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Mon Dec 13 2010 17:41:30

Free Shipping - Marketing Hype or Consumer Preference?

By: Ina Steiner

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Experts say consumers love free shipping when shopping online. In a recent ComScore survey, 84% of consumers indicated that free shipping was somewhat or very important when making a purchase this holiday season, and 55% of respondents indicated they would be at least somewhat likely to abandon their shopping cart without a free shipping promotion.

There's an assumption that shoppers will act in their own best interest, but that isn't always the case. ComScore found the average order value for transactions in the third quarter involving free shipping was 41% higher than transactions without free shipping.

And more recent data from the research firm showed that for the week ending December 5, 2010, transactions using free shipping were $125.20 on average, 45% higher than those with paid shipping. 

Retailers who are worried about the costs of offering free shipping should remember that consumers will be more willing to open their wallets when they can take advantage of the free-shipping incentive, ComScore wrote. "While there's a tendency to think that having to offer free shipping is a margin-eater for retailers, it can actually be to the retailer's benefit if utilized effectively."

It's less certain if that holds true on third-party marketplaces like eBay, where shoppers can actually compare costs of multiple listings for the same item. If they can see Seller A is offering a toy for $16 with free shipping, and Seller B is offering the same toy for $10 with $4 shipping, which one will they choose, all other things being equal?

There's an additional wrinkle for sellers listing on eBay, since it's more expensive for them to offer free shipping. eBay actually puts more money in its pocket on free-shipping sales, since eBay earns fees on the selling price, but not the shipping costs. For example, eBay makes more money on an item with a selling price of $50 with free shipping than on an item selling for $45 with $5 shipping, even though the consumer pays the exact same price.

Amazon is strategic with its free shipping offers, requiring a minimum spend to qualify for super saver free shipping. And Amazon Prime, its $79 program that offers members free shipping, gives members an incentive to purchase from its marketplace rather than from other retailers.

One thing is for sure - online retailers are embracing the free-shipping trend and, like Amazon.com, are trying to use free-shipping offers strategically.  

FedEx expects to pick up 16 million shipments around the world today, making December 13 the busiest day in its history and up nearly 13 percent from last year's busiest day. But the 1,300 merchants who signed up for Free Shipping Day are hoping December 17 will give them a boost in sales by offering free shipping as the window for Christmas delivery begins to close.




Comments (29) | Permalink

Readers Comments

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Nervous Nellie

Mon Dec 13 18:02:23 2010

This all sounds very tempting... and I'm seriously considering adding free shipping to my ecommerce site, but I'd definitely have to increase prices to make up the difference.

I guess that's the part that scares me. Even with adding free shipping, will the increased prices turn-off my regular customers who are already accustomed to paying my current prices.

Also... when my listings are displayed in Google's product search, will my higher price put me at a disadvantage whenever the potential customer sorts-by-price? (Because at first glance my items will appear to be more expensive than competitors offering identical or similar items.)

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Harriet This user has validated their user name.

Mon Dec 13 18:41:28 2010

Search results in many places return the item total for the item including shipping and if it is a separate shipping fee, that is broken out so you can plainly see it. I would think that shoppers doing comparison shopping will look at the total including the shipping, so my own feeling is that free shipping is a gimmick.

Well, OK, I guess there will always be many folks that can't figure that all out, and don't compare pricing. So when they see Free Shipping, their eyes light up.

It's still not important enough for me to change everything. So far, my customers seem to be happy with things the way they are, and they can see the cost of everything. When I price my items, I price them compared to the total item price of others.

So Free Shipping is still a gimmick.

