The cost of free shipping
Like any other time in history, consumers look for ways to cut costs on the goods they purchase. Savvy shoppers use technology to narrow in on special opportunities to buy more for less: “Big sale,” “BOGO” and “free shipping” banners can entice buyers to shop when they don’t need anything or buy more just to hit the price point that activates free shipping.
For consumers, there’s the obvious cost of free shipping: Amazon’s Prime service comes with unlimited free same-day or two-day shipping on millions of items for $119 a year. And the not so obvious: Want to get free shipping from Target? You’ll have to either be a loyalty cardmember (for a fee) or spend a specific amount of money, which consumers tend to hit so they don’t have to pay for shipping.
For national brick-and-mortar retailers — think Best Buy, Macy’s and Walmart — the cost is more evident. There’s a big price to pay with free shipping. To keep up with Amazon, the king of “free” shipping, traditional retailers have had to accept lower profit margins on thousands of items as they underwrite shipping costs and absorb the costs of free returns. One study puts the annual cost of moving all that merchandise at a staggering $1.5 trillion.
And that’s not to mention the environmental price — a record number of delivery trucks hit the road each day to delivery everything from silverware to socks.
The customer is always right.
According to FuturePay, a company that allows consumers to buy online without a credit card, 86% of online shoppers who abandon their shopping carts without making a purchase do so because they won’t pay for shipping. A National Retail Federation (NRF) study in 2019 found that 75% of consumers now expect free shipping on online purchases, even when they are spending less than $50.
To meet that consumer demand — or perhaps it would better be called a consumer command — retailers are coming up with new, innovative ways to get products to us for what, at least, appears to be free. Here are three of those ways and what they mean for online shoppers.
ONE: Click and collect
Traditional brick-and-mortar retailers have found new ways to use online sales to better leverage the value of their stores. Specifically, they’re more frequently offering “buy online, pick up in-store” services. One advantage of “click-and-collect” for consumers is it’s always free — no memberships or annual fees required. Another bonus: no more worrying about so-called “porch pirates” pilfering their purchases.
Retailers also benefit from click-and-collect. “Consumers want free delivery, and they’re
willing to meet retailers halfway to get it,” said Mark Mathews, Vice President for Research Development and Industry Analysis who heads research development for NRF. “And once they’re in the store, they are very open to seeing what else the retailer has to offer.”
TWO: Make the most of returns
What started with Zappos back in 1999 — free shipping and returns — is now something consumers count on. Walker Sands, a public relations and digital marketing agency in San Francisco, said 68% of online shoppers highly value free returns and exchanges. The downside to that is that while shoppers may return only 10% of what they buy in a store, they’ll send back as much as 40% of what they buy online. Tobin Moore, CEO and co-founder of Optoro, a Washington, D.C., tech company that works with retailers, estimates online returns will reach more than $1 trillion a year in the next five years.
That’s why returns are one of the biggest hidden costs of today’s omnipresent free shipping. Many returns will never be resold for their original value. As much as 10% will never be sold again at all, instead ending up incinerated, thrown away or donated to charity.
There is an upside. Retailers are more frequently using tech companies like Optoro and Happy Returns in Santa Monica, California, to build new supply chains so they can resell more of those returns. For consumers, that’s creating new buying channels, especially for refurbished electronics that have often been barely used. Plus, Optoro, Happy Returns and others now operate liquidation businesses — Optoro’s is called BULQ.com — where hard-to-resell, but basically good-as-new products can both dodge landfills and be purchased at rock-bottom prices.
THREE: Bundle to save
Want to save money and help save the environment at the same time? Opt for slower shipping of more products simultaneously. Bundled shopping — as opposed to express delivery of one or two products at a time — is greener, according to a study by Anne Goodchild, a transportation expert at the University of Washington. Goodchild found that delivery trucks emit less carbon dioxide when trucks are fuller and make fewer stops per week.
Some retailers incentivize that same kind of shipping by requiring minimum purchase levels before free shipping kicks in. But mostly, the choice to buy more while shipping less — even for free — is up to us.