc., 2023). Give consumers choices and allow them to self-select delivery according to their most urgent needs. Here are five basic options:

1. Fastest Shipping 2. Lowest-Cost Shipping 3. Precise Delivery Window 4. Fast and Precise 5. Environmentally Friendly

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Delivery ProblemsWhy are customers leaving my ecommerce business? More than four out of five people ages 18-25 have had a delivery problem in the last three months…21% [of them] did not order from the retailer again (Descartes Systems Group, Inc. 2023).

The hidden danger of delivery problems: Ecommerce churn One of the most common responses to delivery problems is silent ecommerce churn: your unhappy customer quietly takes their business elsewhere. This may seem insignificant, but consider the cost of acquiring a new customer:

Total Sales and Marketing Expenses / Total Number of New Customers = Cost of Acquisition per Customer (CAC) Every time you lose a customer, you must pay to acquire a new one. This erodes your bottom line and prevents your business from achieving profitability. How much money are you losing? Look at your customer lifetime value:

Average Order Value X Average Number of Orders per Customer = Customer Lifetime Value (CLV) Cost of acquisition takes a cut out of your first sale to each new customer. The average CAC for ecommerce retail/consumer goods is $10-22 per customer (Rathi, 2022). Subtract it from the CLV, and you will see your profit potential. How much profit are you throwing away in customer churn?

Ecommerce delivery problems damage trust Every time a customer orders from your website, they exercise trust. The level of risk varies according to your brand reputation and price point, so a higher level of trust is required when purchasing from a new brand without much social proof. Your business must intently focus on building and maintaining consumer trust to keep costs low and achieve greater profitability.

Delivery Problems Hurt Repeat Business

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Delivery Problems1. Understand the key delivery problems driving dissatisfaction. Top Three Delivery Problems for Ecommerce Customers:

y 23% of consumers experienced delivery that was much later than expected. y 22% of consumers experienced delivery at a different time than expected. y 18% of consumers said the delivery time offered was longer than they were happy with.

Descartes Systems Group, Inc. 2023

2. Provide timely delivery experiences: How to keep orders from arriving later than expected:

y Eliminate double data entry. Use shipping software for this. Integrate all your shops, marketplaces, and carriers in one program. y Auto-prioritize orders. Technology can efficiently organize and prioritize hundreds or thousands of orders to prevent late deliveries. y Reduce picking time. By using warehouse management software, you can eliminate “treasure hunts” and reduce walking time.

How to deal with deliveries arriving at a different time than expected: y Include a “precise delivery” shipping option. Use highly reputable carriers for this. Customers will be willing to pay extra

for it. y Improve customer communication. Provide a branded tracking page and send branded emails regarding delays.

How to meet fast delivery expectations for ecommerce customers: y Offer a “fastest shipping” option. Customers who want the fastest shipping will pay extra to receive their order sooner. y Save on fast shipping. Protect your profit margin with discounted expedited shipping rates via shipping software. y Automatically use the fastest carrier. Use shipping automation to select the cheapest expedited shipping for orders that

require it.

How to Keep Customers from Leaving Your Ecommerce Business

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Package Theft

How does package theft hurt ecommerce profitability? Descartes’ survey showed that consumers’ #1 home delivery concern this year was security, and 81% of respondents ranked security for home delivery as extremely important (The Descartes Systems Group, Inc., 2023). Every time your customer loses an order to package theft, it damages their trust in online shopping and reduces the likelihood that they will shop with you again. That is a big problem because repeat business is one of the most important profit drivers for ecommerce merchants.

How widespread is the package theft problem? Around 260 million packages were stolen in the United States last year, which is 50 million more compared to last year’s results, according to survey results published by Safewise (Edwards, 2022). Other survey highlights include:

y Estimated 19.5 billion dollars lost. y 79% of Americans surveyed were victims of package theft. y Over half of the victimized consumers experienced multiple instances of package theft.

Why is the package theft problem growing? y Ecommerce sales continue to grow, with an estimated $1,034.1 billion in online sales in 2022

(U.S. Department of Commerce, 2023). y Packages often sit outside the door for extended periods and become targets for package theft. y Low-risk, high opportunity. Unless the courier is USPS, stealing a package is not a felony in the U.S.

(Edwards, 2022).

