Free Shipping Makes Sense For Online Retailers
Posted by Matt Krautstrunk on December 10, 2010 in Business News [ 2 Comments ]
According to comScore, the best things in life are free…shipping. Online retailers have seen an influx of business this holiday season, and with that, free shipping is becoming expected. ComScore reports, “In 2009, the percentage of transactions using free shipping declined to around 45% again, while this year the number surged to 55% in the week ending November 28 and came in at a still very high rate of 51% in week ending December 5.”
Online retailers have seen a boom this year; Cyber Monday shattered the record for online spending with $1.03 billion in sales. However even though businesses are selling a shipping more, this report puts pressure on small business online retailers. Consumers are beginning to expect free shipping. E-commerce leaders, Amazon and Wal-Mart are shadowing smaller retailers by offering free shipping on almost everything they sell. Larger online retailers are typically able to negotiate cheaper rates on shipping in bulk. They don’t have to incur substantial shipping costs and can leverage this where as smaller businesses are finding it hard to incur the extra costs of free shipping.
Even though large online retailers are able to negotiate cheaper shipping rates with their shipping service, this doesn’t mean that small businesses can’t incur short-term costs to give their online shoppers what is now expected (free shipping). Even though small online retailers may not see the benefit in leveraging their logistics, incurring extra costs to offer free shipping makes sense.
Businesses that offer free shipping increase the average order amount. According to an Internet Retailer report, “Retailers are offsetting the margin loss from offering free shipping, because the average order value for transactions with free shipping are an average of 30% higher than those without.”
Image Credit: comScore
Online shoppers that receive free shipping are spending more per transaction. Offering online promotions to “spend X amount and receive free shipping” is a great marketing tactic around the holidays. Consumers always appreciate a business that will go the extra mile to ensure they are happy. For online retailers and consumers, free shipping is definitely spreading the holiday cheer.
Image Credit: Blog. Stamps