Consumers hate paying for shipping more than just about anything

Discussion
Photo: Getty Images/400tmax
Feb 20, 2020
George Anderson

Consumers will do just about anything to avoid paying for online orders to be shipped to their homes. That’s the takeaway from new research that reinforces the unwillingness of American consumers to pay anything beyond a product’s sales price and sales tax.

A survey of nearly 5,400 consumers in December by RetailMeNot found that 82 percent prefer free shipping to paying a fee to have their shipments expedited.

Cost is also a factor when it comes to eco-friendly shipping options. While 51 percent of Americans say they are willing to wait longer to reduce the environmental impact of shipping their orders, 70 percent prefer a lower price to making a small contribution to saving the planet.

The one time of year consumers are keen to have expedited deliveries is during the holiday selling season. RetailMeNot found that the ranks of shopping procrastinators are growing, although its report findings do not indicate if consumers want their goods delivered both fast and free for Christmas.

The findings of a survey of 2,500 consumers by Convey reinforces much of the findings in RetailMeNot’s study.

Cost was cited as the most important factor by 64.3 percent of respondents, with speed (18.7 percent) as the next most important attribute. Free two-day shipping has become the de facto shipping norm for the vast majority of consumers (79.3 percent), with in-store pickup, presumably important for its convenience and as a way to avoid shipping fees, cited by nearly 31 percent.

While the appeal of free and fast shipping is undeniable, RetailMeNot’s research finds that keeping up with competitors’ deals is a significant challenge for many retailers. The survey found that 63 percent of merchants are having trouble matching or beating shipping deals offered by their rivals.

DISCUSSION QUESTIONS: Will fast and free delivery or buy online, pickup in-store grow more as a percentage of total retail dollar sales volume over the next five years? What are the 63 percent of retailers that are having trouble keeping up with competitors’ shipping offers to do?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Retailers should focus on encouraging BOPIS as the increased customer traffic as orders are picked up also increases sales."
"Consumers don’t care nor do they have to realize anything about the real cost of shipping or that there’s no free lunch. Their expectation is to get the best deal they can..."
"For struggling retailers there is a need to recognize that this is the new normal and that it is actually the ante to stay in the game."

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25 Comments on "Consumers hate paying for shipping more than just about anything"


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Ken Lonyai
BrainTrust

Every merchant on/offline needs to look at the data and listen to consumers. If shoppers want these shipping perks, not providing them is a big mistake. We’ve discussed ad infinitum that in reality there is no free shipping and it has to be paid for somewhere, so burying shipping costs in the price of goods seems to work for consumers. Amazon is often not the lowest price provider, so there may be some room for competitors to hide delivery costs and remain price competitive. Nveretheless, there is no alternative for non-boutique sellers.

Neil Saunders
BrainTrust

Unfortunately for other retailers, Amazon has set the pace of delivery and everyone else is in a race to keep up. The problem is that Amazon can afford to absorb enormous shipping costs and its scale means it can build its own logistics solutions. Most other retailers are in no position to do the same so they find their margins severely squeezed.

Given that consumers are not likely to change their minds and suddenly find paying for shipping attractive, retailers need to find ways of reducing costs. This might be by encouraging or incentivizing collection from store, it might be by making more effective use of stores as spokes in the delivery network, it might be about testing minimum values for free shipping, or it might be about subscription schemes.

Ultimately the scale of the problem needs to be reduced. However, the genie is out of the bottle now and there is no going back. Margin erosion from higher shipping costs is here to stay.

Ian Percy
BrainTrust

The consumer’s product delivery expectations is one of retail’s most notable self-inflicted wounds.

Is it just my scepticism kicking in or do most consumers not realize that there is no such thing as “free” shipping any more than there’s a free lunch?

Gene Detroyer
BrainTrust

As noted in my post, I find it astounding that consumers don’t realize they are paying for “free shipping.”

George Anderson
Staff

I don’t think consumers think they are really getting something for free. Most look at the price of the product and the cost of shipping and do the math. The lowest price of those combined factors is the primary factor in their purchasing decisions. The next consideration of their decision tree is the relative ease of taking possession of the product (time to deliver or pickup). For many, that means Amazon, which I would argue has become the relative standard for both price and convenience in American retailing.

Bob Amster
BrainTrust

Fast and free delivery is not a sustainable model. It costs the retailer to offer it and someone is eventually going to have to pay for it. BOPIS is probably less costly to offer and has the advantage of bringing the customer to the store for that one more impulse purchase. Retailers should want, and hope, that BOPIS has more runway than free delivery.