What was that that P.T. Barnum said, "there's a sucker born every minute". It's all smoke and mirrors. I don't like that.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Sir Knowsitall
Web Site

Mon Dec 13 18:56:28 2010

@Harriet:
"there's a sucker born every minute"
Actually, P.T. Barnum never said that. A competing British showman, David Hannum, said that about the crowds that were flocking to see Barnum's fake Cardiff Giant. (Versus Hannum's fake Cardiff Giant)

"Free" shipping works.
Period.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Donna

Mon Dec 13 20:37:48 2010

I started using free shipping in September and actually my sales have increased substantially. I rolled the cost into my price and added the extra fees I pay in as well. I'm coming out even, but I'm doing more sales, and getting to the top of search. YAY!!

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Nervous Nellie

Mon Dec 13 21:27:22 2010

Hi, Donna! Did you do this on eBay or your own ecommerce site?

I've done it already on eBay...but only because it was my understanding that NOT doing it would cause my listings to be less visible.

Frankly, I've seen not a whit of improvement in sales now that I've been offering free shipping for the past 9 months.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

This user has validated their user name. by: basset

Mon Dec 13 21:54:01 2010

I marked several of my items ''free shipping'' last month. Others, I left with paid shipping, but at a lower price since shipping was not built in. I tried to make each category an equal mix of brands & desirability. My result was: 1)Most items that sold were the lower price, paid shipping items. 2) One person bought 2 ''free shipping'' items and purchased a 3rd, heavier, pay shipping item AND wanted it to just be ''thrown in'' with the 2 free shipping items:)  After peaceably settling THAT issue - I quickly found time to change the ''free shipping'' back to ''Paid Shipping'' listings. Just wasn't worth it for me!
   As a buyer, I just add the shipping to the price & compare with the ''free''. Total price is what I use for comparison. Also, I would NEVER filter a search for ''free shipping'' only items.  Not unless I wanted to miss out on some great items & deals!

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Troglodyte

Mon Dec 13 23:14:46 2010

"Free" shipping has done nothing for my sales except decrease the number of multiple item orders.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Rick1313

Tue Dec 14 00:05:59 2010

Many interesting things to say about this blog. But for now, the replies...

Posters ''Donna'' and ''Basset'', if you are based in the USA, you have just admitted that you broke FTC regulations (as a vendor).

Using the word ''Free'' to advertise and sell your product, when the ''free'' part is hidden in cost of the item, is a big no-no with the FTC.

The correct terminology is, ''shipping included'', when hidden in price of item.

To poster ''Nervous Nellie'', you talk about wanting to convert over. You'd best look at FTC's website and what they say about using the word ''Free'' as a vendor. You have reasons to be nervous.

To ''Sir Knowitall'', ''(''Free'') shipping works. Period.''...

I'm sure it can. That is, until the FTC starts becoming involved (they eventually will) and start coming down on those vendors who deliberately deceive their buyers in thinking that they are receiving something they are NOT getting.

All should notice what ComScore said, as quoted by Ina, ''...margin eater for retailers,...''.

Hope to expound on this later on today. But for now...

Nite all.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: tim

Tue Dec 14 00:59:07 2010

Because there are two camps to this argument, and thus two types of buyers, use both tactics. Some items with free shipping, and some without so you hit all the types of buyers relating to shipping costs and the respective perceptions therin. Specifically to eBay, Free shipping is important for best match/search on fixed price items and paying the FVF on the shipping portion is more then worth it in most cases. On auction items Free Shipping does not affect search but using a mix will appeal to both audiences.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Meg or Peg

Tue Dec 14 03:17:19 2010

As a buyer, I dont like free shipping. It doesnt work if you are buying small items from one seller that can be thrown into the same shipping box.

Dont expect much intellect from the American (or Canadian) consumer. They purchase largely based upon emotion and perception. No wonder they are so deep in debt. Why else would free shipping work? People are clueless.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

This user has validated their user name. by: Stockmiser

Tue Dec 14 10:16:36 2010

There actually is a clear advantage to the consumer for buying the $10 item versus the $8 item plus $2 shipping. In the event of a return or refund, the seller cannot deduct shipping costs since they were "free".

When a seller offers "free" shipping, they are also telling the buyer that they will refund the FULL amount if there is a return.

