Free Shipping Offers From Online Merchants Will Increase
A recent article in Advertising Age questions whether free shipping from websites may be less common due to rising fuel costs. I believe free shipping with and without conditions will increase. Free shipping has more to do with getting around MSRP than actual shipping costs. For a retailer to cut out free shipping, theoretically the free shipping would have to account for 50% of an item's price thereby canceling out any profit for the retailer. (I'm assuming that the item in question is marked up 50%, as most retailers do.) Fuel surcharges may be up, but I foresee a 1/3 of online retailers continuing to offer free shipping without conditions and 70%+ to offer it with conditions. In these tough economic times, retailers will choose to cut further into their profit as long as it doesn't completely nix any profit. Why? Most online purchases can be drop shipped, so it's not skin off the retailer's nose to make as little as 10% on an online order (granted, they must deter returns with a restocking fee). From my client base, I can see that retailers offering offer free shipping fare better. This also helps in Google. If you saw two Google results, and one offered free shipping, which would you click?
Furthermore, it's worth noting from the article that "consumers preferred free shipping over coupons, buy-one-get-one-free promotions, free gifts, gift cards or early-bird specials, according to a Shop.org study. In the same study, 35% of consumers said they would spend more online because of free-shipping offers, while 13% said they would spend less because shipping charges were too expensive."
In sum, I think free shipping is here to stay, and will likely continue to grow.
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No Such Thing as Free Shipping? Facing Rising Costs, Online Retailers Likely to Attach Strings to Holiday Promos
By Natalie Zmuda
Published: September 22, 2008 NEW YORK (AdAge.com) -- Retailers counting on online shopping to buoy sales in a tight economy are wrestling with a big problem: free shipping.
Shipping discounts, which have become a mainstay of the holiday season, are being carefully analyzed by retailers as they weigh the benefits against the mounting costs. Transportation costs have skyrocketed in the last year, with diesel prices rising 50% year over year. In response, fuel surcharges applied by UPS and FedEx have more than doubled to 10.5% for ground packages and 34.5% for air packages.