Surprising though it may seem, delivery costs can make or break a sale. There is nothing that online shoppers hate more than getting all the way to the checkout and then being slapped with exorbitant delivery charges at the last minute.
Equally, free delivery can help guarantee a sale. “Free delivery is effective as long as the pricing of the product is the same as anywhere else,” says Forrester Research analyst Rebecca Jennings. She adds that it is also a great way to help drive traffic. “If you know you can offer it, I would shout about it.”
Before Christmas, many retailers were doing just that. John Lewis had huge banners on its site promoting free delivery – normally only available to those spending more than£100 – while retailers such as Game, La Senza, Tesco and Boots improved their search engine optimisation so they appeared on the first page of results when searching for free delivery.
Hitwise analysis shows that, for the week ending December 8, the number of searches containing the term free delivery increased 30 per cent year on year. John Lewis ran a free delivery offer online from late October to Christmas and through the Sales. The move followed a brief offer last Christmas and a four-week summer trial. “The results have been incredibly positive for us, both commercially and in terms of customer satisfaction,” says John Lewis head of web selling David Walmsley.
Some argue that free delivery is either not profitable or that it forces the retailer to disguise such costs elsewhere within its proposition. Walmsley says John Lewis can afford to offer it because of its product mix, which includes a lot of big items that cost more.
However, he adds that it is constantly revising the commerciality of such a proposition. “The main thing is the balance between the dilution of the order value – which naturally goes down when there is free delivery – and how many more people convert,” he says.
If a retailer does offer free delivery, it is vital it doesn’t become a second-rate service. “It’s about having a brand that you trust to deliver the product,” says Jennings. At John Lewis that promise to deliver is paramount, says Walmsley. He explains that it has built in a “recovery window”, allowing for a few days’ leeway on delivery.
John Lewis also found that offering free delivery helped persuade customers to shop early in the run-up to Christmas. “It helped us smooth out demand. We have seen people shopping earlier and more frequently,” Walmsley says.
The more options, the better
However, free delivery, which tends to be within a loose time frame such as five days, won’t suit everyone. Experts agree that the ideal scenario is to offer such a service alongside other options. A Boots spokeswoman says: “As long as the delivery charges are clearly communicated and reasonably priced and the goods delivered on time, Boots believes its customers prefer the empowerment that comes from paying for the delivery option that best suits their lifestyle.”
At Comet, the basic free delivery option is communicated alongside the product before you’ve even clicked into product details, but the web site also actively encourages shoppers to upgrade to either standard delivery or one of its premium delivery services if the five to eight-day window offered by the free basic service isn’t suitable. “To me, that’s perfection and should be the norm,” says IMRG chief executive James Roper.
Many retailers use the incentive of free delivery with a certain spend to encourage customers to increase their basket size. Argos ran pre-Christmas promotions along these lines and Boots offered free delivery on orders of more than£45.
Above all, transparency about charges is essential. “A lot of people make a big deal out of the amount of shoppers that abandon their shopping cart, but often [building a cart] is the only way to find out the delivery charge,” says Hitwise research director Robin Goad.
Disguising such information is also pointless. As Jennings says: “Price comparison sites mean it’s easy for people to compare postage and packing.”
High delivery charges not only risk losing retailers sales, but tarnishing their reputations, too. Roper says: “A lot of retailers see it as a profit opportunity, but it irritates people. Customers are not stupid and know rough delivery charges and how much it costs to send things.”
Net-a-Porter delivery charges start at£10 for a one to two working day service delivered by DHL Express. Although many of its products cost hundreds of pounds, there are cheaper items on the site for which the basic delivery charge could be as much as a third of the cost of the item itself. However, the retailer defends its charges. “Our shipping rates are priced at an appropriate level because they cover express delivery and do not rely on standard postal services,” says vice-president of sales and marketing Alison Loehnis. She says most packages are delivered the next day and orders can be tracked and estimated delivery times obtained if required. Insurance is also included. “Most significantly, we do not charge for returns or exchanges,” she says.
Even if retailers can’t afford to offer free delivery, offering clear and fairly priced options is one of the best presents they can give their online customers.