Do retailers need to further commit to free delivery?
While often cited as a conversion necessity, the wide majority of retailers only offer free shipping occasionally for promotional campaigns, according to a study from parcelLab.
The logistics platform from July to October 2020 studied the order, shipping, delivery and returns processes of 52 of the National Retail Federation’s top 100 U.S. e-commerce retailers that regularly shipped products to customers.
Of the 52, only four — or eight percent — generally offered free shipping with no minimum purchase required. Sixty-two percent offered free shipping above an order value of $35. The remaining 30 percent did not offer free shipping at all, adding an average of $4.25 to each purchase for shipping costs.
Free returns were more common. Slightly more than a majority of retailers analyzed offered returns for free or had a “no need to return” policy. Of the 43 percent of retailers that charged for returns, 59 percent charged more than $10.
ParcelLab said requiring free shipping minimums or always charging for shipping or returns could “increase the chances of a customer opting not to shop with the retailer in the future due to these additional, inadvertent costs.” Not doing so also puts retailers at a competitive disadvantage to the free shipping promise of Amazon Prime.
Yet the reason many retailers set minimum thresholds for free shipping or charge is to offset escalating logistic costs. A Gartner study from December found retailers with more than 50 percent of revenue from the online channel have logistics costs as a percentage of sales that are almost double those of their store-focused counterparts.
Logistic costs have remained elevated during the crisis as carriers have steadily applied surcharges to offset the strain of unprecedented online shipping volume. In mid-January, FedEx Corp. announced plans to add a surcharge for its large customers (over 30,000 weekly average packages) “until further notice.” The move heightened concerns that shipping charges that traditionally arrive during peak selling periods may become a regular occurrence.
- Discover which US retailers are outperforming their competition – parcelLab
- The Retail Supply Chain Cost Challenge of Rapid Online Growth – Gartner
- FedEx Shipping Rates – FedEx
- Another FedEx Rate increase – LinkedIn
- Will free deliveries for Prime members make Amazon the driving force in online grocery? – Retailwire
- Free next-day shipping hits Amazon in its bottom line – RetailWire
- Will retailers pass along or eat COVID-19 shipping surcharges? – RetailWire
- Will pop-up e-commerce fulfillment centers help Walmart manage demand? – RetailWire
- How can retailers avert a holiday returns catastrophe? – RetailWire
- FedEx adds new surcharge for residential deliveries by large customers – The Load Star
- Most recent FedEx pricing surcharges feel permanent – Freight Waves
DISCUSSION QUESTIONS: Should retailers be looking at free shipping more as an online margin killer or as a shopping cart abandonment saver? Do retailers have viable options for absorbing the inherent costs of free shipping?