By Tom Caporaso, CEO of Clarus Marketing
SAN FRANCISCO (TheStreet) -- The Internet has changed completely the rules of the retail road for consumers. No longer are they at the mercy of "the only game in town" -- which, back in the 1990s, was the local fashion or entertainment outlet or that catalog they got in the mail every three months. If consumers don't find what they want quickly, conveniently and at a price they're willing to pay, it's very easy for them to search for a better deal with just a click or two on their laptops or a few flicks on their mobile gadgets.
That doesn't mean consumers are always thrilled by what online retailers offer. Sure, the prices can be more appealing and the range of options is about as limitless as they could hope for, but too many e-tailers still don't fulfill the one expectation consumers have when they shop online.
Consumers have two simple words for the online retail industry: Free shipping! Is that so hard to understand?
It's no mystery why consumers want free shipping:
It's free. This shouldn't require explanation, but just in case: When consumers can choose between paying to get something or having it delivered for free, they're just as likely as retailers are to choose the "free" option.
It lowers their overall costs so they have more money to spend on things they want. If retailers want to know the biggest reason consumers abandon their online shopping carts in the middle of a transaction, it's simple: Right when they're about to click that "place your order" button, they discover the shipping costs have jacked up the total purchase cost far more than expected -- and out of their acceptable price range. Just think: If only those consumers had received free shipping, all those sales wouldn't have been lost.
It just feels right. A free shipping offer helps convince consumers that the retailer cares about them. If there's one factor that improves a consumer's online shopping experience more than any other, it's free shipping. (In fact, consumers prefer free shipping over same-day delivery -- or even lower prices!)
It's (almost) everywhere. At this point, free shipping is so ubiquitous that consumers no longer see it as a "special offer"; it's now a "customer expectation." When retailers don't offer free shipping in some form or fashion, that's their choice, but they should expect to lose business to all of those e-tailers that give consumers what they demand.
What Does Free Shipping Mean for Retailers?
Clearly, retailers shouldn't count on consumers to meekly accept unreasonable -- or even reasonable -- shipping and handling charges. The good news is that free shipping inspires consumers not only to shop more but to spend more. For instance, the millions who joined Amazon Prime, a service that offers "free" two-day shipping for an annual fee, spend an average of $1,340 a year with Amazon, more than double the $529 non-members spend there every year.
A well-designed program is a win-win proposition for both retailers and consumers:
- Consumers know how much shipping is going to cost before they even start shopping -- eliminating all those unpleasant surprises (for both parties) at checkout.
- Subscription fees can help cover (or completely pay for) a retailer's shipping costs upfront.
- Having made a financial commitment to shop with a specific retailer, consumers will try to get their money's worth, creating greater loyalty and increasing the likelihood of repeat sales for that retailer.
- A retailer with a subscription program can market exclusive deals and discounts to members, which will enhance their shopping experiences -- and improve the retailer's brand image.
- As program subscribers, consumers will be more open to reading and responding to the retailer's messages and more likely to encourage their friends to take advantage of attractive savings opportunities the retailer offers.
Success in the online retail industry means catering to consumers' demands in a cost-effective manner, and the cost of shipping has become the single most important factor in purchase decisions. A prepaid shipping program that meets and exceeds customer expectations will enhance the online shopping experience for consumers -- better yet, it'll also generate more revenue, more repeat sales and an abiding sense of good will for savvy retailers.
Online retailers should remember two words -- free shipping -- and customize their programs from there.