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Wednesday, Nov. 12, 2008 at 8:21 am

Is Free Shipping a Must in this Economy?

By Bryan Eisenberg
November 12th, 2008

An interesting question that has been popping around the office from several clients and also on the Shop.org blog. It has all of us at FutureNow wondering if this is another case of predictable irrationality.

In a recent comScore study, 72% of consumers said that if an e-commerce site eliminated free shipping, they would use another e-commerce site that did offer free shipping. Last week the LA Times reported that this year, nearly 80% of consumers said they were more likely to shop online with a retailer that offers free shipping, compared with 60% who said that last year.

The questions we have for retailers are:

  • do customers prefer to see a Free Shipping offer rather than calculate and pay a lower price that includes paid shipping?
  • If you sell online, do you currently offer Free shipping? If so, are you planning to for the rest of the holiday season? Are there any limitations or restrictions on it?

The questions we have for customers are:

  • Is the allure of Free Shipping that hypnotic for you as customers?
  • As someone who buys online, what do you prefer?

We have asked these questions through testing in the past and found plenty of surprises. I’m sure most retailers would be surprised by the results of asking these questions correctly.

Please share your thoughts.

Add Your Comments

Comments (43)

  1. We do offer free shipping for orders above 60€ and clearly see that we don’t have orders between 40 and 60€; most of our customers with around 40€ in their cart push up to 60. For that, we have on the cart page a random selection of products in stock and under 15€ that can be added quickly to the cart.

    Alex.

  2. Thanks for reminding me I need to hurry up and get my money’s worth from Amazon Prime for the year. ;)

    (Damn you, pseudo-free!)

  3. As a customer, most of all I want to know the total price of my order before I decide to purchase, and an offer for free delivery / shipping helps to clarify that.
    For a retailer, as well as being a useful promotion, free shipping can be helpful for SEO, as more people are searching for the term in this season:

    http://www.e-consultancy.com/news-blog/366694/more-reasons-to-offer-free-shipping.html

  4. Great links, Linda!

    Gotta love how perceived value affects our decisions. As much as we all worship Zappos, FREE shipping is rarely sustainable — especially for small and emerging businesses — but “free” shipping is always something to consider.

    Retailers just need to make sure that they’re optimizing their “free” shipping price point according to their own metrics, not Zappos’s or Amazon’s.

  5. I think most people see free shipping and think something will be cheaper. I try to always get the best price but in reality this does catch me every now and again.

  6. Consumers expect free shipping these days. We launched 100% FREE Shipping in early August, a first in the online healthcare segment.

    Since then, our Overall and Shipping Costs scores improved dramatically on Shopzilla’s Point Of Sale Survey.

    I believe the more simple you make it, the more consumers respond. Many in our industry have confusing free shipping promotions with minimums or coupons.

    We opted to go free shipping across the board with no coupons or minimums for everyone and the results have exceeded our expectations (and our customers as well).

  7. As a consumer, the Free Shipping is something I look into, however with the ease of ordering and researching online I always opt for the lowest price – regardless of promo, coupon or free whatever.

    As a marketer I like the option of Free Shipping to draw in people, however I feel the overall price at checkout must be competitive or Free Shipping and other promos will only go so far.

  8. Kristen – great point. Most savvy shoppers like yourself know to add the product price and the shipping price to come up with the total cost.

    However, you would be shocked how many people are not as savvy as you. I have brought this up repeatedly to Amazon since they made changes to their Seller Central Market place.

    Have a look at this link:
    http://www.amazon.com/gp/offer-listing/B0016J1NEQ/ref=dp_olp_1?ie=UTF8&qid=1226513112&sr=8-6

    You’ll see the second listing is $1.99 + $7.98 = $9.97.

    Our listing on the top is $8.99 + $0 = $8.99

    Amazon gives the second guy the “Low Item Price” checkmark. Not that this is wrong, it really is the “Low Item Price”, but it’s misleading because the overall price is higher.

    Amazon and others contribute to merchants artificially pricing products low while jacking up shipping.

    A smart consumer, such as yourself will see this, but you would be surprised how many people do not.

