More than ever before online retailers are using free shipping as a marketing tool to increase revenues. As a result many companies are feeling the pressure to offer free shipping to their customers which may or may not be a good idea. In order to understand whether it makes since for you, we must first understand why it’s offered to begin with. To be completely blunt, it is offered because it works and the #’s back it up. In a recent comScore report, three-fourths of consumers surveyed said they abandon retailers at checkout if shipping isn’t free.
Here are four key ways to understand this fast growing free-shipping trend: 1. The importance of free shipping is growing. ComScore reports that free shipping accounted for an incremental 6 points of all transactions in 2009. As more companies are offering it, the pressure to compete intensifies. 2. Shipping costs are the most common reason for shopping cart abandonment. Many times consumers don’t understand the true cost of getting their products shipped to them, and as a result shipping becomes a weak link in the check out process. Forrester Reseach surveyed online shoppers and found that Forty-four percent balked at the price of shipping and abandoned their shopping cart. 3. Customers tend to spend more when they receive free shipping. Amazon.com is a great example of a company that has proven this is indeed true. They have been quite successful in getting their customers to purchase one more item in order to hit the free shipping threshold. A comScore survey of Holiday (4th quarter) spending in 2010 showed that the avg. order on free-shipping purchases was $110, compared with $95 for non-free shipping purchases. Now this may not seem like a big difference but the numbers start adding up fast! 4. Free shipping boost sales when offered as a special. Stamps.com put out a survey of online retailers in October of 2010 and found that 64% stated that “some type of free shipping promotion” with or without a minimum spend is the most effective promotion they can offer to drive sales during the Holiday season. From the online retailer’s perspective there really is no such thing as free shipping. Large online retailers such as Amazon.com or LL Bean can absorb the added cost due to the economies of scale they have. If you are not a large behemoth of a retailer, how can you survive? Many smaller retailers understand that people will buy more if they offer free shipping, but they can’t afford to absorb all of the shipping costs and never pass any of them along to the customer. The good news is that with free shipping comes options. Actually, offering free shipping on every order all the time is the exception rather than the rule. Here are six alternatives to offering free shipping all the time: 1. Flat rate. Many companies set up thresholds where if you exceed that threshold the shipping is free and below the threshold it is a flat rate. Macy’s ships all online orders of $99 or more for free. For order that fall below, they charge an $8 flat fee. In addition, companies that offer flat-rate shipping typically send those orders via ground delivery to keep their costs under control. 2. Shipping club. Many retailers offer customers the option of paying a one-time fee in order to receive free shipping or faster shipping. Amazon was the first to use this strategy but now other companies have caught on. 3. Optional upgrades. Online retailers are giving their customers the option to upgrade to a faster service for a fee which is usually between $3-$6 unless it is a large shipment. This allows the retailers to set the proper expectations in terms of delivery times and also gives decision making power to their customers, which is always a good idea. 4. Free shipping for minimum purchase. Many retailers now provide free shipping with a minimum purchase. This is becoming much more popular in the ecommerce industry. 5. Free shipping on eligible products. This option is often offered with products with higher profit margins or on products that a retailer wants to promote. 6. Free shipping for a limited time. A survey by the E-Tailing Group found that nearly 9 out of 10 online retailers offered some form of free shipping during the holiday season last year. Free shipping also works well to help move more products that are out of season. Today I present to you a great whitepaper on E-Commerce Shipping created by ShipRush. ShipRush is an award-winning, free, shipping soft-ware published by Z-Firm LLC. ShipRush integrates with e-commerce marketplaces and shopping carts to eliminate copy/paste and simplify shipping. Enjoy!
When selling online, the cost of shipping is a key factor. On one hand, it is important that buyers pay an amount that covers your shipping costs. On the other hand, you don’t want to lose buyers who “abandon” their cart when they see the price of shipping. So, how do you walk that fine line? Let’s review the two sides of shipping for e-commerce sellers: Pre-Sale: This starts in the cart and continues all the way up to the moment the buyer presses the final “purchase” button to complete the sale. Your cart needs to figure out how much to charge the buyer for shipping. Post-Sale: The buyer has checked out. Now you are going to handle the actual act (and cost) of the shipment. In this article, we talk about the pre-sale side of shipping. Here are some pre-sale shipping options to consider: · Flat-rate shipping · Indexed shipping · “Free” shipping · Calculated shipping Flat-rate shipping is easy. You set a rate and that is it. Say you sell a pretty uniform item, like sweat-shirts. You could have a basic shipping charge of $8, and that is that. It might be $8 per shirt, or it might be $8 per order. Another method that can be used is to index the shipping cost to the order amount. For example, charge $10 shipping for the first $100 purchased; $18 for the next $100 purchased, etc. But, this option only works if your items are relatively uniform. If you sell items of different sizes and weights, this option probably isn’t the best alter-native as the shipping cost for a 2-pound item is very different from that of a 25-pound item. “Free” shipping is the most basic form of flat-rate shipping. With “free” shipping, you, the seller, builds the shipping cost into the item cost. This lets you advertise “free shipping” on your web store and in the checkout flow, but – as you and everyone else knows – nothing is really free! The shipping cost has been built in elsewhere. Some e-commerce merchants offer a hybrid approach and offer flat rate shipping up to a cer-tain dollar value and free shipping for orders over that dollar value. Calculated shipping requires more work. To estimate shipping cost accurately the e-commerce system needs to “do the math” to figure out the shipping cost. This means it needs item weights and dimensions so that it can calculate shipping using the FedEx® rate calculation application programming interface (API). This works great for single items, but can get quite complex for multi-item purchases. For ex-ample, one sweatshirt or three sweatshirts might all fit into the same box, only changing the weight a little. But, if the order is for laser printers, it will be one printer per box, no matter how many are ordered. While calculated shipping makes sense to the seller, the downside is that it may be less appealing to savvy web buyers who want a low shipping cost and want to know what the ship-ping cost will be before they start the checkout process. Calculated shipping also requires the e-commerce system to “know” a lot about the items being purchased before it can perform the calculation. Armed with an understanding of pre-sale ship-ping, you’re ready to pack and ship. Stay tuned for Part 2: post-sale shipping! |
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