As consumers gain access to new technologies like click and collect, grocery delivery apps, and Amazon Prime, their perception of retail shifts drastically. For instance, you can have online orders available for pickup in-store or have brick-and-mortar purchases delivered to your front door. Increasingly, as the division between online and brick-and-mortar is lifted, customers tend to have similar expectations of their shopping experience. Namely, shipping is increasingly expected to be free.
Aside from its attractive price tag, free shipping is also reassuring to customers since it is usually a hallmark of larger retailers. Even still, consumers still see free shipping as a bit of a lower priority from retailers. In a study ShipStation conducted, they found that while 86% of consumers prefer free, slower shipping for themselves, they’re 75% more likely to pay to upgrade to an express shipping option when buying gifts for others.
Looking at this, you can make the case that express shipping is seen as a premium upgrade. If someone does pay for shipping, they’re going to have more expectations of its delivery speed. Free shipping, however, is also seen as a default slower option. In essence, free shipping can be seen as “you get what you pay for.”
Does Amazon Prime Change Things?
Amazon Prime is the most commonly referenced free shipping option. However, it’s not truly free. Because it charges a premium membership, it is an added bonus of the service. As such, free shipping from other retailers doesn’t necessarily have to be delivered in two business days. In ShipStation’s study, a major finding was that even as much as companies like Amazon have rewired how we think about shipping, the shipping speed hasn’t changed as drastically as you might think. Consumers still anticipate waiting about four business days for their orders—sometimes longer for free shipping. This means while free shipping gives you a competitive edge, it doesn’t have to break the bank.
Services like Amazon Prime work, too, because you don’t receive sticker shock at checkout. When added charges like Shipping & Handling and taxes factor into the final checkout total, many customers will abandon their cart and look elsewhere.
Items that do and don’t work for free shipping
Free shipping is seen mostly as a more economical shipping option that can take over a business week to arrive. In the ShipStation study, it was found that consumers expect different timeframes for different items.
Items like toys, art, and sports equipment are frequently ordered with less urgency than items like apparel, cosmetics, medicine, and pet food. So, depending on what you sell, your customers may opt for more premium, express shipping options.
How to Offer Free Shipping
Free shipping always comes at a cost. Usually, it comes either through offering free shipping for customers whose order totals exceed a certain threshold or by injecting the shipping costs into the item costs. Free shipping works because it avoids in-cart surprises.
Free Shipping at a Threshold
Free shipping for orders over amounts like $50, $75, or $99 has been a long-established standard for online shopping. It incentivizes customers to buy more, and for merchants, it typically doesn’t increase shipping costs too much.
Incorporate Shipping Costs into the Item Price
This is starting to change. In fact, at least 75% of customers now expect free shipping for orders under $50, according to the National Retail Federation. Anyone that has ordered from Amazon has probably noticed that not everything is cheaper.
Rising Shipping Costs Impact Free Shipping
Every December or January, carriers roll out their new rates for the year. These rate increases aren’t to line up with the rate of inflation, though. Rather, they’re more commonly associated with the increased volume of parcels being shipped. To keep up with consumers, carriers have to charge more to build out fleets of vehicles, maintenance, and more sorters and drivers.
Sometimes, these rates are minimal, like a $0.05 increase on flat envelops, but they can be more significant than that.
The ecommerce landscape is constantly changing, but a focus on free shipping is likely to stay for a while. Make sure you determine what shipping options work best for your business and customers so you can ensure you aren’t losing customers at checkout.