  9. Yes, but if the retailer goes broke on a promotion…

    http://www.rimmkaufman.com/rkgblog/2008/11/10/online-promotional-dilemma/

  10. What people *say* in a survey and what people *do* in real life aren’t always the same thing.

    We have got some big improvements for clients by going with free shipping.

  11. “do customers prefer to see a Free Shipping offer rather than calculate and pay a lower price that includes paid shipping?”

    Very well said – it depends on the customer profile. Some of them calculate total costs and compare it with other retailers.

    MOST of them NOT.

    How to satisfy both of them? I run a test recently with a famous brand names perfume website.

    Instead of only offering free shipping, I offer customers free shipping for every order (no minimum) and for every additional product they buy a good discount. (the more they buy the better the discount is)

    The scheme is:
    free shipping
    buy 2 – x$off
    buy 3 – y$off where 2x<3y

    Do you have other suggestions? I’d love to hear them.

  12. Shipping is the big hidden cost in online shopping. You may THINK you’re saving money buying online, but the savings are often lost if you pay another 15% on top for shipping.

    For price-focused shoppers, free shipping is a must.

    For convenience-focused shoppers, though, it matters less.

  13. We did a promo with Free Shipping for all orders and we did not really make a profit, a lot of sales but the profit was low because we spent a lot on shipping cost.
    We still wonder how a company can stay open making 1.00 on each order and at the same time effect the market by selling 1.00 over cost just to get a sale. A pay workers and insurance and etc.

  14. In this credit-strapped run up to Xmas the offer of free shipping could be a very attractive consideration for many online shoppers.

    It also cuts out one additional step in the sales process with the need to calculate a shipping cost and an extra decision the shopper needs to make before final action.

    From a vendor perspective it depends on either the value of product and/or value of final purchase.

    The higher the value, the higher the margin and the less delivery costs are in relative terms. And the easier it is to include and cover the cost of a free shipping offer.

    It may be that free shipping on a stated order value is the optimum for both vendor and shopper. If clearly stated on all sales pages the customer is in full knowledge of what is required.

    As Melissa Burdon in her blog post here (The Smooth Leg Approach to Conversion) showed that depending on the value of the purchase the ‘shock’ of the shipping cost could well have ended with abandonment of the sale and only overcome by a good discount offer (which could, perhaps, have been made earlier in the process).

    So it could depend on the offer made and the perceived value by the shopper.

  15. This is a fascinating subject and a question we wrestle with each year.

    Anecdotally, I have not seen any impact on our order volume by offering free shipping.

    Of course, the question is influenced by the kind of products that are being offered.

    A jewelry site, with high value-low shipping cost products is going to be different from a site that offers products that are more expensive to ship.

    I think the bigger issue is full disclosure up front. As a customer, I was very upset when I discovered a shipping charge that was 50% of the order value, but not until the shopping cart presented. I was very upset with the surprise. But I was too far into the order, and too late in getting the gift sent, to quit. Instead, I went away vowing never to do business with that vendor again.

    If I had been advised upfront that there was a shipping charge and how much, it might have changed my product selection. But I would have been a much happier buyer.

    In our business, because we sell one-off art and jewelry objects, we frequently conclude our sales with a telephone conversation. We have never had a buyer ask for free shipping, but we have had requests for discounts.

    We do quote shipping at cost. Perhaps that is more acceptable to the customer who believes it is an inevitable third-party charge.

    Here is another free shipping question. What about return shipping of a product that is deemed unsatisfactory when it is received and inspected? Since a satisfaction guarantee is a fundamental condition for closing a sight-unseen online order, perhaps offering free return shipping in the event of dissatisfaction would have a dramatic effect on sales.

    Anyone have any thoughts about this?

  16. William,

    Great comment, wonderful ideas – I haven’t tested the impact of free return shipping, but there is a downside:

    I’ve had customers that choose the wrong product and then wanted to return it (even it wasn’t my fault they choose another product because they thought they would like it)

    Offering free returns for this kind of buyers might prove to be costly.

