- NETMEDIA International
[Tribune] Free shipping: the rise, fall and future of a controversial service
This article was originally published by Sabi Tolou, CCO at Sendcloud.
The question of delivery is controversial and a real headache. Should it remain free of charge for consumers while it generates costs and important constraints for professionals? Zoom on the costs linked to this service and which are still being discussed.
The comments about the delivery and its gratuity are going well on the internet and the opinions are shared. While some people say that free delivery is no longer popular, others say that delivery fees are a major constraint in the online shopping process.
Free shipping and free returns seem to have become the standard. Consumers have become accustomed to it and now demand to receive the product they want on the same day they order or at the latest the next day. But perhaps it is time to analyze this trend, because it is far from being without consequences: particularly difficult to manage for many e-retailers, carriers and parcel delivery services, the issue of delivery fees has become a real headache.
Retailers are sometimes singled out for charging delivery fees, but they don't do it just for fun. The reasons they do it have nothing to do with the consumer, but directly involve their profitability. So what to do?
Free delivery, the Grail for e-commerce giants
To better understand what is at stake when it comes to delivery fees, it is necessary to go back to the roots of the creation of e-commerce giants like Zalando. In order to gain as much market share as possible, these " giants " of online sales have relied on a powerful tool for consumers: free delivery. The purchase of products in bulk at rock-bottom prices reinforces this phenomenon and ultimately contributes to their growth.
The same applies to the shipment of packages, where the carriers play a leading role. In order to cope with the increasing number of packages being shipped each day, carriers also have to innovate, invest in new technologies and therefore pass on some of the costs in the delivery price. A real dilemma, then.
Disillusionment: when the bill rises for e-tailers
How could the e-commerce giants have managed not to charge for delivery for so long? It's simple, they have the resources to pay for it. But on the consumer side, many seem to forget the time and investment required to ship their packages. The costs of packaging and associated labor, the carrier and the various delivery runs (if any), not to mention the additional actions and costs associated with package returns are often not even close to being a primary concern for consumers. Yet all of these elements represent a significant loss for e-retailers, especially in the case of returns, where they have to deal with both the loss of revenue and the financing of the entire return handling process.
Delivery costs, now what?
Of course, everyone is expecting the problem to be solved with a magic wand. But, unfortunately, it's not that easy. While there are no miracle solutions for retailers, there are a few options available to enable them to offer home delivery at affordable prices for the consumer.
One of the easiest options to implement is delivery to a relay point. But improving the notification system for consumers is also a serious solution to consider. Indeed, even today, consumers are often given several hours slots for the delivery of their packages, sometimes forcing them to stay at home for half a day to be sure not to miss them. This is all the more surprising since it only takes 15 minutes for the deliveryman to hand over a package to its recipient.
For e-retailers who wish to persuade the most reluctant of the interest of free delivery, changing the conditions to benefit from it seems to be a good solution. Instead of offering free delivery as a matter of course, retailers should, for example, establish a threshold (often an order amount) above which delivery costs would no longer be applied. This way, consumers will keep in mind that delivery is not always free and will change their mentality as it was the case for many aficionados of Sephora or Zalando brands. This strategy will enable e-merchants to not only reduce logistics costs, but also improve the conversion rate. Moreover, by choosing wisely the free shipping threshold, sellers will be able to encourage consumers to add another product to their cart, thus directly impacting sales. This is especially interesting since a recent study shows that 73% of French consumers would be willing to add an additional product to their cart to benefit from free shipping. After all, many consumers prefer to invest in tangible products rather than one-time services like delivery.
Another option may also be relevant when it comes to optimizing the notification system to reduce costs. Today, consumers mainly receive them on their mailbox. Notifications sent via this channel could easily be drowned in the mass or simply forgotten by the consumer. Moreover, by using tracking platforms or social networks as notification media (Facebook Messenger or WhatsApp), consumers would not only benefit from information about the delivery of their package, but could also contact the e-retailer or the carrier without having to call the customer service on a premium rate number and wait endlessly on the phone.
Third and not the least: implement a strategy. E-retailers who use personalized shipping labels (based on weight, destination, etc.) for each order are likely to see their shipping costs skyrocket. By working with several shipping companies, they will be able to take advantage of the characteristics of each of them by determining, for example, which type of delivery is the most beneficial for different types of packages (light, heavy, bulky, etc.) or different destinations.
By implementing these tips, pure-play retailers can keep delivery costs down while ensuring their customers are fully satisfied. These changes, however simple, can make a difference and make delivery costs worthwhile.