Does Free Shipping Help, Hurt, Or Not Affect Online Retail Sales?

I blogged in December about the pitfalls of free shipping for both retailers and consumers. (6 Reasons Free Shipping Isn’t All It’s Cracked Up To Be).  The article noted that 93 per cent of consumers in a Compete.com survey said that free shipping is the number one item that would encourage them to purchase more products online. I decided to check what retailers thought and used my own LinkedIn group with over 750 members, most of whom are retailers - Competitive Pricing for Online Retail - to do one of those quick Linkedin Polls with the question:  “Does free shipping help, hurt, or not affect online retail sales?”  

The results were the following:

* 89% of the respondents indicated that free shipping “helps” -- saying it’s an added perk and motivates purchase.

* 2% said free shipping “hurts” -- because you have to raise prices to cover shipping.

* 7% said free shipping has “no effect” -- because the consumer looks for item value.

Here are some recent lists, quotes and notes about free shipping: 

First, comments from this knowledgeable group of respondents to the poll.

* “Free Shipping offers can be a very valuable tool as long as the price-point threshold to qualify is reasonable,” said the director of Internet merchandising, marketing, and procurement for one retail company.

* “(Free Shipping) had a positive effect on our sales,” said the director of eCommerce business development for a beauty and hair care products distributor. “Free Shipping is helping the merchant overcome some of the core difficulties when comparing the experience of online shopping to traditional retail.”

* “Free Shipping as a promotional tool can be very effective,” said the Senior Manager of Pricing at a tool and equipment company, adding: “We’re very cautious when pulling this pricing lever. We watch closely the length of promotion and number of times repeated annually. The last thing we want to do is train our customer to look for Free Shipping Promotions to make a purchase.”

* “Free shipping has helped us compete in the very competitive consumer electronics market ... We routinely offer free shipping but will change the qualifying dollar amount from time to time depending on competitor’s promotions and seasonal purchase opportunities.” (Consumer Electronics Entrepreneur).

* A Media Merchandising Manager and former major bookstore chain merchandiser said, “Free shipping will drive excitement with your customer base... but... as a promotion it should be used strategically so as not to train customers.”

* “I guess it all depends on the quality of the execution of the free shipping program. No doubt "free" anything will incentivize shoppers,” said financial analyst of a company that helps choose quality veterinary care. 

 

More notes about free shipping and profitability from other blogs and sources:

* In Internet Retailer, Don Davis tells of a company whose conversion rate went up immediately when the company reduced shipping charges.

* An online retail merchant for Etsy blogged: “I do most of my shopping online and a large factor in what I buy and don’t buy comes down to free shipping. Another says, “Free shipping is good marketing. Whenever I buy on the Internet, I always look for free shipping. I usually use shopping bots to find the lowest overall cost on an item (including shipping & tax)."

Seven free-shipping strategies compiled by the folks at FreeShipping.org are: 

#1. Totally free shipping

#2. Free shipping with membership

#3. Minimum order shipping

#4. Select item shipping

#5. Site to store shipping

#6. Free return shipping

#7. Flat rate shipping

Five key factors that come into play in determining the profitability of a free shipping offer according to 
Randy Pickard in Internet Marketing Remarks are:

 #1. The cost of shipping;

 #2. The price of the item for sale;

 #3. The profit margin on the item;

 #4. The incremental sales resulting from an offer of free shipping;

 #5. Whether free shipping is offered as an ongoing benefit or just as a short term promotion.

 FINAL REVEAL:

Constantly upgrading to provide its clients with the best in pricing intelligence resources, a major pricing intelligence tool pioneer is about to rollout some really cool ways to track shipping information.

 What do you think about free shipping? Please add your comments below. Thanks. Gilon

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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