As for it being a "gimmick", well, it is and isn't. Anyone that's spent years buying online know they have - more than once - abandoned a shopping cart when confronted with a huge (and unexpected) shipping charge. Suddenly all that online shopping was just a waste of time. Free shipping means there are no surprises, and buyers like that.

As Ina suggested, the best use is strategic. I offer free shipping on my website at a certain price point, and 99% of my buyers buy at least that price point. It's almost doubled my average order price.

I get most of my supplies at Officedepot.com - they ofer free next day delivery for $50 or more. I haven't paid shipping in 5 years - and it's more efficient for them to deliver fewer larger orders than many small orders. It's a win/win.

As for the FTC - they have never found free shipping to be deceptive - and that is the ultimate test. The FTC's document on the use of the word "free" is a GUIDELINE and not a statute.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Harriet This user has validated their user name.

Tue Dec 14 10:17:32 2010

@ Rick-

Glad you said what you said. I get an icky feeling when I see Free Shipping. I know that the seller is trying to pull the wool over my eyes.

It reminds me of stores that have a liquidation sale going on for years and years touting the lowest prices, etc. That's not real, and neither is Free Shipping.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Nervous Nellie

Tue Dec 14 10:41:13 2010

''To poster ''Nervous Nellie'', you talk about wanting to convert over. You'd best look at FTC's website and what they say about using the word ''Free'' as a vendor. You have reasons to be nervous.''

Let me make sure I understand what you're saying...

So a merchant who offers ''Free'' shipping knows in advance what their overhead will be...and like most merchants, the prices they charge are based (in part) on the profit margin they need to cover their expenses.

It seems to me that the cost of shipping is a legitimate expense...and to cover that expense (along with all other expenses) the merchant will calculate the price of their merchandise accordingly.

What's the crime in that? I'm not sure I understand the problem here.

I'm pretty good at searching the Internet, but I see nothing on the ftc.gov site that would suggest ''free shipping'' is illegal... or that using the phrase ''free shipping'' is prohibited.

In contrast, there are other articles on the ftc.gov site that warn consumers about paying for ''free'' merchandise or paying for ''free'' trials, etc... however ''free shipping'' doesn't seem to be included. ~ There's also a pdf document that advises consumers to consider the entire cost of the purchase and that ''free shipping'' isn't always the best deal. (Still... nothing that I could find about it being illegal or deceptive.)

Have I overlooked something? If you have some specific information on this, I am very interested in learning more.

If we extend the logic of your warning even further... someone could suggest that I should not include the words ''toll-free'' when I provide a phone number on my web site.

After all... I must pay for the incoming calls, and I've also considered *that* cost when calculating the profit that I need to make on my items. (So in reality, my customers do not called me for ''free''... each customer actually PAYS for their call as a percentage of my profit.

And if a caller doesn't buy anything, then the cost of their call is shifted to OTHER customers who DO buy something. I wonder if there's some FTC regulation against that as well.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Jim This user has validated their user name.

Tue Dec 14 11:41:18 2010

Rick1313

I really doubt the FTC is going to take that on.  A google of free shipping FTC litigation comes up empty of cases.

I would prefer the shipping included label but litigating over the difference between free and included seems to be something that would get dismissed with prejudice as De minimis.    I.E. not worth the court's time.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Stockmiser Hype

Tue Dec 14 15:14:48 2010

Stockmiser
As Ina suggested, the best use is strategic. I offer free shipping on my website at a certain price point


Unless you show your site to the world Mister Ebay Educational Specialist, everything you say is 100% B.S.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: AC_in_mich

Tue Dec 14 16:35:59 2010

I actually have been thinking of a couple things not mentioned here

First, I like eBay Bucks - sure, they aren't a huge amount, but the sellers that include the price of shipping into their product price and then offer ''free'' shipping gets me a larger ebay Bucks than the ones that split out the shipping, so I order from the ''Free'' shippers if the combined price is close.

