Consider the Cost: Why Free Shipping Is a Shared Expense

Free shipping is basically expected nowadays. When shopping online, you may be caught off guard if you see a shipping charge added at checkout. At that point, you have a couple of options: decide if the product is worth paying $5-10 extra to have shipped; search online at another retailer who does offer free shipping; or, take advantage of in-store pickup if there’s inventory near you.

Free shipping is an incredibly powerful tool to motivate a purchase, but it isn’t really all that ‘free’ – it’s just a matter of who covers the cost. And in a cultural climate more concerned with protecting the environment, retailers and shoppers aren’t the only ones sharing the burden.

The Sliding Scale of Free Shipping

I mentioned the motivating power of free shipping and the role it plays in the buying journey. If I know a retailer offers it, I’m more likely to spend my money there, and that translates to my increasing loyalty. The way I see it, free shipping is a bit of a sliding scale, where the retailer or the shopper covers a smaller or larger portion of shipping expenses, depending on the scenario. The company may eat the cost at one time to win consumer affinity, but through devoted shopping dollars, the consumer helps to lessen the blow.

What immediately comes to mind as an example is my identity as a Target REDcard holder. I don’t have to pay for unlimited, free two-day shipping, as one does with the membership cost for Amazon Prime, but Target sure does get a chunk of my budget each month. Big picture: I see it as a great deal. The retailer is rewarded with my loyalty, and in the end, we’re both pretty pleased.

Because of my work with Ketner Group client OrderDynamics, I watch the industry closely for trends related to order fulfillment and shipping. Our friends at OrderDynamics put out a study this year called Omni-2000, in which they found that 75.7% of retailers with an eCommerce site provide free shipping with a minimum purchase. In cases like this, the retailer foots the bill to deliver your goods. However, the cost to you as a consumer is often spending more than you intended. And because you’re increasing the size of your order, the added sale helps to reduce the hit the retailer will take for covering shipping costs.

It all costs someone something – it’s just a matter of how you look at it.

A Greener Future for Free-Shipping Shopping Habits

Financial costs aside, retail fulfillment has become increasingly complex, and the associated logistics have ramifications for the environment as well. Turning orders around more quickly means more trucks are on the road. In the name of timely and convenient delivery, those trips aren’t optimized to fit the most boxes in one vehicle at a time. Plus, there’s the additional waste associated with cardboard boxes and packing materials.

With Earth Day right around the corner, this is an interesting conversation to have in the industry. I found this short five-minute video extremely insightful, discussing the environmental cost of two-day shipping, if you’re interested!

I believe because of present discussions around global warming and carbon emissions, we’ll start to see retailers become more vocal about their proactivity to reduce their global impact, while still coming through on omnichannel convenience. And if it’s an important issue in the heart of its customers, retailers ought to gain even more loyalty in the process.

I’m also curious to watch for the emergence of other fulfillment channels as retailers work on efficiencies, cost savings and waste reduction efforts. Will there be wider availability of BOPIS, BORIS and ROPIS offerings, perhaps? Incentives besides free shipping to nudge conscious consumers to select a “greener” option? Driverless cars and drones? We’ll have to wait and see.