Wednesday, October 29, 2008

Holiday Season To Do: free shipping

Try doing your best to offer free or discounted shipping. This is always important for the reasons mentioned below, but it will be particularly important this Holiday season. Consider the following:

  • Expensive Gas = More E-commerce.
    Research has been done showing that people do tend to shop more online when they feel like getting in the car is costing them more money. For example, see Gas Prices Boost E-Commerce.
  • Shipping Costs = #1 Drop-Off Reason.
    There is a lot of evidence indicating that the number one reason for a serious prospect (customer that added products to the shopping cart and began the checkout process) to abandon the order is high shipping charges. For example, see Shopping Cart Abandonment Rises.

So - in practical terms - what can you do?

  • Consider keeping prices a bit higher, but offer free shipping (e.g. ground shipping). Customers often make a final purchasing decision on the total cost of the purchase, not on the initial product price (which is why the drop-off is so high during checkout, when the total cost becomes clear).
  • Let them know! Strongly advertise on your store that you offer free shipping (e.g. with a very visible graphic that becomes part of your store interface)
  • Use free shipping to promote repeat purchases. For instance, consider sending a coupon to those who buy inviting them to purchase again and obtain free, faster shipping (e.g. an electronic coupon that makes "Second Day Air" free). Remember that your margin on a repeat purchase is by definition higher as there are no marketing costs associated with acquiring that customer, since this is an existing customer.
  • Last minute gifts. Consider offering free, fast shipping right before Thanksgiving and Christmas (last minute gifts).

2 comments:

Zachary E. Cook said...

This is a great series for retailers to make sure their sites are ready for the upcoming season...keep them coming!

We recently covered free shipping on our blog (Does Free Shipping Sell?) as it is a surprisingly complex promotion.

Our message to retailers would be to mind their margins and include free shipping promotions as part of a larger promotion strategy that segments customers on value...would you agree?

Massimo said...

Hi Zachary, interesting comment. I don't completely agree in that "Free Shipping" has to be complex and that you need to employ sophisticated technology to target different segments differently (technology that small business e-commerce Web sites typically do not have).

If you study some of the largest retailers out there, what you see is that quite often free shipping is delivered as a very simple promotion. For example, as of now (time this comment is being written), look at these very large retailers:
- Staples.com = Free Ship over $50
- Dell.com = Free Standard Shipping on pretty much everything
- Gap.com = Free Ship over $150

There are many others that follow the same, simple approach.

That said, it's certainly true that retailers need to be careful about their margins. That's why it's important to compete on the total cost, and why it's crucial - as you point out in your blog - to make the "free shipping" offer very, very visible early on in the process (above I recommended using a catchy graphic in the store interface, so it's visible on every page).

Additionally, good e-commerce software allows the store manager to decide whether a certain offer (e.g. electronic coupon that gives Free Ground Shipping over $100) can be used together with other offers or not. So the issue of avoiding overlapping discounts can be managed as long as a good e-commerce solution is used.