Package Theft Threatens the Customer Experience

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Package Theft

1. Provide accurate delivery tracking. Besides security, 74% of consumers also ranked delivery tracking as extremely important (The Descartes Systems Group, Inc., 2023). Knowing precisely when a package will arrive allows consumers to plan for someone to receive the delivery.

y Provide branded tracking pages to underscore that your business provides the necessary information.

y Send branded email notifications. Build trust as you manage customer expectations about shipping.

2. Provide shipping protection. Some thefts may still occur despite everyone’s best efforts, so have a plan to help your customers achieve a smooth and painless claims process.

y Use a shipping insurance provider. We recommend ShipRush Total Shipping Protection for delivery security and painless claims.

y Make your customers aware of extra security measures your company is using to protect their purchases.

3. Work with highly rated carriers/couriers. Consistently ship items with carriers with an excellent reputation for secure, on- time delivery. When packages arrive at the correct time and place, consumers have the best chance of receiving them before porch pirates can strike.

4. Take advantage of carrier-specific services. Security-related services are provided by leading carriers such as FedEx, UPS, USPS, and others. Using special services is very easy via automation within the shipping solution. Set automation rules and the program will automatically apply special services to the order.

Four Ways Ecommerce Businesses Can Protect Consumers from Package Theft

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Rising Costs

Why isn’t my ecommerce business growing faster? Less Disposable Income 37% of ecommerce consumers said having less disposable income will prevent them from increasing the number of online purchases they make in the future. “Less disposable income” recently jumped to the number- one spot as a threat to growth for ecommerce businesses. Comparatively, it was only the fifth-highest reason last year, according to the previous consumer sentiment study (Descartes Systems Group, Inc., 2023).

Shipping Costs This year 79% of consumers rated delivery costs as extremely important. When describing their delivery preferences, a whopping 39% of consumers preferred the lowest-cost delivery option, stating that delivery speed was less important than low cost (Descartes Systems Group, Inc., 2023). When ecommerce shoppers arrive at checkout and see their total, including shipping costs, many abandon the cart if shipping costs are more than they expected to pay.

Growing Costs Threaten Ecommerce Business Growth

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Rising Costs

A low-cost shipping strategy does two things: lowers operational costs for your business and lowers shipping costs for your customers. Does that always mean free shipping? Not necessarily. “In the US, 21% of small and medium-sized online retailers always offer free shipping.” (Fariello, 2022). What are your competitors offering for shipping options? Can you do something similar or better?

1. Use multi-carrier rate shopping to find the cheapest shipping rates. Shipping software integrates multiple carriers into one program then uses multi-carrier rate shopping and automation rules to choose the lowest-cost shipping option for each order.

2. Take advantage of lower rates negotiated with carriers by shipping platforms. Software companies negotiate discounted shipping rates with carriers to save ecommerce businesses money on shipping. Some shipping solutions also offer the opportunity to use the software for free and get discounted rates at no cost to you.

3. Offer free shipping for a minimum order value or subscription. By setting a minimum order value for free shipping, you will increase the average order value of your ecommerce transactions. Similarly, by using a subscription, you increase the likelihood that people will shop at your store instead of somewhere else.

4. Offer low-cost shipping among other delivery options. Customers value different things when it comes to home delivery, and not everyone needs low-cost shipping. Instead of applying the same low-cost shipping to every order, let your customer choose the delivery option they value most.

Four Steps to a Low-Cost Ecommerce Shipping Strategy

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What’s Next?

What’s Next? Moving Forward with Confidence Overcoming Threats to Your Business Now that you understand what’s threatening your business, we invite you to take action and put what you’ve learned into practice. Select the threat that currently impacts your business the most, then choose one thing from the accompanying how-to page to try next month.

Control the Factors That Help Your Customers As an ecommerce business owner, you often encounter factors beyond your control. When that happens, turn your attention to what you can influence: your customers’ experience with your brand. Focus on improving the factors within your business that will help your customers the most. As you show them you care, their trust in your brand will grow along with their loyalty. Ultimately, this will help your business to remain successful during difficult times.

Take measures to improve the home delivery experience for your customers, and you will reap the benefits of happy customers, repeat business, and greater profitability for years to come.

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References

The Descartes Systems Group, Inc. (2023, March). Dear Consumer: How Do You Feel About Home Delivery Now? Waterloo.

