When developing a marketing strategy, most companies consider whether or not they should offer free shipping for customers. This depends upon the ROI of implementing this staple.
Multiple sources suggest that consumers are greatly influenced by free shipping. Every year, a Free Shipping Day takes place, and last year, online sales were around 1 billion, making this day as one of the biggest shopping days of the holiday season. 71% of consumers placed it at the top of their Christmas lists according to the annual holiday survey conducted by Deloitte & Touche LLP. Consumers also perceive themselves in a winning situation when they get free shipping offers. The value is as high as the customer imagines the shipping cost for the company. Here are some barriers that prevent companies from offering free shipping.
1. Cost
The cost of shipping is the number one factor that prevents companies from implementing the strategy. They are worried about the cost of carries and the impact it will have on the current profit margins.
2. Time
Free shipping is often offered to customers with a long time frame. It might be a while before the product actually reaches the hands of the customer, which may damage the reputation of the company.
3. Competition
Many companies are already on the free shipping bandwagon. Companies looking to join in hesitate by the level of competition, and some drop the idea all together.
However, many businesses still have implemented free shipping. The time factor may not hold true. AlixPartners conducted a survey which indicated that 50 percent of the consumers are willing to wait up till 1 week if they’re offered free shipping on their selected items.
As mentioned above, shipping costs are the number 1 factor that prevents companies from using the free shipping tool. Choosing supply chain solutions that offer discount on regular shipping, and have low per unit delivery cost may be able to lower the overall cost of delivery. Distributors often have multiple offers for businesses that use free shipping frequently throughout the year.
Giving this special privilege to the customers will increase the chances of better ROI in the long run. Costs of using other promotional tools, such as giving discounts on certain items, may reduce as companies can use free shipping as a promotional tool itself. Companies that are low on budget can also take advantage of free shipping through the right strategy. They can offer a membership and offer free shipping to those who sign up, along with other benefits to members.
Free shipping is going to remain one of the top promotional and marketing tools in the upcoming years, and businesses using this tool will have a driving edge in the future.
Vijayraj Reddy
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