Should you offer free shipping from your online store?
A growing number of online businesses are offering free shipping to their customers, and you may be wondering if you should jump on the free shipping bandwagon. There is certainly evidence to show that free shipping offers generate more sales, but retailers need to weigh the associated costs against the projected benefits.
If you have done any online shopping yourself, you have probably encountered a number of different free shipping offers. Some retailers offer free shipping for orders above a certain limit, often between £50 and £100. Others offer free shipping to customers who enrol in a service and pay a fee. Amazon Prime is a good example of that business model.
It is important to look at what other retailers are offering, but it is even more important to know what customers are actually looking for. The results of a recent consumer survey are very enlightening, and they should be helpful for retailers trying to balance the cost of free shipping against the potential benefits.
Free Shipping Remains Popular Among Consumers
It should come as no surprise that free shipping is a popular perk with online shoppers. The 2014 Holiday Shopping Survey commissioned by mail services giant Pitney Bowes revealed that customers ranked free shipping as more important than fast shipping, with more than 8 in 10 consumers preferring free to fast.
The 2014 Home Delivery Survey conducted by business advisory firm Alix Partners found similar support for free shipping. In that survey, consumers said that free shipping offers had a strong influence on their online purchasing decisions. Some 69% of the 1,016 respondents cited free shipping as a major factor in their buying decisions.
A 2014 survey conducted by UPS and digital analytics company comScore revealed even more about the value consumers place on free shipping offers. That survey found that 58% of the more than 5,800 shoppers surveyed had added an extra item to their cart just to qualify for free shipping.
The Value of Free Shipping Varies by Age Group
While most consumers find free shipping important, the perceived value varies by age. The Alix Partners study found that free shipping is especially important for shoppers in the 35 to 44 age group. Some 78% of respondents in that age category said free shipping was a very important factor in their purchasing decision, compared to about half of respondents overall.
Free shipping was least important among consumers aged 18 to 24. Even so, 63% of respondents in that age group did say free shipping had an influence on their buying decisions.
Older Buyers are More Patient
This UPS survey found that 83% of those surveyed were willing to wait an additional two days for their packages if they got free shipping in return. The 2014 Home Delivery Survey also revealed that older shoppers were more willing to wait than their younger counterparts.
Some 54% of buyers 65 and older were willing to wait a week to get their packages if the goods were shipped for free. Only 22% of shoppers between 18 and 24 were willing to make the same trade-off.
Younger shoppers were the most demanding when it came to time of delivery. Some 15% of respondents in the two youngest age groups (18-24 and 25-34) expected to receive their goods within two days even when shipping was free. By contrast, only 5% of respondents between 55-64 and 4% of those 65 and older had the same expectation.
The results of these surveys show how important it is to know your customer demographics. If the majority of your customers are younger, a combination of free and fast shipping will probably yield the best results. If your customer demographics skew older, free shipping is more important than quick delivery.
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