Is free shipping the answer to shopping cart abandonment?
It comes as no surprise that price is king when it comes to online shopping. Internet Retailer recently covered a BizRate survey that found that “74.94% of respondents said price was a determinant in their decision to complete a purchase online.” But what might be surprising is that while a product’s price may encourage a would-be-buyer to click “confirm order,” it is often the product’s shipping cost that can drive those same shoppers to abandon their online cart. Several months ago, Newgistics sponsored an independent survey of customers to study their shopping habits. Eighty five percent of shoppers admitted to not completing the purchase after selecting an item to order, and the number one reason cited by survey respondents was shipping costs—more than 28 percent of shoppers that had abandoned a cart did so because of the cost of shipping. The findings in Newgistics’ study were corroborated recently by L2ThinkTank, which reported that 55% of abandoned carts were the result of shipping cost concerns. L2ThinkTank goes on to explain that most often these are nominal shipping costs ranging from $6-20. “The fact that such a relatively low add-on cost would deter so many purchases presents an extraordinary opportunity for retailers.” We agree. When shoppers hunt for an online retailer with the best price for a specific product, the eTailer with the best deal on shipping will be an attractive option. And consumers increasingly expect not just economical shipping, but free shipping. According to BizRate, 53.57 percent of online shoppers said they had received free shipping on their last online purchase. This trend is of increased significance for merchants that sell commodity products. Planning for this consumer expectation can be a key marketing strategy to help eTailers attract not shoppers but buyers and avoid shopping cart abandonment. Free shipping offers can come in all shapes and sizes. Some are targeted to only the most loyal shoppers, and sometimes free shipping is offered as a limited-time-only promotion code. For eTailers that boast everyday free shipping, most require a minimum purchase order, often ranging from $25-100. Not all free shipping offerings are created equal, and are uniquely tailored to the individual retailer’s specific reputation, price point and market strategy, so it’s up to the retailer to decide what is best for its brand. To sweeten the deal and entice hesitant shoppers to complete a purchase, brands are also offering other shipping-related incentives such as free or reduced-price expedited shipping and return shipping. Our own commissioned research found that “more than half of consumers surveyed said they had returned merchandise to an eTailer at some point. Among these shoppers, the top expectation for returns—far and away— was a prepaid, preaddressed shipping label.” Free return shipping can alleviate an online shopper’s concerns about buying an item sight unseen. Many savvy retailers are strategically including free or discounted shipping offers in abandoned cart email reminders. Though free shipping costs consumers nothing, it is, of course, not free for the retailer. When products are readily available from competitors, it is often impossible to factor the free shipping into a product’s price. To offset the cost of free shipping offers in such a competitive online marketplace, retailers must look to their operations budget or other internal budget. The selection of a shipping partner can benefit retailers beyond the moving of boxes. Newgistics delivers not just packages, but incremental revenue streams as well, which can off-set costs in other areas to help recover some of the expense of offering “free shipping.” Mashable, which recently covered Forrester’s latest eCommerce forecast, reported that “the growth of eCommerce, which already accounts for about 8 percent of total retail sales in the U.S., is expected to outpace sales growth at bricks-and-mortar stores over the next five years, reaching $370 billion in sales by 2017.” As eCommerce continues to become a larger slice of the overall retail sales pie, it is especially crucial that eTailers understand the shipping component of consumer expectations. Online retailers should not look at the growing expectation of free shipping as a problem, but as an opportunity to hone their marketing strategy to encourage first time buyers and to build long-lasting relationships with satisfied customers.