The concept of Free Shipping has been debated since the beginning of internet sales and has driven many marketing and operational decisions. While there are a variety of opinions, supported by anecdotal and empirical evidence, it has become clear that consumers prefer free shipping and base many of their internet purchases on this factor. As the economy has presented increased challenges, online retailers have been forced to consider anything that will allow them to maintain or improve sales.
Retailers have to offer consumers a strong reason to shop online. There are few factors that elicit a stronger reaction than free shipping. In fact, free shipping can be such a powerful motivator that it can cause consumers to act irrationally. David Bell, Wharton Marketing Instructor, has observed that consumers will favor an offer which provides them with $6.99 of free shipping over a $10 discount on the product.
Online retailers spend a significant amount of their resources to encourage customers to shop on their site. According to the data, this expenditure can be undone by shipping charges. The E-tailing Group’s survey noted that seventy-eight percent of customers reported that the prohibitive costs of shipping discouraged them from making online purchases. Even those customers who have placed items in their online shopping carts can be lost, if shipping charges are added to the bill. PayPal and comScore’s survey revealed that forty-three percent of customers would abandon their shopping cart if they felt shipping prices were too high.
In addition to serving as a motivation to purchase online, free shipping was also found to determine which retailers’ consumers would use to make their online purchases. A Forrester Research poll found that seventy-five percent of consumers prefer to shop with online retailers that offer free shipping. A comScore study reinforced these results when it demonstrated that seventy-two percent of consumers would switch to a different online retailer if their current retailer discontinued free shipping.
Free shipping has also been shown to create a more positive purchasing experience.
Free shipping has also been shown to create a more positive purchasing experience. Compete, reported that their Online Shopper Survey showed that consumers rated their shopping experience ten percentage points higher than those who paid for shipping. She also reported that, “high shipping costs were rated as the number one reason why consumers were not satisfied with their online shopping experience.”
As has been demonstrated by the above, free shipping is a factor at every point of the online purchase. In order to take advantage of the opportunity afforded by online shopping, retailers have to review their shipping policies. To maximize the return on an online store, free shipping is essential.