. . . And they’re off. I’m already seeing lots of discussion popping up about online holiday shopping. Internet Retailer reports that LL Bean is already promoting free shipping with no minimum (in October!).
We’ve done quite a bit of research in this area, so I thought I might do a few subsequent posts about the issues we’ve studied most closely. Nice and early, so we can all feel stressed out about the paltry 82 (!) shopping days we have left (or more like 53 days if you’re trying to make any last-minute tweaks to your e-commerce site before Cyber Monday!)
First up: free shipping, since LL Bean is getting the ball rolling. (By the way, LL Bean was ranked 8th in our survey last spring of customer satisfaction with the top 100 online retailers, so they clearly know what they’re doing).
Our research last November and December of more than 10,000 shoppers to top e-retail sites shows that 41% of respondents cited free shipping as the primary factor in buying from the retailer. And, a full 79% of survey respondents said free shipping generally influences them to choose to buy from one retail site over another.
Free shipping, undoubtedly, is necessary to compete in the critical holiday season. But, is it really a competitive advantage? Does it drive short-term sales and long-term loyalty? And, are free shipping offers equally effective for repeat customers as for those that click on a retail site for the first time?
Here’s what we found:
- Offering free shipping leads to a 2-point (2.5%) bump in customer satisfaction and a 2-point (2.4%) increase in a site visitor’s likelihood to purchase online
- The impact of free shipping is negligible on the future behavior most tied to loyalty: likelihood to purchase next time (which is only 1 point, or 1.1%, higher for respondents offered free shipping that for those that weren’t)
- Free shipping generates goodwill as measured by enhanced perceptions of the image of the retailer and likelihood to recommend the site to someone else.
In short, free shipping is a cost of entry into the holiday retail game (customers have come to expect retailers to compete for their business during the holidays with deals, discounts and gimmicks not necessarily available during the rest of the year), but it doesn’t appear to be the most effective tool in driving long-term loyalty.
Free shipping is also an effective sales tool for first-time customers who may otherwise have bought from the competition. But, retailers should recognize that free shipping is more effective in creating intangible benefits than at impacting the bottom line.
Free shipping, especially when it’s truly free (no restrictions or limitations that make a customer feel the offer was “bait-and-switch”), can create a lot of goodwill for an organization. But, it won’t drive long-term behavior change,
So know what free shipping is and isn’t good for and use it accordingly.
More discussion of the pros and cons of free shipping in Bob Tedeschi’s column last week.
Next up: Cyber Monday tips.
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