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Free shipping. That promise can be an effective way to entice online shoppers, who have consistently cited shipping and handling charges as one of their major buying deterrents. Even so, to avoid seeing their margins sliced thinner than deli pastrami, online retailers are becoming more judicious in their willingness to offer free shipping.
In a survey of e-merchants by Boston Consulting Group and the trade association shop.org conducted this past fall, 40% of retailers said they planned to offer free shipping during the holiday season-28% with conditions, such as the $100 minimum order stipulated by Amazon.com in its pre-Christmas offer. “We have not seen nearly as many free-shipping offers as last year,” says James Vogtle, Boston Consulting’s research director. “That will be the trend; we won’t see as many blanket free-shipping offers.” As the population of first-time e-shoppers dwindles, so will the use of free shipping, Vogtle predicts. “Shipping charges are one of the obstacles for first time online buyers,” he says. “Free shipping can lower the barrier. After that, it’s an expensive way to acquire customers.”
Online retailers are no longer dealing with an entire population who don’t know anything about the Internet. “It’s not as important to offer free shipping to repeat customers, who will return, regardless,” Vogtle says.
Particularly during the holidays, shoppers are more concerned with timely, correct delivery than the cost of shipping, he notes “because if you don’t get it, you may be disappointing a loved one, not just yourself.”
Nonetheless, free shipping isn’t all it’s cracked up to be, says Bill Payne, senior consultant with KPMG Consulting LLC. “Consumers are smart enough to know you’re just going to hide that cost in the price,” he says. “Retailers need to spend their money in ways that will make their sites better and easier to use. Consumer satisfaction is more a fulfillment question-being able to get what I want when I need it.”
Coldwater Creek, the Sandpoint, Idaho-based retailer of women’s apparel, gifts and accessories, selectively uses free shipping to entice Internet shopping newbies. It offered free shipping on its web site from Dec. 11-20, and also on its “Gifts to Go” site, designed for last-minute shoppers (gift wrapping is also gratis). “We cut our teeth on catalogues, which are considerably more expensive to sell through,” says a Coldwater Creek spokesman. “It’s one more way to get those catalogue shoppers to make that shift to buying online.”
Land’s End, the Dodgeville, Wis. apparel retailer, doesn’t offer free shipping under any circumstances. “We don’t want to treat our Internet customers differently than our catalogue customers,” says a spokeswoman.
In October, 1999, New Jersey-based entrepreneur D.J. Vallauri launched Freeshipping.com, a portal for retailers offering free shipping. Many of his nearly 1,000 affiliates only offer free shipping through his site, and most require a minimum order. Some of those merchants offer only discontinued or excess inventory.
“During last year’s shopping season, everyone thought free shipping was forever,” Vallauri says. “But companies have been cutting back on free shipping to minimize their burn rate and maximize their cash reserves.”