Free Shipping to be Heavily Promoted This Holiday Season

In their quest to build online sales, more retailers are exploring the best way to offer free shipping. The elephant in the giant room of online sales, Amazon, offers a program designed to boost loyalty with free shipping to customers who belong to Amazon Prime. While free shipping is just one of the many strategies Amazon uses to maintain market dominance, it has definitely attracted the attention of consumers who are paying close attention to the bottom line.

A recently published Forrester Research consumer survey looked into the reasons consumers abandoned their carts during online shopping sessions. For 44% of respondents, shipping and handling costs (often the place where a retailer can build in profits) were too high. Online marketers got the message. In the 2010 season, nearly half, 49%, of e‑commerce transactions included free shipping.  In 2009, that number was 44%. Free shipping is increasingly a part of e‑commerce activity for the rest of the year as well. In 2009, 37% of online sales included free shipping. So far this year, 47% of online sales have been made with free shipping.

Larger well-​known retailers are launching a variety of free shipping options. Late last year L.L. Bean announced free shipping on most of its items. And Williams & Sonoma soon followed with its own free shipping program which involves charging customers a modest annual fee for this convenience. Where does that leave smaller retailers that serve niche audiences? Many are joining sites like ShopRunner which has negotiated good deals from vendors like UPS and can bring down shipping rates to affordable levels for online retailers. Combining that strategy with a program that charges customers an annual service fee might prove lucrative for online retailers, especially those that compete directly with Amazon.

As the competition heats up, look for more retailers to promote free shipping programs.

[Sources: Woo, Stu. Amazon Battle States Over Sales Tax. WSJ. 3 Aug. 2011. Web. 15 Aug. 2011; Demery, Paul. The dawn of the age of free shipping. Internet Retailer. 31 July. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.