Free Shipping Day Comes But Once A Year?
According to organizers Kinoli Inc, Americans made Free Shipping Day last year the third-heaviest day ever (at that time) for online shopping. "The total of $942 million spent in that single day was an increase of nearly 60 percent over 2009, and bested Black Friday in online sales by $300 million."
There seems to be clear evidence from the National Retail Federation (NRF) and ComScore that shoppers do not like, and will not accept, delivery charges. Some refuse to shop with certain retailers and even cancel orders if they get to checkout and find that they are about to pay for delivery. Conversely, they might spend more to reach the minimum purchase required for free delivery. With the fourth annual Free Shipping Day scheduled for December 16 in the U.S. and December 9 in the U.K., some retailers who normally charge may find a sudden surge in sales when they stop.
Heather Dinolfo of Atomic PR points to digital agency iProspect’s clients who "are hoping for a piece of the pie which last year saw an increase in sales of 61 percent YOY for the event," adding "27 percent have purchased items they didn’t plan to buy to qualify for free shipping." NRF’s research found that 36.3 percent of shoppers will spend more online this year if shipping comes free.
Change has come rapidly. Brad Tuttle in Time refers to a New York Times story in November 2010 noting that 41 percent of online orders were shipped free and says it was "an impressive figure at the time." Since then, it has become more of the norm. Extra enticements may be available in reduced (or eliminated) minimum purchase requirements. And a potential increase in small businesses, including some 190 Esty artisans and 150 eBay re-sellers, offer a more individual range of presents than big retailers. Catherine Clifford in entrepreneur.com reviewed the experiences of three small businesses, comparing the attraction of new customers with reduced profits from absorbing shipping costs. Perhaps paid delivery really is genuinely a thing of the past.
- Free Shipping Day
- Holiday Spending: Just how important is free shipping to online shoppers? – Time
- Should small businesses join "Free Shipping Day"? – Entrepreneur
- Online Retailers Preparing for promotion-heavy holiday season, according to shop.org eHoliday survey – National Retail Federation
- Free shipping puts retailers in a box – The Wall Street Journal
- Online Retailers Preparing for promotion-heavy holiday season, according to shop.org eHoliday survey – National Retail Federation
Discussion Questions
Discussion Questions: Should retailers join Free Shipping Day? Day-to-day, if retailers continue charging for shipping, how should they best position charges for shoppers?
The way to position shipping charges, if any, is through transparency or alternatively, through subsidization.
Shipping is a cost for retailers and ultimately for customers. Today, free shipping is commonplace for many merchants with the minimum amounts to qualify for free shipping continuing to drop.
The big problem with shipping charges is pretty simple: they are used by retailers (and B2B companies as well) as profit centers or at the least, to make up for margin shortfalls elsewhere. The lack of transparency for both sectors is obvious and customers don’t like it, ultimately switching providers.
Retailers should make sure that they can service customers, while making a PROFIT.
Online sales are destined to continue to grow, as consumers seek value, comparative pricing, convenience, and ease of use. “Free Shipping” is not the only answer in terms of meeting consumer needs and expectations. It is an important marketing tool.
The monthly Consumer Intentions & Actions (CIA) Survey asks over 8,500+ adult respondents about their online purchase patterns, and what is important to them. In ranking their preferences, consumers point to the following services that are important to them:
1. Low prices
2. Free shipping
3. Flexible return policies
4. Website is easy to sse
5. Pick up and return to store availability
6. Toll-free “live” customer service support
Retailers have to determine what their online objectives are. At that point, they can blend in their strategies. No need to join “Free Shipping Day” if it doesn’t fit a particular retailer’s objectives.
We have reached the point where charging for shipping ensures push back from shoppers, vs. free shipping being seen as a bonus a few years ago. Setting minimums to qualify for free shipping would seem to be a great way to get shoppers to spend more, and keep them from getting aggravated with you.
If the retailer can “deflect” shipping charges by promoting a more compelling service or offer, then they can sway customers to their sites…sometimes. Retailers can be more creative in managing a necessary cost of doing business (shipping). They can co-brand with a single shipper to earn discounted rates. They can offer loyalty programs that eventually “earn” free shipping forever, based upon purchase history, etc., etc. I don’t feel the industry has tried to manage shipping charges for customers very well yet. For now, those charges have become a profit center for too many retailers.
It’s easy for those uninvolved in online businesses to recommend free shipping to those who are. In one of our businesses, it’s simply not feasible. First, this business has customers in 98 countries and international shipping is cost-prohibitive for a “freebie.” Second, the products are medical systems with a customer timing requirement for a money-back guarantee, so there’s an extra layer of shipping expense for a signed proof-of-delivery. And third, only the expensive FedEx can provide all of this for us. We simply can find no way to offer free shipping. Wish we could. We took a chance and tested it last year, hoping that increased volume would make up for it. It didn’t. We also tested reducing our shipping charges behind-the-scenes to see if volume increased. That didn’t work, either. Ours are one-time customers, so a loyalty program would not apply. They either want our product or they don’t, and shipping cost rarely seems to be an issue. Perhaps we’re lucky like that.
This is a dilemma: unless the shipping costs are uniform to all customers — as would be the case where everyone buys only one of the same item — free shipping ultimately is a subsidy from the small spenders to the big ones; and as such is obviously “unfair” to the former…but how to convince them of that, and even worse, how to get the latter to “pay up”?
Customers likely don’t think beyond “free” to work out actual costs. If shipping costs $10 and you order 10 things, it’s obviously $1/item. But if shipping is “free,” the retailer may add that $10 onto each item or just divide it between two or three in the hopes that each customer will buy that many. The customer is still paying for delivery but has no idea how much and it may possibly be far more than paying for it as a separate item.