Free Shipping: An Ecommerce Headache or Opportunity?

Oct 14, 2013 9:41 PM  By

Some of the hottest ecommerce trends are born from consumer behavior and the preferential treatment toward omnichannel experiences that outshine traditional mediums and models for purchasing. One ecommerce trend, viewed as pesky by some retailers, yet continues to present opportunities for competitive differentiation, is free shipping.

Recently, UPS and comScore released a customer experience study, the 2013 UPS Pulse of the Online Shopper, which gleaned insight into online shopping behaviors and what exactly influences a consumer’s purchase decision. Regardless of what the research and studies show, retailers know they need to provide more shipping options for less, but remain unsure how it will impact their business and if it is even possible.

According to the UPS report, three out of four shoppers add items to their cart in order to qualify for free shipping when the offer presents itself. This strategy seems brilliant – upsell the customer to take the edge off free shipping costs to the retailer. Retailers that are embracing customer expectations for shipping are thinking outside the box and understand that in this age of digital commerce, the consumer experience does not end at checkout.

But for some retailers, the post-transaction experience is just that, an afterthought. Ecommerce companies that invest in shipping extras, such as speedy delivery times, vast fulfillment networks and free shipping are seeing surprising returns through customer loyalty, referrals and positive reviews. So what’s holding the rest back?

For retailers, it feels like all or nothing – they have to swallow the cost of free shipping or same day delivery for good customer service, or they accept the fact that they aren’t known for satisfactory delivery and shipment and hope their products (and prices) outweigh that downside. There is a happy medium. Retailers that spend time understanding their customers and what makes them tick can change course and accommodate shipping expectations accordingly. But the results can be intimidating.

The same study from UPS showed that delivery options can be a main driver for not shopping online or shopping cart abandonment. In fact, 44% of shoppers abandoned their carts in 2013 prior to checkout for shipping times alone. This increased since 2012, and it is bound to continue to increase year-over-year as consumer expectations grow, patience wanes, and retailers such as Amazon continue to offer quick and inexpensive shipping options.

However, retailers can combat this impatience head-on by offering free shipping, and therein lies the happy medium. If a consumer knows to expect a week plus wait time for their package to arrive, the sting of the wait is curbed by the fact that it is getting to them for free.

How can retailers truly know what delivery options their customers want? And, how will they react to the decisions the business makes from a shipping perspective?

  • Invest in shopping cart analytics and traffic monitoring to understand what makes a customer leave. Are they closing the window when they see you don’t offer free shipping?
  • Poll your customers. What shipping options make them shop elsewhere? More importantly, what shipping options make them happiest (and therefore more loyal)?
  • What are your competitors doing? Can your customers go elsewhere for free shipping? If so, you should reconsider your options and reallocate costs to satiate consumer shipping expectations.

Now that you know what your customers want, and in some cases, what they demand, how can you start to implement these offerings without disrupting your entire business? This is not a process to dive into head first. Instead, have a solid understanding of what your business can handle. This not only means from a cost perspective, but also ensuring that you don’t promise the world and deliver much less.

Here are some tips for online retailers that want to get innovative with their shipping options:

  • Delivery models and fee structures should co-exist and support one another. If you can’t fulfill an order for same-day shipping, consider cheaper shipment options that enable you to offer low or no-cost shipping fees.
  • Experiment and think outside the box. If you can’t support free shipping, free returns or guaranteed shipping, differentiate in new ways. For example, tie shipping to a promotion, and reward customers with a shipping perk if they promote the purchase on social networks or share it with friends.
  • Test the shipping waters before the holiday season. You don’t want to get in over your head. Can your system handle high traffic fulfillment and shipments? If so, prepare promotions during the November timeframe for the holidays to include shipping instead of vast discounts elsewhere.
  • Returns are equally as important. If you have a hassle-free returns policy, promote this to your customers so that they know what to expect should they need to return. Retailers must incorporate this into their overall supply chain so there can be some give-and-take to make customers comfortable with purchasing.
  • If possible, offer multichannel options. Customers appreciate the ability to purchase online and pick up or return in store. If you have brick and mortar shops, and your supply chain can handle this model, it is a solid option to present to customers to show your ability to adapt to their preferences.

Where to start? Have the conversations with your customers, see how they react, crunch some numbers, and roll out slowly so you aren’t overpromising and under-delivering. It’s not as scary as it seems and the shipping options that everyone is talking about could very well be attainable for you and your business.

Ecommerce shipping is not one-size-fits-all. Every business is different, but examining all opportunities, challenges and options ensures businesses are choosing the shipping model that works best for them – fulfilling consumer expectations and meeting business demands at the same time.

Darren Hill is co-founder and CEO of WebLinc.