Edwards, R. (2022, December 19). Worst Metro Cities for package theft for 2022. SafeWise. Retrieved April 11, 2023, from https://www.safewise.com/blog/ metro-areas-porch-theft/

Fariello, G. (2022, October 30). Shipping strategies: How to offer free, flat rate, and more. Shopify. Retrieved May 1, 2023, from https://www.shopify.com/blog/ shipping-strategy

Rathi, R. (2022, February 2). Customer acquisition cost by industry: CAC Benchmarks. StartupTalky. Retrieved April 12, 2023, from https://startuptalky. com/cac-by-industry/#Customer_Acquisition_Costs_by_Industry

U.S. Department of Commerce. (2023, February 17). Quarterly Retail E-Commerce Sales -4th Quarter 2022. Washington, D.C.; U.S. Department of Commerce.

References

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Descartes Ecommerce

Descartes Ecommerce For ecommerce businesses to scale, Descartes Ecommerce is creating the world’s most comprehensive and highly integrated ecommerce supply chain technology stack. Because we know that seamless integrations and smart partnerships build strong ecommerce businesses, Descartes curated a selection of recommended software programs for your ecommerce tech stack.

Ecommerce Platform Recommendations: Shopify, Big Commerce, WooCommerce, Magento, NetSuite Ecommerce Shipping Solutions: Descartes ShipRush, Descartes OzLink Shipping, Descartes XPS Ship, Descartes Enterprise Webship Inventory Management Recommendations: ActionShip Inventory, Fishbowl, Order Hive, InfoPlus, Finale Inventory Order Management Partners: Brightpearl, Cin7 Enterprise Resource Planning Partners: NetSuite, Epicore Profit21, Microsoft Dynamics Warehouse Management Systems: Descartes Peoplevox, Descartes OzLink Mobile Warehouse for NetSuite, Descartes Pixi LTL Shipping: Descartes ShipRush, Descartes OzLink Shipping, Descartes Order Express, Descartes Aljex Fleet Management: Descartes On Demand, Descartes Routing, Mobile & Telematics

https://shiprush.com https://www.descartes.com/solutions/ecommerce-shipping-fulfillment/warehouse-management/descartes-ozlink-shipping-for-netsuite https://xpsship.com https://peoplevox.com/ https://www.descartes.com/solutions/ecommerce-shipping-fulfillment/warehouse-management/descartes-mobile-warehouse-netsuite https://pixi.eu https://shiprush.com/integration/ltl-freight/ https://www.descartes.com/solutions/ecommerce-shipping-fulfillment/warehouse-management/descartes-ozlink-shipping-for-netsuite https://www.descartes.com/resources/knowledge-center/descartes-order-express https://www.aljex.com/lp-freight-broker-tms/?utm_source=GSN&utm_medium=cpc&utm_campaign=AljexG2&gad=1&gclid=Cj0KCQjwnrmlBhDHARIsADJ5b_lTkfKEBPq2dzl9WTHIsbZIyHRj2htwme4cj9nsZfvK2JdLtNe1uCwaAlMEEALw_wcB https://www.descartes.com/resources/knowledge-center/descartes-route-planner-on-demand-multiple-stop-route-planner-optimzed-route-planning https://www.descartes.com/solutions/routing-mobile-and-telematics https://twitter.com/DescartesSG https://www.facebook.com/DescartesSystemsGroup https://www.linkedin.com/company/descartes-systems-group http://www.descartes.com

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About Descartes

Descartes (Nasdaq:DSGX) (TSX:DSG) is the global leader in providing on- demand, software-as-a-service solutions focused on improving the productivity, security and sustainability of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, track and help improve the safety, performance and compliance of delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world.

Learn more at www.descartes.com, and connect with us on LinkedIn and X.

The Descartes Systems Group Inc. 120 Randall Drive, Waterloo, Ontario, N2V 1C6, Canada Toll Free 800.419.8495 | Int‘l 519.746.8110 www.descartes.com | info@descartes.com

Uniting the People & Technology That Move the World © The Descartes Systems Group Inc. All rights reserved.

About Descartes Systems Group

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Intro: Four Threats Economic Downturn Delivery Problems Package Theft Rising Costs What’s Next? References Descartes Ecommerce About Descartes Systems Group What"s Next_

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