More and more retail websites in the U.K. are offering free delivery, weighing expenses and adjusting product prices so they don't take too much of a hit. However, there is more to the story than just balancing out the cost of free delivery with the gain retailers can realise by offering it.
Through analysis of more than 7000 visitors to the top 30 e-retail websites during the critical Christmas shopping weeks, we found that the answers are more complex than e-retailers may realise.
Key findings:
- Free delivery is becoming increasingly common and highly satisfies shoppers when available: 66 per cent of online Christmas buyers said they received free delivery offers, 23 per cent said free delivery wasn't offered to them, and 11 per cent couldn't recall if free delivery was offered.
- Free delivery has limited value as an acquisition tool: It is slightly more effective when it doesn't involve restrictions, though we've seen free delivery with restrictions impact customer satisfaction less than it once did, as shoppers become more accustomed to limitations on offers.
- Delivery costs are a huge factor in whether people choose to buy online or offline. Almost one-fifth of all shoppers (17 per cent) report that when they choose to buy something from a retailer's store instead of website, avoiding delivery costs is the main reason. When they choose to shop on a retailer's website instead of in-store, 31 per cent report that the availability of free delivery encouraged them to buy online.
- The availability of free delivery is a key reason shoppers choose one online retailer over another. Free delivery heavily influenced almost half of online purchasers in their decision to purchase with the e-retailer they chose instead of from a competitor.
In a difficult economic climate, retailers need to weigh their own goals and satisfaction profiles. If a primary goal is laying the groundwork for loyalty down the line, these incremental advantages of free delivery may be justified. In addition, individual e-retailers may find different factors encouraging their visitors or certain customer segments (such as first time visitors versus repeat visitors).
To conclude, delivery costs still really matter to shoppers. High delivery costs (or perceptions of high delivery costs) drive people to buy in stores and low delivery costs drive people to buy online. Not only do delivery costs influence what channel shoppers choose, they influence the retailer they choose. Only when e-retailers understand the behaviour of their own customers will they really understand the true cost to their company of offering free delivery -- or the true cost of not offering free delivery.
Larry Freed is president and CEO of ForeSee Results.
