Without Free Shipping, We’re Not Buying

Online shoppers really like free shipping—and apparently, stores are willing to oblige. The percentage of online purchases that include free shipping is way up.

Per a Chicago Tribune story, 42% of online sales in 2009′s third quarter involved free shipping, up from just 31% in 2008′s first quarter. While the proportion of purchases with free shipping was up, overall e-sales in the third quarter of 2009 were down 2% compared to a year ago.

I’m not sure how to take this, however. It’s not entirely clear whether stores or consumers should be happiest about the rise in free shipping. Have online retailers become more generous in giving free shipping? Are shoppers more inclined to purchase the minimum $25, $50, or $75 of goods that’s often required to get free shipping?

Free shipping sounds great, but it can make shoppers behave irrationally. Check out this story I’ve referenced before (see #6 on the list), which mentions that you’re four or five times more likely to make an online purchase if an item costs $5 but has free shipping as you are if the same item costs $2.50 and shipping costs $2.50.

Considering the minimum purchase that many retailers require for free shipping, this “freebie” may in fact push people to spend a lot more than they’d intended. Net result? Retailers win.

Survey: Costco Given Retail Crown for Best Shopping Experience

American consumers don’t just like buying in bulk—they like the shopping experience at one bulk-buying warehouse store a lot more compared to other retailers. Based on the results of a new survey, Costco has been named the retailer scoring the highest overall ratings with shoppers.

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Kohl’s gave free shipping to it’s most valued card holder customers (MVC) since 2007 and took it away in August promising on Facebook they were working on it – telling MVC’s to keep checking their emails. To date Kohl’s has not replaced the loyalty benefit and has not replied to it’s most valued customers.

MVC’s have interpreted this to be a message from Kohl’s to shop other retailers. Many have stopped shopping Kohl’s and cut up their Kohl’s card. There was an article in the Wall Street Journal (Retailers Feed Holiday Demand for Free Shipping) and Chicago Tribune (Friends and fans: Kohl’s and other retailers learn that Facebook connects stores with loyal customers)

Kohl’s has not responsed to it’s MVC’s and is projecting a 30% increase of online revenue for 4Q – not sure how this will be met after losing their MVC’s.

http://online.wsj.com/article/SB10001424052748703816204574485233689205064.html?mod=WSJ_hpp_RIGHTTopCarousel

http://www.chicagotribune.com/business/yourmoney/sns-200911050802mctnewsservbc-facebook-retail-mw21,0,3320388.story
http://money.blogs.time.com/2009/12/02/false-economy-think-youre-saving-money-think-again/ False Economy: Strategies to Save That Actually Make You Spend – It's Your Money – TIME.com

[...] It's commonplace to get duped into buying more than you normally would have. Many retailers have carefully-considered dollar minimums that a shopper must meet to get free shipping. So, even if you only wanted to buy one $12 item, you [...]
http://money.blogs.time.com/2009/11/19/free-shipping-day-whats-the-deal/ Free Shipping Day: What’s the Deal? – It's Your Money – TIME.com

[...] Without Free Shipping, We're Not Buying [...]
http://money.blogs.time.com/2011/03/11/why-retailers-prefer-ship-to-store-over-plain-old-shipping-to-the-customers-home/ Why Walmart and Other Retailers Prefer Ship to Store to Plain Old Shipping – It's Your Money – TIME.com

[...] times more likely to pay $5 for an item with free shipping than they were to buy the same item for $2.50 when shipping cost an extra $2.50. Perfectly logical, [...]