EBizInsider

Shipping prices have gone up—but many etailers still offer free shipping at the same threshold. What does this mean to your bottom line? Can you continue to offer free shipping when times are tough? What can you do to still gain the sale?

Free shipping adds value to the online shopping experience. But with gas prices soaring, the cost of other services are following suit—including shipping and delivery fees from the major carriers. This presents a challenge to etailers, who have traditionally offered free shipping as a booster for sales.

At the advice of his developer, Reagan Klohn of Brandsport.com recently increased his site’s free shipping threshold to $100, from $50. He made this increase in April, and reports that this increase had little impact on his steady stream of orders and in fact, helped increase his bottom line. “While I still feel there is some intrinsic value in being able to market our site using the ‘free shipping’ terminology, (I’m) convinced the we can raise the free shipping threshold without hurting our business,” Klohn reported in an e-mail to Solid Cactus.

On BrandSport.com’s homepage, a banner in his header touts the free shipping offer. While higher than his previous threshold, this “Free Shipping Over $100” message still communicates extra value. And, with a higher threshold, average order sizes are encouraged to increase as well.

Online retailers could take a cue from BrandSport.com by looking at their own free shipping promotions. Perhaps it’s time to look at an old issue in a fresh way. If the threshold is at $25, perhaps raise it to $50 or $75. Take a look at average order size and make a decision based on that. Your “free shipping” ad is still accurate and simply sets the bar at a new, higher level. You may decide to cancel free shipping altogether. It is true that some online retailers have successfully removed free shipping altogether and have seen little impact on their sales.

In a previous eBiz Insider article we focused on the value of negotiating better rates with the major carriers. If an e-commerce site has the volume, this could also be an option to look into saving on shipping costs. Think about revisiting your busiest shippers and see what they can do for you in exchange for your continued high volume with them. Finally, with products like Solid Cactus’ Shipping Manager, etailers can set shipping rules down to the item level to ensure that they are not losing on shipping, but are instead saving every penny they can possibly save.

Rising fuel prices is not a new problem plaguing e-commerce. Research for this article uncovered articles in the New York Times, C|Net and other online and print publications covering the jump. On August 19, 2005, CNet.com reported that online retailers were beginning to worry about the rising cost of gas. Back then, it had risen to $67 a barrel. Clearly we are looking at newer, vastly higher numbers.

The good news is that inflated fuel costs will only fuel e-commerce as more would-be shoppers look our way. Clearly, there is much to protect. A survey by Harris Interactive in April found that 57% of surveyed shoppers said it is free shipping that urges them to make an online purchase. This same survey also revealed that 33% of those surveyed are shopping online to save money on gas. Clearly, breaks on shipping will continue to impact consumers’ decisions about where
they buy.

There is no doubt that online sales will continue to soar as people opt for the information super highway rather than the asphalt highway. Online retailers can still be smart and increase sales and revenues by building value in other areas, while not losing on shipping costs.

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