No Free Shipping
There is a myth that all ecommerce must offer free shipping to be competitive. Almost daily someone says to me, “But Kim, we must offer free shipping! Everybody is doing it. We must.”
No, you mustn’t!
The “Prime Effect” has led businesses all over the world to believe that anything other than free shipping will hinder sales and kill customer loyalty. Companies spend millions of dollars chasing “free” without understanding the impact to margin or customer experience.
Truth is that free shipping is part of a long list of reasons customers abandon carts. And yes, shipping cost is at the top of that list. However, so is shipping speed, shipping options, and shipping control. According to a survey conducted by Walker Sands, 39% of consumers state Same Day Shipping influenced their purchasing decision and 35% cite Next Day as a driver.
In addition, offering free shipping directly impacts your Cost Of Goods Sold. That cost of shipping must go somewhere. Many companies add to the product cost to offset shipping, jacking up product costs. In an increasingly competitive ecommerce market, a higher product cost can be an immediate disadvantage, eliminating a seller from the consumer consideration before they even visit the website.
Another free shipping coping mechanism is SLOW shipping. Yes, it is free…but shipping takes 7-10 days or even longer. Many customers forget they even made a purchase by the time the package arrives. And as mentioned before, almost 40% of consumers make a buying decision based on speed.
Free and slow shipping typically comes with minimal tracking and control. Once the order is shipping, the customer has very little information or updates that lag for days as the package sits and waits to move to the next milestone. Many companies attempt to mask the lack of tracking with “predicted’ delivery dates and bogus milestones. As I have mentioned in previous blogs, consumers can smell authenticity.
What’s the solution? It depends. Every DTC company has different offerings, products, target customers, and goals. If your company is selling general merchandise that competes with the likes of Amazon, free shipping will be heavily weighted, but so will speed. Can your margins accommodate?
However, if you are a recognized brand or selling specialty items, charging for shipping is acceptable. Charging for shipping does not need to be an expensive affair - nominal shipping costs in the $5-$10 range can offer up a world of options. Offsetting shipping costs with small fees can provide opportunities to offer FAST shipping without completely destroying the product margin.
Additionally, offering a few shipping options can be just what your customers are seeking. A free and slow option isn’t always acceptable for every customer. However, a free and slow option paired with an expedited and/or same-day delivery for a small upcharge will provide the consumer with options to meet their specific needs; and help with your margin.
Yeah, free shipping is cool and ubiquitous in today’s ecommerce environment. But free at the expense of competitive product pricing or shipping speed is not acceptable to consumers…and increasingly so. And if free shipping is forcing your company to operate in the red, shipping at all will be a moot point.