Although consumers--and some retailers--have the perception that free shipping is rampant on the web, that is not the case--and retailers shouldn’t base their marketing strategies on free shipping, says Lauren Freedman, president of Chicago-based consultants The E-tailing Group Inc. “Free shipping is just one tool in the arsenal, and it’s not even a must-have tool,” Freedman says. “Merchandising should be number 1.”
Only 6% of online retail sites that The E-tailing Group surveyed in Q4 last year offered totally free shipping. 47% offered conditional free shipping. While that 47% is up from 30% the year before, the free shipping is based on conditions designed to increase business for the retailer. The most common--at 68%--was a minimum purchase in dollars, followed by minimum purchase in number of items. Other conditions included ship to store or use of a proprietary credit card. “Very few customers will get their orders shipped totally free,” Freedman says.
Before a retailer offers free shipping, it should understand the needs of its customers, Freedman says. “If they’re selling a house brand, then customers will pay for shipping because they can’t go elsewhere,” she says. Further, if customers are higher income, they may be more willing to pay for shipping. “It’s a time-value equation,” Freedman says. “Does the customer have the time to shop around to find a lower shipping charge on the same product?” Further, she adds, customers calculate shipping costs as a percent of the total cost and if it doesn’t exceed a certain percentage, they’re likely to pay it without complaining.
Freedman adds that most retailers can’t afford to offer free shipping. “Shipping and handling is a profit center,” she says. “So we’ll continue to see shipping and handling charges.”