Free Shipping in 2006
Sean Williams

If you are like me, you love to shop online, but the thing that keeps you from doing more online is the cost of getting the items you want to your front door. This holiday season changed that a little bit. I received more emails touting free shipping than ever before. Most had a limit of what you needed to spend in order to get the benefit but there were some who had no limit. Some did not have offer free shipping, but they did offer express shipping for the same price as standard shipping. The retailer I saw pushing complimentary shipping the most was LL Bean. They sent me email after email. I even saw a TV advertisement around their offer.

Why isn't free shipping even more common?

The reason why you haven’t seen every retailer coming out with a shipping offer has to do with the way they position their brand and their companies pricing strategy. Some retailers feel that they should not be promotional. They feel that their brand has enough prestige and proprietary products that if someone really wants to have their product they will pay for it. Brookstone is probably a good example of this. I have never seen an offer from them arrive in my inbox or my mailbox. The same goes for a company like Tiffany’s. In a way they are right. Offers are very promotional and ones having to do with shipping are the most promotional. They feel offers degrade their brand so they just don't offer them.

Free shipping is being hindered by a second reason

The second shipping offers are not as popular as they should be has to do with the fact that many retailers simply can't afford them. An apparel company typically pays $3-7 to ship something to your house, which is a small hit to their overall profitability when they offer to take care of the shipping. However, going back to our prior example, a company like Brookstone sells massage chairs and those can cost from $100 - $250 just to get them to your house. Granted, not everyone is buying something like a massage chair, but given that these products don't have a high margin rate to begin with, the company may simply break even if they give away the shipping. Obviously, this is not why companies are in business.

The future of free shipping

More and more the retail environment is becoming shipping friendly. One of the major reasons is that you have coupon sites out there such Discount Quest promoting free shipping as a major area on their websites and emails. This makes it something that consumers run across constantly. Also, companies are realizing that consumers want to shop from the convenience of their home and do away with the time it takes to travel to the mall, find a parking space, brave the cold, and then find the store in the mall only to be assisted by an unhelpful associate. The increase has been pretty amazing when you consider a company like LL Bean always took the staunch position that they were non-promotional, as it was their corporate philosophy and today they are kicking out free shipping emails at one per week, blasting this across all of their catalogs and televising their offer on national TV. Shipping offers whether free, discounted or flat will continue to be out there and likely will be an even larger part of our lives in 2006.

What does this free shipping trend mean for the consumer?

The consumer is going to benefit from this trend as it is not going to stop. Personally my hope is that every company takes on the Staples philosophy and offers free next day shipping on everything they sell. Currently, the distribution networks that companies utilize (most simply use UPS) won't allow this, but if you take a Staples model with 18 distribution centers to get you the product you want the next day and apply it to a national level, then it makes it all the more feasible for companies to charge less or nothing for shipping. I know of course the answer is going to be the inventory cost is too high for companies but I think there will be ways to deal with this as well and increase the number of inventory turns companies see overall. In the end it may mean a smaller presence and investment in mall stores as consumers turn away from this shopping experience in order to enjoy the joy of shopping from home. Net net, consumers will continue to benefit. Just make sure that the price of the item is not higher than what you might pay in retail so that the company can cover the cost.