David Naumann
BrainTrust
David Naumann
Retail Industry Analyst
7 months 4 days ago

While fast and free delivery is becoming expected by consumers, it has been a thorn in the side of retailers, especially small retailers. Executing on this promise profitably is a huge challenge. One of the best alternatives, though maybe not the best, is for retailers to strongly encourage consumers to opt for pickup in the store instead of home delivery. One way to do that is to offer them a percentage discount on all of their other in-store purchases on the day they pick up their online order.

Kathleen Fischer
BrainTrust

Offering fast and free shipping is becoming table stakes for retailers, and based on increasing customer expectations, this will continue to grow. Retailers should focus on encouraging BOPIS as the increased customer traffic as orders are picked up also increases sales.

Gene Detroyer
BrainTrust
“Consumers will do just about anything to avoid paying for online orders to be shipped to their homes.” This has been a discussion since “free shipping” was introduced. I find the shopper attitude to “free shipping” to be a bit bizarre. shoppers will not buy a $10 item with $3 shipping fees yet will buy the very same item for $14 With “free shipping.” “Free shipping” is not free. The buyer is paying for it. Any retailer who complains that they cannot afford “free shipping” because they are losing margin should also be complaining about rent and labor. They are the same thing. It is the cost of doing business. And when there is a complaint that Amazon can deliver more efficiently, where is the complaint that the Walmarts and Targets of the world’s labor and store costs are more efficient? Today the rules are driven by the consumer. If you want to play the game, you better be prepared and have a strategy that works within the consumer’s rules.
Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
7 months 4 days ago

This is one factor that makes online retailing so hard, and a game for deep pockets. A differentiated brand and product has some opportunity to implement certain thresholds for shipping. But typically after a $100 purchase, nearly every store – except probably items that need freight shipping – does free shipping. Stores like Wayfair that do even the freight shipping free are not profitable.

Retailers have to find savings and efficiencies somewhere else, and leave free shipping alone.

Georganne Bender
BrainTrust

The old “give customers what they want, when they want it, the way that they want it” always holds true. We have trained shoppers to expect fast and free shipping; when it becomes the norm it’s expected. What can retailers do? Perhaps something in-store that makes choosing BOPIS sexier with packaging, bounce back incentives or luxury pick-up areas.

I agree with Ken about burying the shipping fee. Consumers know they are paying it, but it’s not an in-your-face extra charge. Southwest gets it with its Bags Fly Free program. We know it’s not really free, we’re just happy not to be nickeled and dimed at checkout.

Ricardo Belmar
BrainTrust

Both fast shipping (two-day standard) and BOPIS are important for both retailers and consumers. Retailers should view BOPIS as their optimal route to achieving “same-day delivery” to their customers. Retailers that implement this effectively, providing one or two-hour in-store availability to consumers will win the hearts and minds of consumers! I expect BOPIS (if executed well by retailers – there are plenty of examples where this is not being done effectively) will grow slightly faster than delivery because this can be the best way for consumers who want that instant gratification of getting their product that same day rather than even waiting two days for delivery. This is why Amazon has moved to one-day delivery – it’s their best way to challenge BOPIS given they can’t expand Prime Now as widely without having a broad store footprint. The retailer that masters both one-hour pickup for BOPIS and a same-day delivery option will be the ultimate winner (looking at you Target, with Shipt leading this charge!).

Rich Kizer
BrainTrust

It is impossible to take much of a contrary position on these comments. It is interesting that as we conduct consumer focus groups, it is rather rare that having to pay for delivery comes up. However when we lift the cover and ask if they think delivery charges are OK, the conversation and position changes. One important point we must all remember: in business it is easy to give a service, etc., to remain competitive. But it is agonizing and risky to take a given perk back.

Jeff Sward
BrainTrust

I want it cheap! I want it fast! I want this super fast delivery to be free! Because it’s super important that I get my new socks tomorrow. Oh, and I want all of this to be eco-friendly. Actually–cheap, fast and free is good. All the green stuff can wait. Mother Nature know how important my new socks are.

Richard J. George, Ph.D.
BrainTrust

Just like for the cat that tasted fresh tuna, canned tuna is no longer an option. Fast and free delivery is the new normal.

For struggling retailers there is a need to recognize that this is the new normal and that it is actually the ante to stay in the game.

Ananda Chakravarty
BrainTrust

Retailers will offer incentives to make their BOPIS platforms perform as well as their online delivery. Once e-commerce is in place, the next jump is to offer BOPIS. Free shipping (and mitigating its attractiveness) is being built into retailer infrastructure. For Amazon it was green fields, for most retailers, however, readjusting continues to take time — but it’s happening.

Retailers have experimented with fast OR free delivery and incentives for pickup, varying delivery times and fulfillment options. Companies like Target offered a new Good and Gather granola bar in a more expensive bag when picking up a BOPIS order. A portion of the delivery dollars saved on pickup for the retailer goes straight to marketing their private label, branding, and retaining the customer for future pickups. These types of initiatives will drive the retail market which remains overwhelmingly in the store.

