Re-Posted from Inc. Magazine on-line (November, 2014):
Why Free Shipping Is a Must
Offering free shipping is a necessity, not a perk, for retail sites
Shipping things is a necessary evil for most internet retailers. As much as people like buying things cheaper online, they don't like waiting to get them, especially if shipping costs significantly increase the final cost. It is now possible for small businesses to offer free shipping, next-day shipping, reduced rate shipping and so on. However, these features have been around so long, that business owners shouldn't consider them to be a perk for their customers. Rather, the research has shown that, whenever possible, free shipping is a necessity for retail sites. It's a useful tool for promoting a site, improving customer service and encouraging consumers to spend more.
Consumers have begun to expect free shipping to be available at many retail sites. Either as a bonus for buying a certain number of items, or as an automatic feature of the site. It's not so much that people expect it, but they actively seek free shipping when they search for sites to shop at. According to recent data from Accent, 88 percent of consumers would be more likely to shop at a site online if they were promised free shipping.
The appeal of free shipping is easy to see. In many cases, shipping costs can greatly increase the final price paid for an item bought online. If an item costs $25 and the shipping costs are $5, the shipping costs have raised the price by 25 percent. Price savvy consumers on the internet are searching for ways to save money and as the various research survey shows, people turn to coupons and free shipping as the fastest way to cut their final costs.
This new research echos a lot of older research that showed the shift of customers towards sites that have free shipping. For example, Lab42 released data a couple of years ago that found 96 percent of online consumers are more likely to shop on a site if it offers free shipping. The same study also noted that 87 percent of online consumers are more likely to shop on a site if it offers free returns.
Businesses that have free shipping or free returns should make that information known to the public on their website and on their marketing materials. People are more likely to choose a retail site where they are more assured that they won't get stuck paying to return something they don't like or that shipping costs will suddenly raise total amount they have to pay on the great deal they saw.
Besides its effect on site selection, offering free shipping has often become the deciding factor in how much someone spends and whether or not they make the purchase. A 2013 study from Compete found that three out of five (62%) of consumers would not have made their most recent online purchase if they had not received free shipping.
Earlier this year, comScore released a study, which found that 83 percent of US online shoppers are willing to wait an additional two days for delivery if shipping is free. Similarly, 58 percent of US online shoppers have added items to their shopping carts to qualify for free shipping. These studies show that offering free shipping can lead to greater sales revenue, since people are willing to buy more to get free shipping.
Whether you focus on price or ease of use, offering free shipping at a retail site boils down to providing good customer service. Research from the Boston Consulting Group suggested that 74 percentof US consumers would cite free delivery as a top factor that would improve their online shopping experience.
It makes sense when you think of the issue from the point of view of the customer. Why pay $10 for shipping when they could spend that $10 to buy an item they want and get both shipped for free. Similarly, if one store offers 10 percent off on a $40 item, but the shipping is $8, and another store is selling the item at full price, but offers free shipping, it's better for the consumer to go to the store where they pay full price for the item but save more because of free shipping.
Oddly enough, there is a slight age variation on whether consumers prefer free shipping to traditional percentage discounts. According to research cited by eMarketer, respondents between the ages of 18 and 45 preferred percentage discounts to free shipping when making a digital purchase. Older internet users preferred free shipping above discounts. The dichotomy shows why retailers would be wise to include both options in their holiday marketing campaigns.
**Verde Fulfillment USA does not necessarily agree with the Free Shipping philosophy as written in this post. However, we felt it was worth hearing from the other side of the coin. Verde does not believe an e-comm site needs to offer free shipping, except for short promotions or during the initial on-set of acquiring a new customer. The focus of the e-tailer should be on offering something unique that the customer needs and wants, and in doing so is willing to pay the cost of shipping to get the product. The margin-erosion from offering free shipping is sometimes not worth it in the long-run with reduced profits.