Think about the difference between shopping in-store and online. Most of us would probably agree that the factor of convenience is the prime benefit of buying online. But even when being able to shop from the comfort of your home, one big downside remains: shipping.
Consumers usually have to wait for days or even weeks to receive their goods, and the price paid for the delivery isn’t exactly a consolation prize. Modern shoppers see delivery dates, tracking, return options, and price all as important factors when making the purchase. After all, 63% of them say that excessive shipping fees are a reason to cancel a purchase.
Free shipping, on the other hand, can be the perfect ace in the sleeve of eCommerce stores looking to shine during the end-of-the-year shopping craze. Why is free shipping better than an online deal, and how can it be leveraged?
Growing consumer expectations
Not so long ago, supply chains looked completely different. But with companies reaping the benefits of powerful technologies, we have seen the delivery process become way more efficient. But new supply chain capabilities have also brought new expectations into play.
Fast and effective delivery has not only become a competitive edge but an absolute necessity. For example, 38% of online shoppers will not finish their order if the delivery takes over a week. And hiccups in the process are hardly forgiven: 69% of consumers are less likely to shop with a retailer if the delivery was not made within two days of the promised date.
But it’s not just the improving standards of supply chains, but also the preferences of customers, that eCommerce stores must pay close attention to. For example, Generation Z, who is going to represent some 40% of consumers by 2020, is known for its frugal approach to buying. For segments like these, the price of shipping may be a true gamechanger.
The powerful psychology of free shipping
The faster and more convenient the shipping, the better. That’s why we have seen the emergence of services such as ultra-accurate tracking, next-day or guaranteed 2-day delivery, free returns, or free shipping.
It’s easy to imagine situations where customers find discounted goods online and fill up a basket worth tens of dollars – only to find then that their check is going to increase by a third or fourth with the shipping and handling costs. This way, their purchase may not seem to be so economical after all.
Providing the service for free can reverse this train of thought. Not only does it encourage consumers to buy if they were previously undecided, it’s also said to increase the overall value of purchases made by 30% on average.
This is because there’s a powerful psychological aspect in getting something without having to pay for it. Whenever we see something that’s free, we automatically attribute it more value. This effect is multiplied for online shoppers who are already accustomed to high shipping fees. According to a Return Customer survey, 93% of respondents preferred free shipping even when given an option between discounted items or a bonus that would have the same value.
Setting limitations to protect margins
But free shipping can be just as destructive as it is beneficial, if not rolled out correctly. That’s why eCommerce stores need to carefully assess the real possibilities and the impact it could have on their margins. After all, experimenting with free delivery requires certain adjustments.
For example, unconditional free shipping is ideal for high-margin goods that aren’t difficult to be shipped, such as jewelry or luxury accessories. However, the most common scenarios include some sort of limitations that can be deployed strategically.
For the holiday season, the most trending set-up is free shipping for a limited time only. This encourages action across the entire customer base while adding urgency to buying. Its alternative – or supplement – is free shipping on orders over a certain amount. This is usually the favorite: It helps increase the average order value while not causing damage to the retailer’s margins.
However, there are other ways to get creative. Some eCommerce stores incorporate the concept of exclusivity to encourage a certain action. For example, they offer free shipping to first-time shoppers only, to newsletter subscribers, or to those who have purchased one but haven’t returned since. Other limits can be product-based or geographic, which are a smart way to meet a certain supply chain need.
The shipping factor is perhaps more important in customer decision-making than eCommerce stores could think. By taking away the cost of the single main inconvenience of online shopping, eCommerce stores can utilize the right limits to provide value to their customers while increasing their profits.
Simone Wu is the Digital Marketing Manager at CouponBirds.
Free shipping stock photo by AzriSuratmin/Shutterstock
