With the holiday season approaching and gas prices still higher than anyone could've imagined, analysts predict more consumers will shop for Christmas gifts online this year to save at the pump. Low flat-rate shipping and free-shipping promotions may be the most effective means to attract and convert price-sensitive shoppers.
Consumers consistently rate free shipping as their most sought-after promotion. "Sticker shock" from higher than expected shipping charges is considered the top reason for abandoned shopping carts. Last year's economic conditions prompted online sellers to be very aggressive with shipping promotions -- offering lower qualification thresholds, free overnight shipping and even free return shipping.
Controlling shipping costs
How can you control costs when offering online shipping deals to your customers and prospects? Think about how to work with carriers. You could work with several carriers and ship each order based on the cheapest option, or develop loyal relationships with fewer carriers. Opinions are mixed on which of these options is better.
Patrick Sedlak and Jeff Mueller of Sedlak Management Consultants, a Highland Hills, Ohio-based logistics and supply chain firm, advise against putting all your accounts in one basket. These days, they say, with carriers' rates constantly changing, having a choice allows you to cherry-pick deals in real time and can save you money in the long run.
What's more, rate-shopping software like AnyRate or Logicor integrates with warehouse management systems to help determine the lowest rate from a number of carriers on a per-parcel basis. Prices are quoted according to dimension, weight, destination and delivery date.
Zachary Applegate, search and marketing manager, and Ryan Douglas, Internet marketing manager, for PlumberSurplus.com, a Riverside, Calif.-based online seller of plumbing supplies, prefer to build relationships with carriers.
The more volume you do with a carrier, the more leverage you presumably have to negotiate better rates and better service. Price is not the only consideration; speed, reliability and customer service all are important as well -- especially for fragile or oversized items. The costs of damaged goods, return shipping and unsatisfied customers can outweigh the cost savings of a cheaper carrier.
In terms of controlling costs, also understand that free shipping doesn't have to be universal. There are several ways you can offer free shipping. Consider these four:
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Restrict the offer to higher margin products or items with low shipping weight and dimensions.
- If you drop-ship, look to partner with manufacturers. Here, in exchange for promoting their brands, vendors may ship items direct to the consumer for free from their own warehouses.
- Consider offering free shipping as an affinity program, extending it to your best customers or e-mail subscribers.
- Offer free shipping only above a certain minimum purchase threshold. This encourages new and repeat customers to build larger baskets.
The decision to offer shipping promotions to select customers, on select products, above a certain minimum purchase threshold or not at all depends on a variety of factors, including your product mix and margin, your fulfillment methods, your shipping carrier relationships, and your competitors' prices.
Some retailers view free shipping as a strong holiday marketing strategy; however, they will reallocate budget from other areas to absorb the shipping costs.
Get mileage out of free-shipping offers
If you decide to offer free shipping, it's important the message gets through at every marketing touch point, from search engine to shopping cart. Here are some examples of where to place your free shipping message:
- Meta tags and descriptions. Henderson, Nev.-based online shoe retailer Zappos.com appends its title tags with the phrase "Free Shipping Both Ways & 365-Day Return Policy." These can positively impact clickthrough rates from search engine result pages -- even when Zappos.com is not the first result. Some of its meta description tags also include the offer, reinforcing the incentive.
- Search ads. Including your offer in your search ad headlines and body copy can help improve your clickthrough rates.
- E-mail marketing. Test free-shipping calls to action in e-mail subject lines, but always repeat the offer in your e-mail creative and landing page. Examples from this summer include eBags' "Pain at the Pump? Stay Put. We'll ship it to you for Free" and Macy's "Gas prices got you down? This week clearance items ship for only 99¢."
- Data feeds. Some comparison-shopping engines like Shopping.com and PriceGrabber.com allow merchants to include a promotional message on a product-by-product basis. Other engines allow users to select the term "free shipping" from a menu of predetermined promotions. Take advantage of these fields. Your listing may even include a "Free Shipping" icon or appear higher in results when users sort by total cost (inclusive of shipping), depending on the engine.
- Affiliate promotions. If you're offering free shipping for a limited time only, make sure your affiliates are notified in advance, and that all coupon codes work before you post them or send them out.
- Offline advertising. Include your offer in radio ads, postcard marketing or direct mail, and state your restrictions clearly.
- Homepage. Devote significant homepage real estate to the free-shipping offer, including delivery date cutoff times as the holidays draw nearer, in addition to banners at the top of each individual Web page.
- Category pages. Endless.com, an online shoe and handbag store operated by Seattle-based Amazon.com, shows "Free Overnight Shipping" below each product thumbnail and price on its category pages. This helps communicate the value proposition to visitors who land on category pages through search and ignore the banners on your site.
- Product pages. Mentioning a product's free shipping eligibility on the product page (near the price or "add to cart" button) also is useful, for the same reasons as noted above.
- Shopping cart. If you offer free shipping above a threshold, use a "carrot" that reminds customers "You're only $X away from free shipping!" and a "continue shopping" link. Most online retailers who offer free shipping above a certain cart total don't do this.
Ponder the variables
Additional Holiday Selling Tips
Offering free shipping isn't the only way to get customers to come to your site this holiday season. The following is a list of additional holiday tips for Web merchants:
* Emphasize the comfort and convenience of shopping online by stressing its benefits. Namely, save time and gas; incur no parking hassles; and no lines.
* Overcome fears, uncertainties and doubts. High-quality product images, zoom, multiple product views and even videos help put consumers at ease, because seeing and handling a product is the strongest advantage of shopping in retail stores.
Another consumer fear is online privacy and security, so exhibit your assurances like McAfee Secure (formerly Hacker Safe) badges. And since customers want to make sure their gifts arrive on time, showing shipping options and cutoff dates clearly on each product page is very helpful.
* Show off your value propositions. Customers may research on your site, only to purchase from a different retailer they know and trust. Communicate why you are the best retailer to purchase from -- even if you can't offer the lowest price. Each of your product pages should answer the question, "Why should I buy from you?" Testimonials, guarantees and even free gift wrap can have a powerful influence on conversion.
* Position yourself as a one-stop shop. Most holiday shoppers have a long list that includes gifts for children, in-laws, bosses, teachers, neighbors and friends. Gift finders and gift guides that suggest items by gift recipient and personality help solve customers' problems and increase your average order value.
A good example is Target.com's gift finder. You also can capture valuable search engine traffic by including "Christmas gift ideas for Dad," "Christmas gift ideas for boys" or "Christmas gift ideas for boys age 6-9" in your gift finder results page's title tags.
* Promote gift cards. An October 2007 Consumer Reports National Research Center survey found 62 percent of consumers planned to give gift cards last holiday, and gift cards were the most-wanted gift among women and third most-wanted among men. Gift card sales are expected to hit $100 billion in 2008. Electronic gift certificates always are free to ship, and arrive instantly, making them popular among last-minute shoppers.
* Offer gift certificates for gift givers. In lieu of free shipping, promote repeat purchases by offering gift givers a gift card they can use for themselves.
* Point them to your retail store if you have one. Some shoppers consider visits to the shopping mall inevitable but will still use the Web to research offline purchases. Direct them to your retail stores by promoting store locators and showing in-stock availability. An advanced technique is to use geo-IP targeting.
