Free Shipping Achieved with More SKUs in the Shopping Cart Also Increases Chances for Picking Errors
Inc. magazine reported that shipping things is a necessary evil for most internet retailers. As much as people like buying things cheaper online, they will not wait to receive the merchandise, especially if shipping costs significantly increase the final cost. It is now possible for small businesses to offer free shipping, next-day shipping, reduced rate shipping and so on. Research shows whenever possible, free shipping is a necessity for retail sites; a useful tool for promoting a site, improving customer service, and encouraging consumers to spend more.
Consumers expect free shipping at many retail sites. Either as a bonus for buying a certain number of items, or as an automatic feature of the site. Consumers actively seek free shipping when they search for sites to shop. According to Accent, data marketing research company, 88 percent of consumers would be more likely to shop at a site online if promised free shipping.
The appeal of free shipping is easy to see. In many cases, shipping costs can greatly increase the final price paid for an item bought online. If an item costs $25 and the shipping costs are $5, the shipping costs have raised the price by 20 percent. Price savvy consumers on the internet are searching for ways to save money and as the various research survey shows, people turn to coupons and free shipping as the fastest way to cut their final costs.
Increasing pressure on retailers to offer fast and/or free shipping is seen through promotions from Target, L.L. Bean, and Nordstrom this past holiday season. However, last year, Amazon spent approximately $6.64 billion on shipping while only receiving about $3.1 billion in payments for shipping, which raised concerns over how offering free or cheap shipping can become a significant cost.
Tim Hoj with WarehouseOS emphasized that the cost of free shipping places an important need to implement best picking practices.
Leaders are looking for a competitive advantage, have dynamic and experienced sales forces, and a corporate culture which is customer-focused and intent on building long-term relationships with satisfied customers. This is spoiled when picking costs are a larger percentage of the overall fulfillment process.
As retailers examine the costs versus the gains of offering free shipping, profit margins need to be evaluated. The good news is that consumers act to utilize free shipping offers, including adding more items to the cart to qualify for free shipping. In this case, the cost of free shipping becomes offset by higher average order values. Hoj noted that large orders to qualify for free shipping can also represent a great opportunity for mispicks due to the increased number of SKUs packed.
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- Free Shipping Means More SKUs and Increase Chance of Mispicks
- Internet Retailers Must Offer Free Shipping, But at What Cost?
- Retailers Offering Free Shipping Must Tighten Fulfillment Practices
- e-Commerce Customers Order More with Free Shipping but punish vendors for Product Shipping Orders