Web "free delivery" is here to stay
January 5, 2000
by David Cooperstein
(IDG) -- This holiday season, several online retailers picked up the shipping tab – a big draw for the four-fifths of Net consumers who say shipping costs figure into their purchase decisions. Now e-commerce retailers must find ways to reign in these delivery expenses without losing customers.
Click-and-mortar outlets like Payless.com, CVS.com and Circuit City have figured out ways to offer shoppers free shipping year-round. They allow customers to order online and select a store location for pickup. Others, such as Office Depot, provide free shipping for volume shoppers once they hit a set dollar amount. And other sites, such as Outpost.com, offer standard no-charge shipping.
Although costly, free delivery addresses a few e-commerce inhibitors. Free shipping will be a perfect enticement for the 11 million households that will begin shopping online in 2000 who will be less affluent and more price-sensitive than current surfers.
However, even today's Web consumers are cost-conscious. A recent Forrester Research survey of 5,831 Net shoppers revealed that, for 82 percent of consumers, shipping costs factor into their purchase decision. Furthermore, 62 percent of consumers say they pay close attention to shipping costs. Free shipping also cuts the chance that a shopper will abandon his or her cart when the total order price includes no delivery charges.
So far, free delivery has been a customer acquisition ploy. But in the long term, customers will head back to stores if shipping charges return. Internet retailers that focus only on top-line growth and not bottom-line expenses will get caught in this free-shipping conundrum. To increase their control over shipping giveaways, retailers must offer it selectively according to purchase size and customer loyalty.
Another strategy is to embed shipping charges in the price. Given that items that are costly to ship like computers and consumer goods will account for 55 percent of online purchases in 2000, it follows that by building shipping costs into the item price and then offering "free delivery," customers may perceive that they found a deal.
"Free" delivery, built into merchandise costs, will make finding the best deal online more challenging for consumers. A Lexmark Optra E310 printer costs more at Outpost than at Dell. How much more? Almost equivalent to Dell's shipping charge for the printer.
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