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April 29, 2011

Solving the Free Shipping Puzzle

Internet Retailer - article excerpt:

Free shipping is a powerful inducement to online shoppers. So powerful, in fact, that L.L. Bean announced in March it would provide free, everyday shipping with no minimum order size to U.S. and Canadian consumers.

Although free shipping can attract more shoppers and entice them to spend more, retailers still have to cover the costs of delivering the package. Picking up the shipping tab for customers means that e-retailers must keep to a minimum the costs of fulfilling and delivering an order and reducing the number of returned items, all without negatively impacting the customer experience.

That's easier said than done, given the complexity of the fulfillment and shipping process. Carriers have a bewildering array of rates and rules that affect many aspects of a retailer's operation. That includes some that don't at first glance seem related to shipping rates, such as the shape of the boxes a retailer uses or how it captures a shopper's home address.

Firms that specialize in shipping and fulfillment can offer the expertise to help retailers keep shipping costs low, making it easier for them to offer free or reduced-cost shipping.

"Consumers have been conditioned to expect free shipping, but that does not mean there is a one-size-fits-all free-shipping strategy," says Ramsey Mansour, director of Retail and Consumer Goods for UPS. "There are a lot of elements that make up a cost-effective free shipping strategy, including supply chain, choosing the right packaging and having partners to help with logistics."

Buyer's remorse

Simply choosing the lowest rate in order to minimize the cost of free shipping offers is a strategy fraught with risk because it can lead to increased delivery times. The longer it takes a package to arrive, the greater the chance of a shopper changing her mind about the purchase or becoming so dissatisfied with the long wait that she opts to return the package. As every retailer knows, dissatisfied customers are less likely to be repeat customers.

"Free shipping energizes customers, but the last thing retailers want to do when offering it is to compromise the quality of the customer experience in any way, because a poor customer experience can negatively impact customer loyalty, which is more costly in the long run," says Jon Routledge, senior vice president, sales and marketing for Streamlite Inc., provider of lightweight package shipping services. "The aim is to deliver without doubt. That means if a retailer guarantees delivery within five business days, that's when the package is delivered."

To read the article in its entirety, visit Internet Retailer.