How to Survive Free Shipping This Holiday Shopping Season
By Ina Steiner
Free shipping offers present both an opportunity and a challenge to online sellers. Manish Chowdhary is founder and CEO of GoECart, an award-winning company that provides online merchants with an ecommerce platform and services to help them grow. Chowdhary presents tips on how to survive free shipping this holiday season in today's EcommerceBytes Newflash guest column.
Free shipping is all about keeping online shoppers happy. The question however is, "How do small and medium online retailers compete with the big and really big retailers"?
Just take Amazon as an example of what large retailers are able to offer to pull in customers. Amazon offers "Super Saver Shipping" that allows customers to place a minimum of $25 of eligible products in their shopping cart and qualify for free shipping. The only caveat is that the items will be delivered in 5 to 8 business days. Amazon's site states that with this shipping option, they are able to fulfill orders in a more cost-efficient way and pass on the savings.
Amazon also promotes the fact that they offer many items priced $10 or less which helps their customers reach the coveted $25 for free shipping. One of their customers commented, "Why spend your money on shipping when you could spend your money on stuff?"
Amazon, through their Amazon Prime service, has also found a way to encourage repeat customers by offering customers the option of paying an annual membership fee of $79 and receive free 2-day shipping on a whole host of items. To sweeten this deal Amazon allows for this membership to be extended to four additional "household" members.
While many large online retailers like Sears, Williams-Sonoma and other have experienced a great ROI from programs similar to the ones offered by Amazon, most small to medium businesses are struggling to compete profitably.
Below are eight innovative ways that can help make merchants combat the free shipping dilemma:
- The free shipping threshold: A free shipping threshold can be used to increase your average order value. For example, if your average order value is $30, you can offer free shipping at $45 to encourage customers to buy more. Take CoffeeForLess.com as an example. Their average price per product is $14.99 and they currently offer free shipping on orders over $45, which means on average the customer will be spending almost $60 in order to get free shipping.
- Explore all potential carriers and services including hybrid shipping: Different carriers excel at providing different services in their zones of concentration. Hybrid shipping utilizes the convenience of easy pickup and tracking technology of private carriers coupled with the cost-effective last mile delivery to the end customer by the U.S. Postal Service. GameQuestDirect, a video games supplier, has used this method very successfully to reduce their shipping costs while providing shipping deals to their customers.
- Ad supported shipping: AdShip.com helps online retailers earn revenue by selling ad space on packing slips and post transaction emails. These relevant ads are a great tool for offsetting costs; however retailers must always be sensitive to their customer's reaction to the increased exposure to advertising.
- Vendor discounted shipping: Retailers may negotiate special discounts with vendors and distributors for increased order volume via premium product placement on their websites. For instance, a retailer may offer premium product placement on their website to a vendor who offers to subsidize the cost of shipping.
- Free upgrades: Free upgrades are a great alternative for retailers that simply cannot afford to offer free shipping. For example a retailer may offer customers a free upgrade from standard ground shipping to second day or overnight. This upgrade provides customers a perceived value that is much greater than what the retailer may be actually paying and particularly helpful in winning last minute shoppers.
- Audit your carrier bills or outsource the job: Many GoECart merchants, especially ones shipping over 50 packages a day, are using third-party auditors to identify billing errors and collect compensation in their UPS and FedEx bills (typically between 1 to 5%) and to ensure that service providers are honoring their service level agreements and not charging inaccurate surcharges or hidden fees.
- Eliminate double shipping: If you ship large quantities to your customers, you can streamline shipping by having your manufacturer or distributor ship directly to your customer. Eliminating double shipping can significantly reduce retailers' costs, allowing them to pass the savings onto the customer.
- Explore USPS Flat Rate Shipping: With this option, if the items fit, then they ship anywhere in the U.S. for a low flat rate. This gives retailers low predictable costs as low as $9.95 per package and is particularly effective for small but dense items.
For many shoppers, free shipping has been the single-most-powerful factor in determining if or where they purchase their holiday item. Hence, many smaller retailers have had to offer free shipping at some point during past holidays - but not always to their benefit. Now with these eight creative tips, merchants can still offer free shipping but increase their profits at the same time.
Manish Chowdhary is the founder and CEO of GoECart, an integrated multi-channel ecommerce platform and order management system provider whose clients include Sears, Elsevier and J.D.Irving. He can be reached via www.GoECart.com or follow him on Twitter @goecart.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to email@example.com.
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