Free Shipping Russian Roulette
Free shipping is a big deal; something that shoppers love and retailers hate. What if we could limit the number of free shipping items and make shopping exciting? A site visitor is browsing your inventory and while on a product page gets a message that says “We give out 5 free shipping coupons every single day and you’ve been randomly selected for free shipping with this item.” Two things happened here, one the customer got a powerful incentive to buy and two, the site experience suddenly became more memorable, increasing chances that this customer would remember your store url. Do you think this is a good idea? Or are we changing customer behavior and incentivizing them to not buy until they’ve been randomly selected?
betterretail
I believe that free shipping has been hyped too much. Let me give an example:- there are two sites A & B selling the same product with the same cost structures.
Now A sells it at a discount of 10% with free shipping and B sells it at a discount of 15% but charges shipping, which is added to the order total in the cart.
Vendor Perspective:-
Both are making the same profits for the same product (again assuming 5% equals the cost of shipping). So what is the problem with free shipping – free returns yes, but why free deliveries?
Anything else – meeting price points and discounts will distort the profit margins, and whosoever has lower costs will win.
Customer Perspective:-
In both cases, the customer ends up paying the same. Yet he might love site A simply because he pays what he sees on the product page. No ambiguous charges added to the cart. If I go to site B and see wow! 15% discount compared to 10% on A, I add to the cart and then see the shipping charge, I would be highly disappointed.
Vikas
September 30, 2009 at 10:30 pm
A rational customer would think like you but there is plenty of empirical data that shows free shipping does improve conversions. Does this strategy lead to sustained growth? I’m not sure.
betterretail
October 1, 2009 at 11:43 am
Free shipping is just a lure. I have seen people mention it on twitter, facebook – “… and they offer free shipping too
”
As I said, I like to see the price upfront and not have to calculate how much more I have to pay when I add to the cart unless its discounts. But then discounts also should be calculated and final price shown there itself.
There have been a lot of instances where I abandoned the shopping cart when I saw the shipping charges.
Sustained growth?? From a vendor’s point of view, isn’t it the same margins unless he also gives the same amount of discounts but with free shipping?
Vikas
October 1, 2009 at 11:49 am
I agree with your view.
“Sustained growth?? From a vendor’s point of view, isn’t it the same margins”
Yes, the two vendors might make the same margin but the vendor with free shipping might have a better conversion rate. Same margin + better conversion rate = greater revenue.
betterretail
October 1, 2009 at 12:07 pm
[...] our case it would translate to orders worth more than Rs. 750. Free shipping over there is used to incentivize the customers to buy in bulk; in fact there is a free shipping day. So why do we not also not [...]
For the love of books » Free Shipping, Why So?
December 8, 2009 at 8:18 pm
[...] This post was mentioned on Twitter by Susanna Haynie, Susanna Haynie and Susanna Haynie, Susanna Haynie. Susanna Haynie said: All the deployment classes in the world don’t help. http://ow.ly/ZVoh [...]
Tweets that mention Free Shipping Russian Roulette « Retail, in the eyes of the everyday customer -- Topsy.com
January 25, 2010 at 10:41 am