For anyone with mainly UK customers, “Free Delivery” is almost certainly a better phrase to use…

(Sorry if this has been mentioned by someone else already)..

It would be great for some of our retail community to jump in here and share their experiences. But the older a post is, the less likely folks will notice new comments.

So I’ll jump in for the interim.

Free overnight shipping in #8 is from Endless.com – that’s an Amazon company. They can leverage their existing, uber-efficient fulfillment operations (that they even offer to retailers with their Fulfillment by Amazon program) so they have that strategic advantage. I agree this is cost prohibitive for many retailers.

The main idea of #8 is to mention your shipping offer in category listings on products that apply, whether it’s free, flat rate or *gasp* free overnight.

About question 2, there are ways to minimize your costs including return-to-nearest-store (if possible) and free return, store credit only. That way you keep the money up front, eat the cost of the return and in the future you take a hit on margin for the replacement item, or the customer may not redeem the credit.

If you’re a retailer that actually does make money on shipping, you *can* still be profitable if you keep your return rate low with detailed product information, reviews highlighting product strengths AND weaknesses. Retailers also cite lower return rate with multiple product images and video.

In Zappos’ case, it used its free shipping policies as a marketing/word of mouth campaign to become the customer favorite. So it saved a lot of money in marketing costs although I’m sure they have some deals with UPS also.

1. In “Way” #8 above, a jacket with price $38.95 has free OVERNIGHT shipping. How is that even possible? If their pricing is on a “typical” retail keystone structure, their cost is approx $19.48, leaving $19.48 gross profit. Even if they used a USPS flat rate priority mail envelope, postage purchased direct, it would cost them $4.80 with online pricing. That’s a 25% reduction in gross profit. And THAT’S USING PRIORITY MAIL! Their offer is for FREE OVERNIGHT. That has got to cost more than $4.80.

What am I missing? Is there a magical source of super cheap shipping options that I just haven’t come across? Or do all of these Free Shippers have cost of goods sold structures under 25% of sales price?

2. The other issue is returns. In the case of a return, it’s common to credit the purchase price but not the shipping fee or return shipping fee. (I have to exclude Zappos from any discussion because I have no idea how, from the very start, they had the shipping charges/return policies that they had.) If you offer free shipping, and you have to take a return, you are absorbing the entire cost – the cost of the product return as well as the cost of shipping the item out in the first place. Even if you raise the product price to cover the “free” shipping, it’s one thing to cover that cost and have it absorbed by the customer’s payment to you. But if that item is returned, you have paid for the original outbound shipping and no longer have the payment from the customer to cover it. You are now negative.

Does anyone have any insight as to how to deal with either of these issues? Free shipping is a huge motivator but these 2 issues specifically have blocked our ability to do anything with it.

But there’s an affordable alternative for smaller retailers who simply can’t absorb shipping costs: Offering a free product or gift card from another company or advertiser as an incentive. The perceived value of the incentive will be high enough to increase conversions and boost AOV–But it will cost far less than the price of shipping and handling.

Here’s an article I wrote about it:
http://blog.trialpay.com/2009/03/05/when-free-shipping-doesn%E2%80%99t-deliver-give-away-another-company%E2%80%99s-product-instead/