Why Free Shipping Is Almost Universal — And Why You Should Be Wary of It

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If you didn’t notice it, yesterday was celebrated in some quarters as Free Shipping Day. It does seem odd, though, to focus on a single day for free shipping when throughout the entire season free shipping has not really been viewed as a deal, but a requirement in order to close the deal.

Free shipping has evolved to the point that it’s “an expectation from consumers all around the country,” a necessity for any store that has hopes of “remaining competitive” in today’s marketplace, to quote a recent Adobe Digital Marketing post analyzing how retailers can use free shipping promotions to their best advantage. While 2,000 or so retailers were expected to partake in Free Shipping Day with some sort of promise of free shipping on orders placed, it was also fairly easy to find thousands of free shipping offers on December 16 or 15 or 14 or … you get the idea.

But what is it with free shipping anyway? Why has it become a necessity for many shoppers? Here, some explanation, in the form of five signs of just how powerful free shipping is to the e-retail transaction equation:

Many of us will only buy online if there’s free shipping. In a Consumer Reports poll conducted earlier this season, 23% of consumers said that one of the ways they’ll try to save over the holidays is by “purchasing exclusively from websites that offer free shipping.” In another survey, conducted for Discover consumers were asked about what kind of online deals they were looking for and what were their holiday shopping “must-haves.” In both cases, free shipping was the top answer. In yet another poll (this one from UPS), “free/discounted shipping” was the top selection when consumers were asked about areas where they’d like to see improvements from retailers. And if free shipping isn’t offered? Well, that’s been shown to be the top reason consumers abandon their virtual shopping carts.

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Retailers wouldn’t be including free shipping on purchases unless it was worth their while, and a survey of marketing officers by BDO demonstrates that throwing in free shipping is very much in their best interests, with free shipping named as the top overall tactic for generating online sales. (Promotions sent out via email came in second place.) Overall, 70% of the executives surveyed who work for top retailers said that free shipping would be the most important factor in driving online sales over the holidays.

We spend more when there’s free shipping. While there has been a noticeable rise in the number of retailers offering free shipping on all orders—no minimum purchase required—often, promotions are structured so that complimentary shipping is used as bait to get consumers to purchase more than they might have otherwise. With free shipping only if, say, the order is $50 or more, a retailer dramatically increases the odds of a shopper spending at least $50, while also making it more worthwhile for the business to cover the costs of shipping.

Regardless, it seems as if the presence of free shipping results in shoppers spending more, not less, which is somewhat unexpected. During the week after Black Friday and Cyber Monday, the Minneapolis Star-Tribune reported:

Surveys suggest that free shipping puts shoppers in a better mood, which may lead them to spend more. Where free shipping was offered last week, customers spent an average of $137 per order, according to the National Retail Federation. Without free shipping, the tab fell to $91.

(MORE: For Most Consumers, Plenty of Shopping Left to Do)

We’re likely to be irrational if there’s free shipping. The decision to buy or not should be dictated by the final cost one must pay out of pocket, regardless of whether one component of the transaction (such as shipping) is free. Yet this is not how the human mind works. The word “free” can play tricks on consumers, exhibited by the frequently irrational behavior that comes as a result of everything from free supermarket samples to a “free” second pair of shoes (after one pair is purchased at full price), to, of course, “free shipping” promotions. Dan Ariely, author of Predictably Irrational, shared his insights on the topic with the Wall Street Journal a few years back:

“Free is very exciting,” says Dan Ariely, a professor of behavioral economics at Duke University. “Free shipping is not just another discount.” Mr. Ariely found in an experiment that people are between four and five times as likely to spend $5 for an item if either the shipping or the item is free as they are to pay $2.50 for the same product plus $2.50 for shipping.

We go nuts for “Free Shipping Day,” even though we can get free shipping most days. According to data from the price-comparison site PriceGrabber.com, 59% of shoppers said they had been planning on taking advantage of free shipping deals offered on Free Shipping Day. This may seem odd considering how commonplace free shipping has been before Free Shipping Day, and how free shipping promos are likely to be around now that Free Shipping Day has passed. Many retail experts, such as Becki Dilworth of ShopAtHome.com, say that Free Shipping Day is now irrelevant. “The concept of a single ‘Free Shipping Day’ is passé and the expectation of free shipping, regardless of holiday season is now the norm,” Dilworth said via press release. “To adjust to this change, retailers are being forced to offer additional incentives, including no minimum purchase and faster shipping options.”

We’ll pay just to get free shipping. While Amazon Prime has benefits beyond free two-day shipping on most orders, the prospect of speedy shipping at no extra charge is enough to keep many Prime members paying their $79 annual dues. This is the case even as the typical Amazon order would easily meet the $25 minimum Amazon requires for anyone to get free shipping—albeit slower “Super Saver” shipping—on an order.

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One might think that the increased ubiquity of free shipping offers would mean that services we must pay for such as Prime and its competitor, ShopRunner, would be becoming less popular. The opposite is true, however. Membership in both Prime and ShopRunner is growing. By paying the $79 per year, a member no longer has to worry about searching for free shipping—no hunting for coupon codes, no waiting for an offer to arrive via e-mail. Also, that membership fee buys the shopper some extra time, which particularly comes in handy at this time of year. In a new poll conducted for ShopRunner by Harris Interactive, 65% of consumers said they would put off making purchases longer than usual if they knew they could get free one- or two-day shipping whenever they finally did make up their minds.

4 comments
SashaDivina
SashaDivina

We are offering free shipping on orders over $50 dollars on our led candelabra website and it seems to work like a charm making customers spend more (http://candelabrabulb.com)

jbd729
jbd729

A great website for online holiday shopping is The Online Shopping Mall (http://jimdavisenterprises.blogspot.com). It has many leading online retailers and highlights lots of holiday deals and specials, that help you save money. Check it out.

AdamSmith1
AdamSmith1

If anybody here is interested in learning how to trade working from home I can suggest a website to you that I recently found and become a member to. The name of the website is Traders Superstore, I believe you can find them on Google. Right now they are running a special too, they didn't have that special when I purchased. I never traded before in my life and now I love doing it thanks to Traders Superstore, their way of teaching how to trade made it very easy for me to learn.