Posted by John Healy, CEO of Dydacomp
Customer acquisition is going to become more difficult as large retailers are maximizing organic search and pay per click to sell more efficiently on the web and as comparative shopping engines handle more and more traffic. Additionally, comparative shopping engines typically serve up the big sites first because they are able to offer lower prices and well known brand names, making it tough for you compete.
As a result, when you finally do have someone on your site, you need to do everything in your power to convert them during that visit. One of the marketing “weapons of choice” retailers often use to try to accomplish this is “free shipping.”
We at Dydacomp have been telling our clients to be really careful about their shipping offers. Shipping is a hard cost that has to be covered with a fee. We estimate that Dydacomp clients spend around $150 million a year just in shipping. Covering this cost can come at the expense of more sales: according to Comscore Research a little over half of consumers surveyed are “somewhat likely” to cancel their entire purchase if free shipping is not offered. But there is good news and that is almost 70% of those same consumers are willing to pay $9.99 and under for shipping:
Carefully look at what Amazon does with shipping as well. Most of the time they are trying to keep it below $9.99/order and this shipping expense issue is certainly one of the driving reasons they want to do fulfillment for you on the items you sell on Amazon.com (as well as speed of delivery). Speaking of delivery speed, one of our Client Advisory Board members pointed out to us recently that you need show the consumer value in paying for shipping. In his example free shipping can be offered as a tier, with a 7 – 10 day delivery window, while the paid for shipping options get the order delivered to the consumer faster. One other benchmark: Many sites offer consumers free shipping over a certain dollar amount or if you are a member of their loyalty program both of which you can handle using Mail Order Manager.
Finally a shipping rule of thumb from Dydacomp: you can probably get away with charging for shipping on orders under $100 if the shipping costs are close to what the consumer would have spent in sales tax for a reasonable delivery date, possibly 3 -5 days from placing the order.