Forrester Research recently conducted their commercial shipping strategy report. Free shipping is preferred by consumers, but it is still not universally integrated. Organizations considering implementing free shipping may want to glance at Clarity’s analysis of Forrester’s findings. At Clarity, we not only build products for our customers, we help our customers succeed.
We concur with Forrester’s findings that free shipping proves to be expensive, effective, involves senior-level decision makers, and serves as a defensive strategy.
For retailers, shipping costs fluctuate anywhere between 5% and 20% of their total revenue. Ultimately, any free shipping offer makes companies absorb this expense. For companies that have historically viewed shipping as profitable, and a revenue driver, there needs to be a paradigm shift. Due to the free shipping offers, there are obviously spikes in volume. As a result, increased labor costs and more complex customer service issues typically arise. Additionally, free shipping can require extra IT resources. The coding and communication needs to be on par to help execute appropriately.
The old saying proves true, “you reap what you sow.” There is a substantial high cost associated with offering free shipping to customers, but there are significant paybacks. Consumers are so eager to avoid shipping charges wherever possible. More often than not, consumers take advantage of free shipping when it is offered. Records show retailers citing, on average, a lift in sales of about 10% to 20%--all due to free shipping. Some retailers cited the ability to reduce the margin erosion of their shipping promotions by forcing shoppers to submit coupon codes, which led to “breakage” (consumers who qualify for free shipping and continue through checkout without using the promotional code).
Involve Senior-level Decision Makers
Free shipping is costly. There is no doubt about it. Senior-level decision making plays a pivotal role in executing this strategy. Typically, marketing executives or even CEOs help determine the direction for these strategies.
On average, organizations believed that in competitive categories, 30% of their customers were “at risk” of switching to competitors if the retailers did not match their industry’s standard for shipping fees. While a minority of retailers with unique business models commented that they use free shipping as a competitive advantage, most companies felt that free shipping was absolutely necessary to preserve market share. Retailers were unable to quantify this value to their business, but Forrester data shows that more than 10% of shoppers at a Web retailer in a competitive category will switch stores to receive lower shipping costs.
Clarity specializes in eCommerce solutions and has helped consult shipping strategies for an array of clients. With over 600+ projects and counting, Clarity has the expertise to help your team grow. We’re only a phone call away, and we can help your team excel. Speak to a Clarity consultant today.