More web merchants are planning to offer free returns and in-store pickup of online order this year, suggest new survey data from Internet Retailer. If so, that would represent a departure from the fulfillment and delivery strategies of most major online retailers.

As of now, only 39 retail chains in Internet Retailer’s 2013 Top 500 Guide, or 24.7% of the 158 Top 500 online merchant that operate stores, let web shoppers pick up their online orders in stores, according to Top500Guide.com. Among the retailers offering that service are Staples Inc. (No. 2 in the Top 500), Wal-Mart Stores Inc. (No. 4) and Toys ‘R’ Us Inc. (No. 30).

Free return shipping, meanwhile, is offered by even fewer of North America’s largest online retailers. Around 9.8% of the Top 500—49 retailers—offer free return shipping. That list includes Target Corp. (No. 18), Kohl’s Corp. (No. 26) and RueLaLa.com (No. 76). (While No. 1 e-retailer Amazon.com Inc. does not offer return shipping, one of its major subsidiaries, Zappos.com, was one of the pioneers in offering free shipping both ways.)

Moreover, only five Top 500 retailers offer both services, according to Top500Guide.com data. They are:

• L.L. Bean Inc. (No. 5), which took in $1.140 billion in web sales in 2012, up 7.5% from the year before.

• Walgreen Co., (No. 36), with $900 million in 2012 web sales, up 9.9% from the year before.

• Signature Hardware, (No. 272), with nearly $58.6 million in 2012 web sales, up 51.7% from the year before.

• A/X Armani Exchange, (No. 308), with $45.3 million web sales, up 8.0% from the year before.

• National Automotive Parts Association, (No. 394), with about $31.1 million in 2012 web sales,  up 19.6%.

However, those numbers could increase in 2014, as survey results from a recently completed Internet Retailer poll that focused on fulfillment and delivery trends show that 17.6% of respondents plan to institute free returns in the coming year. 12.7% of respondents plan to set up buy online, pickup in store programs.

The survey results—which will be reported in full in the February issue of Internet Retailer magazine—was conducted earlier this month and attracted 245 responses. Of those, 13.9% came from retail chains and 51.7% came from web-only merchants. The rest came from consumer-brand manufacturers (14.7%), B2B e-commerce operators (14.3%) and catalogers (5.5%).

By contrast, 311 of the merchants in the Top 500—or 62.2%—offer some form of free shipping.

But while free shipping is relatively common, the leading challenge for e-retailers on the fulfillment and delivery front in 2014 seems pretty clear, experts and merchants say.

“Even though customers prefer free shipping, they are expecting delivery times to be faster every year,” says Greg Dahlstrom, director of global logistics for Vitacost.com Inc., No. 87 in Top 500 Guide.  “The challenge is to optimize delivery networks in a way so that we can continue to provide free shipping but get it to the customers more quickly.”

This challenge was especially apparent in the recently completed holiday shopping season.

A surge in online orders in the final days leading up to Christmas overwhelmed the ability of some retailers and delivery services to get items to consumers by Dec. 25. Nearly a third, 32%, of the top 25 North American e-retailers by sales didn’t get all orders under the tree by Christmas Eve, even though consumers placed the orders before the merchants’ stated cut-off dates, according to a study by StellaService, which monitors the service levels for e-retailers.

Analysts say a combination of e-retailers offering later order cutoff dates and bad weather overburdened delivery services, which weren’t prepared for the late-season surge in package volume, and in some cases overwhelmed retailers’ own distribution centers. The Internet Retailer survey found 13.3% of respondents had Christmas-season delivery cut off dates earlier than Dec. 17, while 43.4% had deadlines between Dec. 17 and Dec. 20. 

Meanwhile, free shipping remained popular among consumers. 63% of online orders shipping free during the just-concluded holiday season, up from 60% a year earlier, says comScore Inc., which track the activity of online consumers.

For much more about trends in e-commerce fulfillment and deliveries, including where merchants plan to direct their investments in 2014, read the upcoming issue of Internet Retailer magazine.

 

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