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It’s easy to understand the value of free shipping by looking at the statistics. In one survey, three-fourths of consumers said they abandon retailers at checkout if shipping isn’t free. Another survey revealed that shipping remains a weak link in the checkout process, with 44 percent of shoppers balking at the shipping price and ditching the virtual cart. Additionally, surveys show that customers spend more when they receive free shipping.
Online retailers face competitive pressures to lower their shipping charges, or eliminate them altogether––not easy for small businesses that may not have the resources or economies of scale to absorb the extra cost.
Taking the first shot
L.L. Bean, a Web and catalog retailer of outdoor gear and apparel, launched a salvo in the free-shipping war in Spring 2011 when it announced it would ship all orders free to the U.S. and Canada, regardless of the amount ordered. Such an aggressive move by a major retailer changed the game considerably and left small and midsize retailers wondering how to compete.
The following alternative strategies can help small businesses stay competitive.
Get creative with caveats
If free shipping doesn’t make financial sense for your business, try some other tactics. The key is to make your customers feel in control by providing them with options. Some retailers build shipping costs into product price, but that can be hard for smaller businesses with lower profit margins, and it can alienate customers who compare prices. Instead, consider adding these caveats:
- Free standard shipping for lightweight (but high-margin) products or minimum-purchase orders.
- Flat-rate shipping via ground to control cost.
- Giving first-time customers free shipping, and then a low flat rate on all subsequent orders.
- Charging customers a one-time fee to receive free shipping, speedier service, upgrade options and other benefits—essentially creating a shipping club.
- Free shipping on products with higher profit margins or products you want to promote.
- Free shipping for a limited time.
Think outside the (shipping) box
As with any aspect of running a successful small business, creativity counts. Here are some other strategies that can help you win the Web’s free-shipping war:
- Offer Saturday delivery at no extra cost (the day most residential customers are home).
- Impress customers with time-definite, day-definite or appointment delivery (even at a specified time and place), which will appeal to those customers with urgent shipping needs.
- Promise faster order delivery, keep your promise, and then market this fact vigorously.
- Give customers the option to hold at another location (for example, the nearest FedEx Office at no extra cost) to eliminate uncertainty when recipients aren’t home or miss a delivery.
- Make it clear that returns will be easy—and then make sure it is easy.
Test to discover triggers
Ultimately, crunching numbers and testing a mixture of strategies will tell you which approach works best. The key is to test, learn and refine. Use a spreadsheet to crunch the numbers and keep track of key metrics (total revenue, operating margin, number of orders, average shipping cost per order and more). Do the math to see what makes sense for your business
Learn more about the free-shipping war
To learn more about free-shipping options, visit the FedEx Online Retail Solutions website and access a wealth of online-retail-industry knowledge and best practices, including the complete white paper, “Strategies To Help Retailers Win The Web’s Free-Shipping War.”
Debbie Kuehn is a Twin Cities-based freelance writer covering a wide range of topics in a variety of industries, including retail, financial services, home improvement and many more.
Note: The opinions expressed in this article are those of the author and do not necessarily reflect the views of FedEx.
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