Free shipping is fixing to be a permanent fixture for online shopping

As e-commerce has gotten bigger and bigger in recent years, consumers have become more comfortable shopping online, whether it be out of necessity or convenience. The numbers bear that out, too, as the percentage of goods ordered online has made major strides, especially in recent years.

And with the proliferation of e-commerce activity comes the consumer request, make that demand, for free shipping. Retailers have heeded that call to a large degree, with Amazon Prime members seeing that play out with free shipping for all goods ordered that comes with the membership fee of $99 per year.

The 2014 edition of the UPS Pulse of the Online Shopper Study pointed out that free shipping continues to drive purchasing decisions, with 58 percent of its study respondents having added items to their shopping carts to qualify for free shipping and 83 percent willing to wait an additional two days for delivery if shipping is free. What’s more, it noted that more than one-half of online shoppers said they want to see the total purchase cost early in the checkout process, and the majority prefer seeing the expected arrival date rather than the number of days it will take for the product to arrive.

Earlier this week, retail giant Target made it clear it gets that free shipping needs to be a bigger part of its e-commerce playbook, announcing that all online orders of $25 or more now qualify for free shipping, which is halved from the previous level of $50. Target officials said this move “makes Target’s new free shipping threshold among the most compelling offers in online retailing.”

This move echoes the takeaways of the UPS study in many ways.

Belus Capital Advisors Chief Executive Brian Sozzi said in an AP report that “The U.S. consumer now views free shipping as a right, adding that he thought retailers would do away with the charges altogether.

Amazon and Target are joined by another large retailer (among several) with Walmart whom offers free shipping for customers willing to wait 6-8 days for delivery.

Given all the news related to free shipping, I asked two of the most knowledgeable parcel consultants in the country about their thoughts regarding Target’s announcement.

Rob Martinez, president and CEO at Shipware LLC, an audit and consulting services company, said that this is a terrific move by Target to generate online sales and boost customer satisfaction.

And it’s also a direct shot across the bow to its primary online competitors Amazon and Walmart,” he said. “We follow multiple published surveys of online consumers, and free shipping is consistently cited as the number one most compelling online promotion. However, a word of caution to Target. Offering free shipping is a very expensive proposition.  Moreover, having a higher revenue threshold encourages upsell and additional revenue opportunities since many buyers will add items to the cart to qualify for free shipping.”

Jerry Hempstead, president of Hempstead Consulting, a parcel advisory firm, had a different take, comparing Target’s move to whistling in the dark.

“It’s an effort to abate erosion to other sites such as Amazon,” he said. “The offering is costly and unnecessary. Target lacks the critical mass of Amazon and it’s incredibly efficient fulfillment.”

Needless to say the experts’ opinions vary, but they both present valid points. Although e-commerce “feels” like it has been around forever, it really is still pretty new, and the same goes for free shipping.

Retailers are absorbing significant costs in order to provide free shipping for their customers. Will it last and continue to make sense or does it speak to a highly competitive and nascent e-commerce marketplace? It may be too early to say, but at the same time it merits our attention in the coming years.