Is “Free Shipping” Really “Free”?

We know that more shoppers today are price-conscious and more of them are likely to comparison shop. One aspect of price that customers are quite interested in is free shipping of online orders.
But “free shipping” has two components that relate to whether it is truly “free”:
(1) Is there a minimum purchase amount required for free shipping?
Although some online retailers set purchase amounts of $50 or higher for free shipping, this policy is transparent and shipping is free under the conditions stated.
Retailers such as Amazon.com, Target, and Wal-Mart offer free shipping with no minimum purchase if a membership fee has been paid (such as with Amazon’s Prime) or at particular times of the year (such as Target and Wal-Mart during the holiday season).
(2) Does free shipping result in higher prices for merchandise?
This practice is NOT transparent and does not really give “free shipping” to shoppers. The cost is merely included in the merchandise prices. Fortunately, due to online comparison shopping, few retailers can get away with this tactic. It only works with unassuming consumers.
As Laura Stevens and Shelly Banjo report for the Wall Street Journal:
“Free shipping was supposed to be a temporary enticement in the early days of E-commerce, but customers came to expect it, and even demand it. In a recent survey of 5,800 U.S. online shoppers, fully half said they have abandoned an order if they didn’t qualify for free shipping, according to comScore Inc., a data tracking firm that conducted the study for UPS.”
“Nearly 90% of [online] retailers offer some sort of free shipping option, compared with about 65% two years ago, according to William Blair analyst Mark Miller. One difference now, though, is that retailers are using the perk as leverage. Free shipping is so important that 93% of online shoppers said they have taken extra actions to qualify, like adding extra items to their shopping cart or opting for a slower method of delivery, according to the comScore survey.”
Click the image for a WSJ video.

 

 

This entry was posted in Online Retailing, Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 5: Managing a Retail Business, Part 6: Merchandise Management and Pricing, Part 7: Communicating with the Customer and tagged , , , , , , . Bookmark the permalink.

2 Responses to Is “Free Shipping” Really “Free”?

  1. Pingback: Is "Free Shipping" Really "Free&...

  2. Pingback: A Look Back at the Evolution of Delivery Services | Retailing: From A to Z by Joel Evans

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