I think free shipping is here to stay and has become a must-have to compete. However, some retailers like Walmart have created an incentive to pick up the item in the store and that not only saves the retailer the shipping expense, it also creates the opportunity for more sales through impulse buying. I see subscriptions as another method some retailers may try, but the subscription would have to include more than just free shipping, possibly a percentage off on all purchases or points accrued toward future purchase savings. It’s more a matter of being creative and finding unique opportunities for your business that will motivate customers to respond.

Free shipping is what it is — a business development tactic for online retail, a loyalty reward for shoppers and a transition toward the variable pricing that is reflective of the total cost of sales. The honeymoon will end and customers of retail, as has been the case with airlines, auto repairs and medical services, will realize that the total cost is comprised of all inputs. Retailers are well served by ship-to-store and consumer experience on-location needs to take customer satisfaction to new levels in acknowledgement of the visit provided.

I think trying to reduce a consumer expectation or change an expectation never works. You can’t change consumers or consumer behavior. That has been the issue with retailers for years. Retailers try to make consumers conform to their method of doing business. E-commerce is consumer-centric so the consumer is in charge.

The problem is not free shipping. The problem is how we think about free shipping.

It is true that Amazon has set an expectation of free shipping to consumers. Pure-play e-commerce companies view free shipping as part of marketing, whereas retailers view free shipping as an expense. That is short-sighted.

Free shipping is not going away. Retailers need to adapt their business model, streamline processes to make them efficient and low-cost, negotiate the best rates they can with USPS, UPS and FedEx and offer free shipping with a minimum purchase. What retailers need to focus on is building the average sale, the customer LTV and retention rates. These will ultimately pay for the costs of free shipping.

While we can’t dispute the fact that free shipping is an attractive option at point of online sale, I’m not so sure consumers expect it every time or if they do they realize that the cost is taken care of elsewhere in their purchase and it’s not actually free. Loyalty schemes where points can be built up to use against shipping might work, or perhaps even very low shipping fees will be enough to keep consumers happy. It’s the high fees that in my view create an issue for consumers.

Retailers are not going to rid themselves of free shipping. It’s become a cost of doing business. They may be able to get consumers to accept slower free delivery or a minimum purchase to qualify, but free shipping is not going away because consumers hate to pay for delivery. And Amazon, with over 60 million Prime subscribers, is going to keep it that way.

Don’t pay Peter from Paul’s pocket! Sure free shipping is a challenge, but getting shoppers hooked on the idea that they get a discount for doing an in-store pickup is just bringing free shipping’s margin-eroding behavior to a new front. If retailers us the click-and-collect pickup discount as a short-term promotion to create awareness — great. If it becomes the norm then it will just erode margins.

Despite Amazon’s $25 free shipping limit, many retailers are resisting by setting a higher limit. This is a good way to wean customers off the immediate expectation and drive up the basket size value.

Otherwise — retailers should focus on the in-store pickup but be careful not to erode margins with the easy, knee-jerk reaction of discounting as a quick fix.

If the store evolves to become more experiential versus just transactional, you can provide different options for the acquisition of the product besides just shipping it. Over time we can educate and influence the new retail shopper to use alternative methods for getting the product instead of the outright priority being put on delivery because of online retailers disrupting the industry.

Pickup, delivery and shipping can be done in such a way to capture more incremental basket lift and impact the customer experience in a way that negates the need for free shipping.

Free shipping and returns became standard customer expectations over the years and they’re here to stay. At the same time, retailers need to provide the same Amazon-like level of service to stay competitive. Subscription-based solutions like Prime with the same or next-day delivery options and in-store pick-ups are a way to go for those retailers with a vast high-street presence. For others, it’s either providing additional incentives, as Professor Kahn noted in the article, or figuring out other ways to provide more value in exchange for a longer delivery time.

We are (finally) seeing brick-and-mortar retailers offering appealing in-store pick up options for online orders. Walmart Grocery and Amazon Fresh Pickup are great examples. As is Target’s new store format, with a separate entrance for in-store pick up orders. But the most common store pickup experience today remains a slog to the old layaway desk in the back of the store to wait in line. Brick-and-mortar retailers have got to accelerate the refitting of their stores to make in-store pick up a more appealing option that offers convenience, immediacy and cost savings.

The high-level suggestions in the article and even in the discussion questions are a start, potentially, to easing the pain of free shipping. However the challenge needs to be addressed at the systemic level. Shoppers will continue to demand stuff for free so it’s time for all retailers large and small to look into the very latest innovations around emerging technologies, like blockchain, to minimize supply chain and transaction costs. This is where innovators are reducing and even eliminating costs as we speak. There’s a ton of good insight around these newer capabilities on the web.

Amazon, through Prime, has been successful at convincing consumers that shipping is free. So retailers need to find a way to blunt this with some sort of collective delivery service offering to defray the cost, eat the cost of shipping and hope there is enough room in the product margin to cover or, as Walmart is trying with a few new tactics such as pick-up discounts, change the perception. Challenging times for any retailer that wants to hold on to its margins and customers.
As long as Amazon can use its other businesses to shore up its lack of profit margins in its retail business and have investors and Wall Street not care, then many retailers will have a difficult time competing.