Shipping Isn’t Free, Despite What Amazon Says

Terri Reid | National Shippers Strategic Transportation COUNCIL

With the ever-increasing growth of online sales that most companies are grappling with, transportation professionals truly understand the challenge of offering consumers a wide variety of fast and “free” choices to stay competitive with other retailers selling online. There are many tradeoffs companies face between providing fast and cost-effective choices and selecting service offerings to attract online buyers; meeting customers’ increasing demands is a never-ending challenge.

Years ago, a colleague of mine in marketing, asked me to attend one of her team brainstorming meetings to discuss a new idea: “free shipping.” Of course, I thought I was being invited to explain the economic impact to our business and present ideas to defray the cost impact of offering such services before anyone else was doing it. I was prepared to ask many questions related to their estimations around the lift in sales the team thought we would get by offering free shipping. At that time, free shipping wasn’t a requirement to compete in the business-to-customer (B2C) arena, and in fact, B2C shipping strategies were just beginning to emerge.

Today, consumers expect free shipping either as a bonus for buying more, as a reward for loyalty or as an automatic feature when buying online.

You can imagine my surprise when the first question that I was asked was “which carriers offer free shipping?” (I kid you not – even I can’t make this stuff up.) So of course, my only option at that point was to dive into educating the team on the realities of transportation costs and turn the conversation into an educational session focusing on strategies to defray costs and protect margins, while offering a shipping incentive to customers.

Of course, the team was very disappointed to learn that shipping companies do not offer “free shipping,” but they were very encouraged when they understood more about guaranteed services, service and price tradeoffs, and that free shipping could inspire customers to shop more and spend more when they shop.

Today, consumers expect free shipping either as a bonus for buying more, as a reward for loyalty or as an automatic feature when buying online. Research shows that consumers actually seek free shipping when searching for online sites to shop.

Why does free shipping work? Well, if you think about it, have you ever been shopping online and go to check out, only to realize that you’re $10 away from qualifying for free shipping? You can fork over $6–$7 for shipping, or find another item to tack on to your order. No brainer, right? So, you happily increase your order amount. It’s really not surprising that “free shipping” has become the most successful marketing tool.

The good news? A well-designed program is a win-win for the retailer and consumer. If you are optimizing your free-shipping threshold, you are tapping into the psychology of choice and the value of the concept of “free.” So, no, shipping companies do not offer free shipping, and Amazon knows all too well that enticing customers through a well-designed free shipping e-commerce program could give them the most simple and appealing kind of choice. Consumers are savvy; they know companies aren’t really taking a loss on shipping – and internet retailers get their money somehow. But when we, as consumers see it as a choice, we feel a lot better about it.

The author, Terri Reid, is President of NASSTRAC and Director of Transportation with Caleres.

This article originally appeared in Fastlane and is reprinted with permission of NASSTRAC.