The disadvantages of offering free shipping

insights  February 11, 2019

When you think about today’s e-commerce, you think of fast deliveries, easy purchase processes and free shipping policies. This last element especially is increasingly taken for granted by both consumers and etailers. It used to be a unique selling point of many online stores, but nowadays this free service is seen more as the mainstream. But is it smart to deliver products without charging the consumer for the service? Let’s have a look at the disadvantages of offering free shipments.

Nowadays this free service is seen more as the mainstream

It changes the buying behaviour of consumers

When no costs are asked for the shipping of products, this encourages consumers to make smaller orders more often. If a fee is asked for the delivery of products to the homes of consumers, consumers will be more inclined to order multiple products in one order. When this delivery is free, it is not financially necessary for consumers to place one large order. With free shipments there will not necessarily be more purchased in the online store, but instead just more often. Free shipments can therefore lead to consumer complacency, while shipping costs actually encourages large orders.

This changing buying behaviour can be seen, for example, with Italian Zalando customers. They were placing more and more single item orders, so Zalando decide to ask for shipping costs from Italian consumers[1].

It creates extra costs for the etailer

When consumers order products more often, but the quantity of products sold does not increase, this will result in higher costs for the retailer. The influence of shipping costs on the conversion can be enormous. A large proportion of online stores miss out on potential income from shipping costs. Some etailers therefore choose to pass this on in the sales price, but this can risk losing some customers. Raising the shipping costs can reduce costs and ensure that the consumer does not have to pay shipping costs several times for each order of more than one item. Another common strategy employed by etailers is that they will only offer free shipping to consumers if their total order value is above a certain amount.

It puts extra pressure on the environment

The frequent ordering of smaller orders at a time instead of bundled deliveries ensures that more delivery trips are necessary. This means an increase in kilometres travelled for small-scale deliveries. The problem also lies in the fact that instead of including one-off purchases in other shopping trips, like grocery shopping, people are making more one-off online purchases while the number of shopping trips remains unchanged[2]. This applies especially to free returns because these are generally one-off pick-ups that cannot be organised into bulk pick-ups or deliveries.

Offering paid deliveries should not be seen as barrier in ecommerce. The most important thing for an online store is communicating a clear policy regarding deliveries to consumers, whereby it should not be thought that offering free shipments is the only option. Offering free shipments will not be a viable conversion tool forever and should primarily be used as a marketing tool or limited time campaigns. Also offering delivery subscriptions is an option to still charge for the delivery of products. The choice of whether or not to ask for shipping costs, ultimately depends on the unique nature of the products and store and the policy of the competitors.

[1] Ecommerce News (2018), Zalando asks for shipping costs for the first time.
[2] Power Retail (2017), The sustainability of e-commerce deliveries.
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