The holiday shopping season is starting early this year with more competitive offers from online and catalog merchants. An article in The New York Times on October 8, 2007 points to free shipping offers as the key to winning holiday gift business. The article points out that L.L. Bean got out ahead of the pack with an early offer of free shipping without a minimum purchase. Although customers are drawn by the savings, making the leap to unconditional free shipping requires careful consideration on the part of the merchant.
The biggest objection to unconditional free shipping is that it severely diminishes the profit margin on purchases and average order size drops. As a high volume and profitable company, L.L. Bean can afford to take the hit, in hopes of attracting new customers. The “must ask” question then becomes, if your free shipping offer does not grow your customer base significantly, providing long term ROI, can your business afford the loss? Noting the metric that “54 percent of online retailers had tried unconditional free shipping offers, but fewer than half said they would use the tactic this year,” the statistics don’t inspire a great deal of confidence.
For many, conditional free shipping and limited time offers on free shipping may provide a safer field for experimentation. To create an offer that protects your business:
- List which items carry the highest shipping costs. Consider excluding these items from the offer – see the article’s example of L.L. Bean excluding items like canoes and couches.
- Use your web design and navigation to lead customers to the items you want them to buy. Choose products that both perform well and carry lower shipping costs and place them on the front page or in a special holiday gift section.
- Let cross-sells help increase average order size. Look at popular product offerings and match them with items that either match or are in the same interest area, like a sweatshirt and matching pants or a fly rod and tackle box.
- If you offer free shipping for a limited time only, choose the period wisely. Shipping ground will take some time, especially as holiday shipping volume increases, so ideally your free shipping period should be well before Christmas so you don’t lose the goodwill you’ve created with late deliveries.
Do you have any great holiday strategies you’d like to share or perhaps your experience with free shipping offers? Post a comment to share them with us and with other M.O.M. and SiteLINK users. We look forward to hearing from you!
Director of SiteLINK Services