Free shipping can add appeal to a retailer’s overall offer; however, the incentive has become fairly common and more costly for retailers to deliver. Our experts offer different perspectives.
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David Bolostsky
Founder, UncommonGoods
12 years as a retail research analyst for Goldman Sachs
While retailers may find it tempting to offer free shipping, I think it is generally bad for the direct-to-consumer industry to give away something of such value.
Before I became a retailer, I worked as a research analyst covering the retail industry for Goldman Sachs. Based on my experience, I concluded that retail promotions are like drugs — they create dependencies. Customers will certainly respond to promotions, but will also defer purchases in order to take advantage of the sale price or whatever the special offer happens to be. Consequently, once you offer it, it is difficult to take it away.
Retailers can appeal to consumers in different ways. Those that specialize in unusual merchandise will attract consumers who are not motivated solely by price.
Think of the value of your customers’ time. Retailers that provide shipping for a modest fee are offering a benefit that saves shoppers time.
I think rising fuel costs will make free shipping much more expensive for online retailers this holiday season. The high prices will likely limit the amount of offers or lead to an increase in the dollar threshold level required for free shipping. Retailers don’t have to swallow the cost of shipping to attract customers. They can appeal to consumers the old-fashioned way — with great merchandise, outstanding service and competitive prices.
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Todd McClain
Senior director of marketing, VistaPrint
More than nine years experience in marketing and analytics
While many have pointed out that free shipping is something that “everyone is doing,” the truth is it can still be a big driver for conversion and revenue. The key is directing the offer to the right audience under the right circumstances.
We have tested the benefits of a free shipping offer against other offers, and at certain times have found free shipping to be highly effective. While it may not work as well as other offers, free shipping can be an effective conversion tool in the right situation. Understanding your customers is the key to successful offers. The offer must be aimed at consumers who look for free shipping.
The problem for e-commerce marketers is that customers have seen so many free shipping offers that they continue to look for and often expect them. While comparison shopping is easy online, sometimes the price of the shipping can determine whether a sale takes place. If you aren’t offering free shipping, but giving deep discounts on your products, the discount will entice consumers to purchase. For example, taking 50% off the retail price of a product will be more impactful than free shipping. We have found both types of offers to be effective with different customer segments.
Like any marketing strategy, free shipping can drive sales. But the offer must be tailored to satisfy your own criteria and appeal to your customers.
DMNews’ DECISION
While Bolotsky raises a valid point about the danger of making offers that consumers come to take for granted, McClain notes that free shipping deals still have the power to generate sales. However, he also adds that it’s not always the discount consumers look for first — so retailers need to study what customers look for when shopping an e-commerce site.
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