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[8 comments]

The lure of free shipping

June 27, 2014

According to a UPS study, four out of five consumers feel that free shipping is an important factor when making a purchase online. Ninety-three percent have taken action — including bundling more items and choosing slower delivery — to qualify for free shipping.

According to the survey of 5,849 consumers conducted by comScore in conjunction with UPS, placing additional items in the cart is the most common action taken to qualify for free shipping, with 58 percent claiming to have done so.

Other actions shoppers have taken to get free shipping include:

  • Choosing slow transit times (50 percent);
  • Searching online for promo codes (47 percent);
  • Choosing ship-to-store as a means to avoid paying shipping costs (35 percent);
  • Joining a loyalty program to qualify for free shipping (31 percent);
  • Delaying a purchase to wait for a free shipping offer (30 percent);
  • Choosing to shop at a retailer's physical store instead of online (28 percent);
  • Purchasing an alternative product priced above a retailer's free shipping threshold (16 percent).

Only seven percent do not take action to quality for free shipping, according to the study.

Around delivery times, 83 percent of consumers are willing to wait an additional two days for their packages to arrive to receive free shipping. UPS did note that sellers of commodity goods that are readily available at local retailers may need to deliver quicker, while retailers of proprietary goods may have more leeway with their delivery times.

More than one-half of online shoppers said they want to see the total purchase cost early in the checkout process, and the majority prefer seeing the expected arrival date rather than the number of days it will take for the product to arrive.

Overall, UPS offered three suggestions for retailers in exploring the "Free Shipping" option:

  • Understand the patterns that matter and how long shoppers are willing to wait for free shipping;
  • Monitor your time frames to receive products while staying aware of the competitive landscape;
  • Assess whether you can absorb these costs as a marketing expense and what strategies will be put in place to preserve desired margin while remaining competitive.

 

FINANCIALS:     [NYSE:UPS] [ ]

Discussion Questions:

What guidelines would you suggest around using "free shipping" as an incentive for online shoppers? Are online retailers offering year-round free shipping missing a powerful selling tool?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which do you think retailers should be using more as a shopper incentive for free delivery?

Comments:

It's arguable that offering year-round free shipping is actually a positive, not a negative. E-commerce sites offering free shipping on a consistent basis (even with restrictions on size of purchase or delivery time) are likely to attract repeat business, compared to sites where the benefit is unpredictable. It can be a powerful loyalty tool for those retailers who can absorb the margin hit.

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Dick Seesel, Principal, Retailing In Focus LLC

Look at the source of the study—UPS has a vested interest in increasing shipping costs. I am not suggesting there isn't some value here, but free shipping squeezes their margins along with the retailers.

Amazon has cracked this code with Prime, which in essence acts as a loyalty program for the company. Retailers looking to embrace e-commerce and omni-channel retailing should be getting a better understanding of how Prime works along with UPS' suggestions above.

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Bill Davis, Director, MB&G Consulting

We have been doing this free shipping deal for a while now, and I still believe that nothing is free, plain and simple. Retailers can not absorb the costs, which continue to rise, without factoring in a higher retail. Are there exceptions? Maybe, but Amazon gets $99 a year for Prime, and the millions who subscribe sure do help offset the real costs.

Adding stuff to your order may help, but many delivery services charge by the weight of the total items, and this could actually make it more expensive to ship, which could actually make the transaction even less profitable. I am a pragmatic person, and I know that costs are added into my so-called free shipping, so let the customer believe what they want, and let capitalism win, as it always does.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Just make it a cost of doing business. As shipping costs escalate, raise your retail prices. Build it into the cost of goods sold.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Most consumers expect free shipping and feel that shipping should be included in the cost of each product. When if comes to retailing, paying for shipping is tantamount to having to chip in at the checkout to pay for the person accepting payment.

Purchasing online allows the vendor to avoid many costs which brick and mortars must include in their pricing scheme including real estate (searching for new locations, maintenance, and taxes for each location) shrinkage from customers and payroll, to name a few.

All these are a part of determining the price offered to consumers. For a company to offer products for an attractive price and then add on shipping, it's simply disingenuous.

Then there is the added cost, frustration and inconvenience of returns.

Arthur Rosenberg, Senior Editor, Chain Store Guide

Tony is right, few things are truly "free" but the article could have been entitled "The Table Stakes of Free Shipping." Zappos raised the bar and consumer expectations years ago and retailers have been playing catch-up ever since. Amazon's Prime program is a fascinating study in this regard. It isn't exactly "free" shipping but it feels that way when those lovely zeros pop up at check-out time. Even so, my recent price comparisons between Walmart.com and Amazon.com on Prime-eligible items usually favor Walmart, regardless of the shipping or pick-up option chosen. Walmart's algorithmic expertise can't be underestimated and Amazon Prime isn't always preeminent.

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Carol Spieckerman, President, newmarketbuilders

As in the poll question (which I'd like to see added an "All of the above" or "None of the above" choice box), it's not a question of what retailers should use more as a shopper incentive for free delivery—just leave the choice to the shopper, whether it be adding items to cart or accepting slower delivery times. Or, yes, taking out an Amazon Prime-type membership—the customer will out, that is to say, the customer will let their will be known by the choices they make.

And also yes, the retailer's got to be sure their prices are in line with the costs incurred, keeping those costs, hopefully, to a minimum, while getting more business.

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Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

Offer it upfront, calculate (and show) it as the consumer purchases each item and clearly communicate what it takes to get free shipping at the beginning of the purchasing process (and even throughout each step)...how much simpler can this get for people to offer something for nothing?

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Kai Clarke, CEO, American Retail Consultants

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