Second is the importance of combined shipping.  I have actually ordered LESS from sellers that have free shipping versus sellers that offer a good combined shipping.  Let me explain further - I buy a lot of notebook AC adapters.  Seller ''A'' sells them for $8.99 with free shipping.  Seller ''B'' sells them for $5.99 with $3.00 shipping, but only $1.50 for each additional item.  If I need 4 of them, who am I gonna buy from? If I only need one, I'll go with the ''Free'' guy and maybe order from him again next week.

Then there are those sellers (usually outside the US) that REFUSE to combine shipping.  I once ordered from one seller, went to his ''other items for sale'' and ordered 3 or 4 other items - the items altogether were 8 or 9 dollars and shipping was $45 for 4 computer cables weighing a total of 2 lbs- No combined shipping, no courtesy to me as a customer last time I would EVER order from him - my fault for not asking him about his combined shipping before ordering, but still - ''you get the customer in the door, make him want to come back'' an old boss of mine once told me.  It always amazed me with companies that would spend $50 in advertising to get a new customer, but complain about spending $5.00 to keep the loyal customer.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Sir Knowsitall

Tue Dec 14 19:19:10 2010

@Rick1313:
"To ''Sir Knowitall'', ''(''Free'') shipping works. Period.''...

I'm sure it can. That is, until the FTC starts becoming involved (they eventually will) and start coming down on those vendors who deliberately deceive their buyers in thinking that they are receiving something they are NOT getting."

There are two chances the FTC would go after free shipping...slim and none.

If they have blinders on in re. the criminal activities of ePal after millions of complaints and are not yet moved to investigate them, they have neither the inclination or resources to move against "Free Shipping" on eBay.

LOL!

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: uncle rico

Wed Dec 15 00:21:19 2010

@ Rick - Surely the FTC has more pressing concerns? It's hard to imagine that they would ever persue the issue.

And as another poster mentioned, you earn more in eBay Bucks when the shipping cost is rolled into the price. I always compare.
Don't forget that you can get cashback along with the eBay bucks - just Google 'cashback site'...there are many that offer cashback on eBay purchases. For instance, a site called Mr. Rebates is currently offering 5% cashback (cashback based on item price - shipping not included ;)

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Rick1313

Wed Dec 15 00:25:36 2010

Millions of complaints? Sigh! If only that was the case (and probably should be) but many PayPal users (re: vendors) feel it is not in their interest to protect their business concern. That's their decision.

Besides, with PayPal (and all other such companies) the vast majority of PayPal complaints are one business enterprise (vendor) against another business enterprise (payment processor).

The court system is what one business enterprise would use against another business enterprise to attract attention of regulators.

Decisions in court cases may have regulatory bodies give closer examinations to businesses such as eBay,inc.

That is why companies like eBay,inc. settle many matters (with privacy clauses) BEFORE it hits the court system and they feel it is not a slam dunk case for them.

The ''Free Shipping'' issue is quite a different matter all together as it is between a vendor and a CONSUMER. I believe the FTC would give higher priority to consumer complaints, than they would for vendors complaints (the whole court thing again).

I'd see someone about laughing out loud (LOL for those who are unfamiliar with the acronym) when you are typing at a keyboard. Not a healthy situation.

Plus, one shouldn't laugh at one's own attempt at humor. It's kind of like adding a laugh track to one's posting.

Well, I was to talk about the AB subject matter, but it will have to wait until another day.

Nite all.

Free Shipping - Marketing Hype or Consumer Preference?   Free Shipping - Marketing Hype or Consumer Preference?

by: Rick1313

Wed Dec 15 00:32:28 2010

Well, I will give a quickie response to uncle rico's post.

It will all depend if FTC receives enough consumer complaints to start an investigation. Not vendors.

Bonus programs are not justifications in deliberately deceiving a buyer who is not getting (re: free) what is advertised by vendor.

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