Shoppers want their online orders fast.
Most retailers know that, but mass merchant Overstock.com Inc. (No. 47 in the 2019 Digital Commerce 360 Top 500) discovered that faster shipping actually improves its conversion rate. And not just a little. A delivery message of 2-day shipping has a 30% higher conversion rate than a 3-day or more delivery message, says Vince Atkin, Overstock’s vice president of supply chain.
Overstock made this discovery toward the end of 2018 and adjusted its fulfillment network to offer faster shipping on more products. For example, more than 90% of Overstock orders are drop-shipped, meaning the product is housed at the supplier’s warehouse, not at an Overstock warehouse. Typically, it houses products at a supplier warehouse near to where they are manufactured or imported. For example, if Overstock’s furniture was manufactured in China, the supplier is likely storing the furniture at a warehouse on the West Coast.
For the Cyber 5 period, Overstock knew which products it would have on sale to promote on its Black Friday deals page. It then moved those products to one of its three 3PL warehouses located in Kansas, Pennsylvania and Utah. With the products that were likely to sell staged in a central location near to many shoppers, Overstock could then guarantee faster delivery for more products, Atkin says.
At the end of 2019, 40% of Overstock’s sales shipped within 2 days, compared with only 20-25% of sales hitting this mark at the end of 2018, Atkin says. Plus, it only missed its delivery-by date 2.5% of the time during the holiday season, compared with 3% of the time last year.
“From a supply chain standpoint, faster shipping means less damage. We ship a lot of bulky furniture and the less touches it has, the less chance it has to get damaged,” says Atkin about furniture being moved from warehouse to warehouse. “The conversion bump is also a big deal.”
Overstock also uses a machine-learning model to forecast fulfillment that factors in historic carrier performance. It builds rules into its reporting to flag issues. For example, if an order hasn’t moved in a couple days, there is likely a problem. Overstock will reach out to its carrier if an order hasn’t moved within 48 hours to proactively deal with any issues, instead of waiting for the carrier or a customer to flag an issue.
“It would be foolish to build a network that could handle Cyber 5 volume and let it sit there for the other 51 weeks of the year,” Atkin says about shipping carriers handling increased volume. “We know it takes a bit to clean up.”
Typically, its shipping carriers have delivered the overload of shipments by the second week of December, Atkin says.
Over the holiday season, Overstock was the fifth most-mentioned retailer for having shoppers’ best or favorite online shopping experience during the holiday shopping season, according to a Digital Commerce 360 and Bizrate Insights survey with 1,719 responses. (In front of Overstock, Amazon, eBay, Walmart and MidWay U.S.A were the top four.)