Consumers are a touchy bunch these days. They showroom and they webroom to determine whether what they see online or in the store is a better deal one way or the other. One of the most important determinations of whether a customer will click the final button on their online purchase, studies show, is what kind of dent the shipping cost puts into it.
To make things even more interesting, some retailers — most notably Amazon, L.L. Bean, Nordstrom, and Zappos — have fundamentally changed what consumers think of as the norm.
Last year, UPS released its white paper on the “Pulse of the Online Shopper” and found that, while consumers generally find satisfaction in their e-commerce experiences, much of the room for improvement lies in increasing the flexibility of shipping options — including shipping rates, shipping speeds, delivery date and re-routing options (tracking), and in-store pickup.
Here are a few shipping and fulfillment variables that affect consumer behavior to a greater or lesser extent and cannot be ignored by online merchants.
1. Free delivery
When L.L. Bean in 2011 expanded its free delivery beyond its signature credit-card holders — with free returns and no minimums — it was actually going back to a policy from the days of its founding in 1912, which it had maintained up until 1992. Zappos.com already long had a free shipping/free return policy, and in general consumers seemed to appreciate the amenity as an unusual perk. That same year, Nordstrom also announced free shipping and free returns with no minimum order — which it proclaims in big letters all over its site to this day.
Why was all of this happening? These top retailers were realizing that customers don’t need much of a reason to ditch their online shopping cart. L.L. Bean reinstated free shipping because it found that customers would abandon their online orders on the basis of what they considered to be unacceptable shipping charges.
And then there was the pressure from Amazon. Amazon’s Super Saver Shipping — free shipping, that is — had a minimum purchase of $25 (raised last year to $35). Even that has been overshadowed in recent years by greater participation in its Prime membership — a service available since 2004 that offers free two-day shipping on a wide variety of products for a $79 annual fee.
To be sure, there are all kinds of changes afoot in the Amazon shipping game — and not just that drones may one day make deliveries or that the retailer may begin fulfillment on items its customers have yet to order. In addition to raising its minimum purchase for free delivery on non-Prime orders, Amazon is making noises about raising the Prime membership fee significantly.
Still, other e-retailers have been grappling with how to respond to the Prime model. Shoprunner’s shipping membership is similar to Amazon’s, and on Feb. 5, electronics e-retailer Newegg announced a free expedited shipping option for customers who pay a $50 annual fee. Again, why? Because, as estimated by Morningstar/Consumer Intelligence Research Partners LLC last year, the average Prime member spends $600 more each year, including the fee, than the average Amazon customer outside Prime. These members are literally primed to shop at Amazon.
As more retailers institute free shipping with no or small minimums — or at least flat-rates — they are essentially shaping a new normal that more consumers have come to expect. And the trend is clearly intensifying: A recent study by Forrester on shipping policies found that 92% of the top 50 retailers studied had free shipping policies. Similarly, shop.org found that as of October 2013, 34.9% of e-retailers offer free shipping of some kind all year — an increase of 51% from the year before.
The good news is that retailers can recoup the expense of free shipping. A large part of that strategy, of course, is simply keeping customers buying through their site and not someone else’s.
2. Fast delivery
Amazon seems to be losing money on its Prime membership, something perhaps to be expected since it is, after all, free two-day shipping with no minimum. It remains to be seen whether Prime members tolerate the discussed-but-not-implemented fee increase. In any case, once you’ve paid your Prime dues, there’s no reason to opt for slower (cheaper) shipping. Yet the company seems very focused on speeding up delivery times. Some Amazon Prime members enjoy Sunday delivery, and the e-retailer is trying hard to achieve routine same-day delivery (for a variety of fees).
But — what's the rush? The fact is, research shows that customers aren’t in that much of a hurry. They’re willing to wait for standard shipping speeds if the shipping-cost line in their online checkout equation is zero.
Still, if increasingly more online retailers advertise speedy delivery as routine or at least easy to come by, consumers will eventually come to expect faster shipping speeds in addition to free or cheap ones — certainly at panicky, deadline-oriented times like the holidays.
3. Free returns
Free shipping is one thing, but it’s a little galling to pay the shipping cost for a customer return. So why do retailers like Zappos, Nordstrom, and L.L. Bean supply that routinely, with no minimum, no problem, all year? Perhaps because e-retailers with liberal free return policies please their customers greatly — so much so that their customers are, in turn, twice as likely to shop through their sites. Plus, they’re willing to spend more, studies show. Retailers who make returns cheap and easy are giving consumers an intangible that they value: the elimination of a layer of risk in completing their online purchase.
The 2013 UPS online shopper study found that consumers want clear communication about the timing of their package deliveries. In fact, when retailers notify customers as early as possible about their purchase delivery status, customers seem to take a breath and become even more patient — to the point where they’re willing to wait an average of a week. The ability to track a package, the study found, is considered “essential,” or at least “nice to have,” by close to everyone.
5. Ship from store
For most companies, ship from store is not so much a consumer perk as a retailer one; a fulfillment idea that may make it easier to meet customer expectations. Increasingly, retailers have found success by treating their stores as mini-warehouses. With customers impatient to have their orders fulfilled quickly, ship-from-store is a way for some to cut costs and achieve the kinds of shipping speeds consumers now assume are consistently accomplished by Amazon, Nordstrom, and other retailers with good shipping reputations.
Best Buy’s strategy of shipping products directly to customers from 50 of their 1,500 stores, for example, was executed well in late-2013 and especially over the holidays, according to StellaService, which monitors various aspects of retail customer service. The ship-from-store fulfillment policy even led to shipping times that beat Amazon’s stellar record during the holiday shopping season, according to StellaService.
6. Store pickup with online order
This one is a bit of a head-scratcher because it puts most of the cost and inconvenience of obtaining an item bought online onto the customer. Yet, 44% of the 3,000 consumer respondents in the UPS study said they would like the option. Sometimes, this is essentially a proxy for same-day delivery, or it presents an opportunity to pay in cash for an online purchase. Sears just this week upped the ante in this category by offering a service that has a customer service agent delivering an online order to a customer's vehicle within five minutes of arrival — no need to get out of the car.
In any case, a good number of customers expect this among a wide array of cheap and getting cheaper, quick and getting quicker, shipping options for online shopping.
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