Subscribe

Analysis

The Problem With Free Shipping (Plus 4 Alternatives To Increase Your Revenue)

As consumers continue to insist on free shipping, these shipping & delivery strategies will help you meet the demand – and increase sales

Adebisi Adewusi
January 12 2019

Come hell or high water, consumers expect free delivery. In fact, 9 out of 10 consumers rank free shipping as their top incentive for shopping online. ComScore reported that 65% of US e-commerce transactions in Q4 2017 included free shipping.

Free shipping is a great customer acquisition and retention strategy, but becomes problematic when it begins to cut profits, especially as shipping costs aren’t fixed. Two-thirds of retailers believe shipping costs have increased over time, with the majority noting a 5-10% increase in costs. As 38% of retailers aren’t charging for shipping, waiving delivery fees can be a significant financial burden.

Smart retailers are addressing consumers’ requests for multiple delivery options to reduce shipping costs and increase revenue. We’ll present some delivery strategies that help keep shipping costs low – while minimizing bottom-line profit losses for you.

Same-Day Delivery

31% of consumers opted for same-day delivery this year, up from 17% in 2017. Companies that don’t offer speedy arrival aren’t winning the battle for the customers. One-third of customers surveyed by the delivery service Dropoff said they feel frustrated when a company doesn’t offer same-day service.

While offering same-day delivery may feel like a logistics headache you’d rather avoid, adding this delivery option could prove profitable. The 2018 PwC Global Consumer Insights Survey showed that 88% of consumers are willing to pay for same-day delivery. American Express reported that over 50% of digital buyers attribute same-day delivery to favoring one brand over another, and popular e-commerce company ASOS also links shipping perks to customer loyalty.

ASOS attributes the jump in revenues during the final months of 2017 to same-day delivery, and reported a 28% rise in group revenue (totaling £808.4 million) for the final four months of the year.

To incorporate this delivery option, allow consumers to choose delivery time slots and to track their packages. For faster delivery services at lower prices, consider partnering with third-party companies. Consumer demand for same-day is only escalating, underscoring the need for creative solutions.

Click and Collect

Think consumers would rather pay for shipping than pick up orders in-store? Not the case. Internet Retailer found that of 57% of respondents who picked up an online order at a store, 73% did so to avoid shipping fees. Retailers are adopting click and collect services not only to reduce shipping costs, but also to drive in-store revenue. The International Council of Shopping Centers discovered that 61% of shoppers who ordered online and picked up in-store also made additional purchases.

Even when consumers do take advantage of in-store collection, you can still offer other click and collect options to make fulfillment even more, well, fulfilling for them. Here’s how Target and Amazon use this model to suit their customers’ lifestyles:

Target’s Drive Up service enables customers to pick up their online orders at a nearby branch.  To access this fulfillment option, customers order items from the Target app, and when they arrive at their selected local store, associates bring their orders out to them.

Similarly, Amazon’s self-service kiosks known as Amazon lockers enable customers to pick up and return packages. From banks to gyms and everything in between, Amazon lockers are scattered across the US, available to all Amazon shoppers for free.

Source

While a click and collect model will help you avoid shipping costs, it can be challenging to carry out. So implement this strategy in locations you can conveniently service, ensuring your store and stock aren’t too far away.

Flat Rate Shipping

When consumers trust your brand, they’ll shop with you. A recent report from PwC stated that more than one in three ranked ‘trust in brand’ as among their top three reasons to shop with a particular retailer.

To earn consumers’ trust, look at your shipping policies and consider offering a flat rate right off the bat. Transparent and easy to understand, flat rates motivate consumers to accept delivery fees upfront, making them less likely to abandon their shopping carts after checkout surprises – and building trust in your brand. In the chart below, we see that online buyers were easily deterred from making a purchase if the final fees were higher than expected.

To earn consumers’ trust, look at your shipping policies and consider offering a flat rate right off the bat. Transparent and easy to understand, flat rates motivate consumers to accept delivery fees upfront, making them less likely to abandon their shopping carts after checkout surprises – and building trust in your brand. In the chart below, we see that online buyers were easily deterred from making a purchase if the final fees were higher than expected.

Source

As one example, J. Crew currently offers flat rate shipping to select international destinations for $9.95.

Apart from reducing cart abandonment, flat rate shipping encourages consumers to spend more on your brand.  After supplement retailer GNC switched to a $3.99 flat rate shipping fee, customers spent more to make the shipping costs “worth it.”

Although flat rate shipping can help convince consumers to shop with you, it works best when you have products of similar size and weight, so that you don’t overcharge or undercharge customers.

Delivery Subscription

 15% of online shoppers have subscribed to an e-commerce service over the past year to make a purchase. Consumers are open to subscriptions, but they’ll only pay for the service if it provides tangible benefits, such as lower item costs or members-only perks. In the UK, 40% of online shoppers have shown interest in an annual subscription model for next-day delivery. This number increases to 68% for those under 35.

Delivery subscriptions provide consumers with fast shipping times for a specific predetermined rate.  One retailer that adopted this model was ASOS. The brand gives shoppers unlimited next-day delivery for a one-time annual payment of £9.95 under its Premier Delivery service. The strategy paid off: ASOS reports that the number of their premier customers increased by 53% to 1.3 million as a result of the program.

Source

 

Other companies have done the same. Fellow trendy e-tailer Boohoo offers subscribers unlimited next-day delivery for a yearly fee of £5.99. According to Boohoo’s 2018 annual report, the service has been well received by customers and continues to attract new subscribers in the UK.

 How Well Do You Deliver?

 Online shoppers place a premium on quick delivery and want options to match their lifestyle. An optimized and high-value delivery system should be established to fully address your customers’ needs. Whether that means shipping from your store for hyper-local delivery or investing in real-time tracking to keep customers informed about deliveries, there are plenty of steps your organization can take to delight its customers in the delivery department – and if done right, can even contribute to significant increases in your bottom line.

 

 

Share

X
X

Get your free print edition!

Fill out your complete details below

Chars: 0
Chars: 0
Chars: 0
Chars: 0
Chars: 0
Chars: 0
X
Chars: 0
Chars: 0