Alibaba received a $192,000 penalty for pricing during the past two Singles’ Day sales.
Study after study has shown that one of the biggest impediments to online shopping is the shipping cost. Last month, zBox Co. Inc. of San Francisco introduced a plan, dubbed “Zeroship”, to pay shipping charges for online buyers. Customers don’t even have to sign up for the zBox product to get the free shipping.
Consumers sign up for a 60-day trial of Zeroship on the zBox.com site. They can extend the free shipping through Dec. 31 by combining Zeroship with the $5 per month zBox home delivery lock box, which delivery people open using a code printed on the shipping label. zBox says many of the 3 million daily home deliveries in the U.S. are not completed because the recipient is not home.
Under the Zeroship service, zBox Co. reimburses shoppers for standard shipping and handling charges on purchases of $25 or more when they shop on the Zeroship Shopping Network of more than 25 online merchants including Buy.com, Cooking.com, Eve.com and PlanetRX.com.
Free shipping definitely has an appeal to consumers and to merchants. A Boston Consulting Group survey reports that 95% of online purchasers would shop more online if shipping were free. “Shipping can be a deterrent because often the delivered cost is equal to or higher than offline,” says James Vogtle, research director at Boston Consulting Group. But he says zBox’s plan is not a permanent fix. “Consumers always say they will buy more if prices decrease. I don’t know that this will stimulate long-term demand but it may drive some first time purchases.”
zBox co-founder and Executive Vice President Tony Paikeday says the company covers shipping reimbursements through zBox rentals and through the commissions it earns from the retailers in its shopping portal. The company believes merchants will like the proposition.
“We are able to allow the retailers to give consumers free shipping at no cost to them,” Paikeday says. zBox Co, plans to do print, transit and radio advertising in the fourth quarter.
And one major online retailer is expected to co-market the bundled zBox and Zeroship service, says Paikeday. In the future zBox Co. says it probably will charge a fee for the Zeroship service, similar to a rewards program in which only the membership base would receive the shipping reimbursements.
Vogtle warns that reimbursing shipping costs could become expensive because consumers will begin to expect it. For now zBox Co. may be on its own. “I don’t think we will see this spreading widely, but rather used in specific situations to incent first-time buyers or to reward loyal customers,” says Vogtle. zBox Co. expects to do exactly that-attract new shoppers to the service-and some online retailers might give away zBoxes to their best customers as special promotions.