Shep Hyken
BrainTrust

First, what consumer wouldn’t prefer free shipping over having to pay for it? We surveyed over 1,000 consumers and found that a majority would be willing to pay for the service. That said, the total value has to be competitive enough to compete against those that might provide free shipping. All retailers, regardless of free shipping or paid shipping, must prove their value to their customers.

So for those retailers that can’t provide free shipping, they must offer value in other ways; competitive pricing, knowledgeable salespeople, an overall better customer experience, and more.

Mohamed Amer
BrainTrust
To my colleagues that treat consumers as perfect decision makers, sorry to burst your bubble: they’re not! Consumers don’t care nor do they have to realize anything about the real cost of shipping or that there’s no free lunch. Their expectation is to get the best deal they can because they figure the retailer is big enough to look out for themselves. They want their order delivered for free and the same day and are willing to pay a slight premium for that convenience and simplicity. Shipping fees give consumers a reason to abandon the proverbial shopping cart and is simply a hangover from the days when catalogs were popular shopping venues and everyone expected to pay shipping. Amazon changed all that. If you don’t kill your shipping fees, you are guaranteeing loss of sales to competitors and higher abandoned cart rates. The resultant death spiral will make it nearly impossible to escape the vortex. This is not a time to ponder or settle for others’ crumbs. To remain viable, you’ll need to expand your… Read more »
Steve Montgomery
BrainTrust

What will happen is free shipping will grow faster. What retailers should make happen is grow order online and pick up in-store. The hard thing about pushing that approach is customers are becoming used not only to free shipping but very fast delivery. Tough combination to compete with.

Patricia Vekich Waldron
Staff

Free shipping is table stakes for retailers, thanks to Amazon. To maintain margins retailers can focus on supply chain optimization and offer consumers value or incentives to pick-up in-store.

Craig Sundstrom
Guest

Methinks the question is misleading: BOPIS is a new, and thus relatively small, component of online, so logically it will grow relatively faster. But if it ultimately maxes out at 10, or 20, or (even) 30% vs 5% now (all hypothetical numbers) but in a vastly greater online market, what does that really mean? “Delivery” still rules, but both categories grew enormously.

TBH, I have objections to the underlying “RetailMeNot” survey: “forced response” is a great way to arrive at the answer you want. Let’s stop asking people if they want free shipping and start teaching them about why it’s really a bad thing (yeah, yeah, I know … those windmills really are a tough opponent).

Ralph Jacobson
BrainTrust

Reading so many of the “There’s no such thing as ‘free'” comments here kinda make me giggle … in the same way as when I hear politicians offer the same “free” stuff. Whether you’re a big or small retailer, this has become a cost of doing business. Build shipping costs into your retail pricing, and/or drop your expected margins by “eating” some of the logistics costs and build them back in over time, so it’s less visible to the shopper.

Bethany Allee
BrainTrust

I’m not sure that resistance to shipping cost really means customers are resistant to shipping costs. It feels like customers are railing against friction in their shopping experience. Thinking about shipping is friction. Every retailer has to face the fact that Amazon defined the seamless shopping experience and if they want to compete, they must match or beat Amazon’s operational excellence throughout the shopping experience, including shipping.

Alex Levashov
Guest

What is important here is to understand the sample of this survey — RetailMeNot is a discount coupon website, so their audience is bargain hunters, price sensitive consumers.
Other thing is that having “free shipping” hidden in the product price makes it easier for consumers to compare their options, no need to do extra steps of adding products to cart to see total cost.

What should retailers do? IMO the best approach is to experiment and try different options to see what works the best in your particular case.

William Passodelis
Guest

Fast and free shipping, as already said, is NOT sustainable. Having said that, there is really no free shipping. If you are a savvy retailer, you have built the shipping cost into the price.

I do not believe that the consumer thinks that they are getting a free shipment. The problem is that most seem to feel that if they are paying and there are shipping costs, then the retailer is making out charging them twice, i.e., it seems that most assume that shipping is already priced in. Perhaps that is because of Amazon?

Either way, shipping IS going to become a problem as we go forward. Amazon may be best situated to deal with it as they seem to be heading to a point where they control their own shipping. Also Walmart and Target need to accentuate the benefit of BOPIS as they have so many outlets and points of availability, and this drives customers to their store, and perhaps — just maybe — another sale of something?

wpDiscuz
Braintrust
"Retailers should focus on encouraging BOPIS as the increased customer traffic as orders are picked up also increases sales."
"Consumers don’t care nor do they have to realize anything about the real cost of shipping or that there’s no free lunch. Their expectation is to get the best deal they can..."
"For struggling retailers there is a need to recognize that this is the new normal and that it is actually the ante to stay in the game."

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