  17. I’ve tried both on a number of sites I have run. I think it depends on the audience and the type of product. People seem happy to pay for delivery if it is upfront and clear. As long as the price remains competitive, with or without a delivery charge, is the main criteria.

  18. I offer our customers free shipping but say upfront it will take 10-14 days. For paid shipping it’s as quick as 2 days. Still, everyone takes free shipping. (or more than 80%). :)

  19. We offer free shipping for orders greater than $36. Boosting our average order to $38-40. However, for returns they have to pay shipping and a restocking fee. We have been testing this system for the last 6 months and it seems effective so far.

  20. [...] Is Free Shipping a Must in this Economy? [via FutureNow]. [...]

  21. [...] Is Free Shipping a Must in this Economy? [via FutureNow]. [...]

  22. We offer FREE SHIPPING. It has increased our conversion over last six months. As a customer who buys online, I think other than JUST AN OFFER, I think it simplifies process form visitor to your website. He or She can easily find out total it will cost him or her without clicking even CHECKOUT button.

  23. [...] Carefully weigh the costs and benefits of offering free shipping [...]

  24. [...] een onderzoek van Comscore dat op grokdotcom.com beschreven wordt staat te lezen dat 72% van de bezoekers van een verzendkosten vrije webshop zouden [...]

  25. Free Shipping and Free returns are the key features that get new websites the consumer trust and confidence needed to complete a purchase.

    It would be interesting to see what kind of Future web commerce promotion strategies are used by websites

  26. Free Shipping and Free returns are the key features that get new websites the consumer trust and confidence needed to complete a purchase.

    It would be interesting to see what kind of Future web commerce promotion strategies are used by websites

  27. I buy goods online.If the retailer provides free shipping,it will be better.While if the price of the item is paid including the shipping fee without telling the customers,there is no need to ship the item free.I would rather pay for the shipping fee.

  28. I’m probably 20% more likely to buy on a given day if I know I’m not paying shipping. The sick thing is, I *know* the shipping price is built into the product though, but it gets me anyways. Given that I know this, I imagine it’s a very powerful tool for those that don’t.

  29. [...] people feel that free shipping is a must in this economy: In a recent comScore study, 72% of consumers said that if an e-commerce site eliminated free [...]

  30. Free shipping is not actually free, there is a hidden charge on the price of the product. this is just to attract customers.

  31. Free shipping is one of those things that you just have to have in today’s competitive Global environment. You can even charge more for the product, as Mr. Arthur just said, as most sellers do. It is just an allusion that they don’t want any extra fees!

  32. [...] [...]

  33. For me it depends on how long is the distance of the business to the customers. If it is just near by are just local shipping many will prefer low rate but if it is international many will prefer free shipping.

  34. I think yes, because peoples will say ” wow no money for transport ” and i think the convertion rate will be much higher.

  35. [...] [...]

  36. As a consumer I find that I’m more likely to make a quick impulse buy if they offer free shipping.

    However if they don’t I try and combine multiple items to help diminish the overall impact of shipping costs but sometimes I won’t find everything I want so I end up leaving and buying nothing. Whereas if they had free shipping I would have bought right away.

    That’s why I started offering free shipping on my website.

    I’ve noticed that sales went up alot.

    Especially single item orders.

  37. I agree about the single item orders

  38. Yes I have always argued for this point. Free shipping is a must if you want to be competitive.

  39. I’ve tried both on a number of sites I have run. I think it depends on the audience and the type of product. People seem happy to pay for delivery if it is upfront and clear. As long as the price remains competitive, with or without a delivery charge, is the main criteria.

  40. I wanted to spark some discussion on how far the end consumer would go to receive free shipping. Would people use a site like shipmonkeys.com and find people in their area to combine their orders with to achieve websites free shipping thresholds?

  41. [...] [...]

  42. We have switched to the FREE shipping model on our new Magento store for Tower Health here in the UK, it seems to have helped increase conversions dramatically.

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Bryan Eisenberg, founder of FutureNow, is a professional marketing speaker and the co-author of New York Times and Wall Street Journal bestselling books Call to Action and Waiting For Your Cat to Bark and Always Be Testing. You can friend him on Facebook or Twitter.

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