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Free shipping: Fact or fiction?

  • How can online merchants save on logistics costs to pass on free shipping savings?
  • The holidays are coming; how can consumers get a real deal?

For many consumers the two words “free shipping” are the deciding factor between making a purchase and abandoning their online shopping cart. Some savvy shoppers have caught on that the adage “there is no such thing as a free lunch” almost always applies to free shipping, but many are still willing to go through with their purchase.

Online merchants advertise year-round and, in particular, during the holiday season offer free shipping on many of their products, and can do so by marking up their products’ overall price to offset the lost profit in shipping the goods. Offering free shipping is not viable for all businesses, particularly for many small online merchants who cannot afford to absorb 100 percent of the shipping and handling costs.

What is an online merchant to do?

A December 2019 survey by Digital Commerce 360/Bizrate Insights revealed that the two most essential factors in choosing retailers when shopping for the holidays were free shipping (67 percent) and past experience with the retailer. Forty-nine percent of the respondents said all their holiday purchases included free shipping and 29 percent said free shipping was included with 74 percent to 99 percent of their online orders.

To capture these shoppers, online retailers do have options to cut down on shipping costs while skipping product mark-ups and offering free shipping to retain new and loyal customers. To reduce shipping costs, online retailers should work early in the year with their logistics provider to get the best shipping prices based on volume.

However, many times it does signify slower delivery times. Setting minimum order value thresholds coupled with stipulations regarding destination (e.g., shipping only within the contiguous U.S.) can help cut back on shipping costs. Several logistics providers offer a menu of delivery options based on the speed of delivery and weight.

Early bird catches the worm

Online merchants can also save for themselves and, ultimately, their end customers by taking a multicarrier approach and working with various logistics providers, thus having flexibility and the best possible shipping rates. Be aware that some logistics operators do have new customer onboarding cut-off dates early in the fourth quarter or even before, depending upon the market at the time.

To avoid peak surcharges due to excess volume, online merchants should forecast as best as possible using their COVID-19 pandemic volume numbers as their baseline. Share in advance your sale and promotional dates with your logistics provider and be aware of some logistics operators’ peak surcharges for oversized packages.

When planning promotional dates, it is important to consider offering some of your best promotions and only on a limited number of stock keeping units (SKUs) ahead of the usual holiday shopping rush that typically commences on Black Friday. Early planning and promotion can help you avoid peak surcharges that, in turn, do not have to get passed on to the customer. 

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How can consumers get a true free shipping deal?

Besides the free shipping promo codes and adding more items to your shopping cart to qualify for the free shipping threshold, there are a few new and not-so-new shopping options some shrewd shoppers are hedging their bets on for this holiday season. 

(Image: DPDHL)

Many online merchants offer member programs based on a set monthly fee that includes free shipping. These member programs often come in handy when buying various items on one website. These loyalty programs also often include extra incentives and first dibs on certain items before they go on sale to the general public.

Consumers can also benefit from the various online services popping up, requiring annual or monthly membership fees to shop for multiple items from hundreds of participating retail partners and receive free guaranteed shipping.

One popular option that some consumers are willing to forego convenience for is in-store pick-up. For the online retailers with a brick-and-mortar store presence, offering an omnichannel experience that can benefit customers by allowing them to pick up items faster instead of waiting for delivery can also help them save on last-mile shipping.

Planning early and forging relationships with logistics operators can make a world of difference in savings for online merchants of any size. Early planning is also vital for many consumers trying to get the best holiday deals. Still, those willing to venture outside of the typical online shopping experience with loyalty and member programs can save a considerable amount in the long run.

Published: November 2020

Stage Image: Pixabay

Lee Spratt

CEO, DHL eCommerce, Americas

With more than three decades of experience in the logistics and technology industries, Lee Spratt has served as CEO for DHL eCommerce Americas since 2008. He oversees the Americas operation that encompasses 20 distribution centers and three corporate offices in the United States and Canada with approximately 3,000 employees. Before his current role at DHL, he held several leadership positions focused on the U.S. domestic market. Lee also held upper management positions in ecommerce software and telecommunications companies. A native of North Carolina, Lee is passionate about helping his B2C online merchant customers thrive.

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