3 Reasons for Online Retailers NOT to offer Free Shipping

Free Shipping may be offered by a lot of online retailers these days but is it really the right thing to offer on your site? Are businesses going to be able to sustain this blanket offer or are we going to start seeing more conditions placed on the “Free Shipping” offer?

Below I outline 3 reasons why I don’t believe Free Shipping is right for most eCommerce sites and also give some quick thoughts on where I think online retailers are heading with these blanket offers.

1. Your average basket size will decrease with a Free Shipping offer
It’s natural for shoppers to seek value for money and it’s no different when paying for shipping. When shoppers are required to pay a fixed shipping cost they tend to want to get value for money, and this tends to mean buying more. If a customer doesn’t have to pay for shipping they will tend to purchase “on-demand” meaning placing multiple orders sometimes very close together or waiting till they actually need an item before purchasing it. Not only does this increase your postage and handling costs, but also means you could lose the subsequent sales to a competitor.

An alternate to offering a blanket fixed postage cost is to offer Free Shipping for orders over X dollars. If X is set at a correct value greater than your current average basket size this offer will increase your average basket size significantly enough to warrant the shipping cost to your business. My thought is that as we move forward into 2014 and beyond we will see more online retailers retracting their blanket Free Shipping offers in favour of these basket size dependent offers.

2. You lose your ability to have Free Shipping promotions
Free Shipping promotions are a great way to reengage dormant customers or incentivise first time customers. By being selective with who you offer the promotion to you can lure dormant customers back or acquire new customers while not affecting your postage revenue from customers who are happy to engage with you without this added incentive.

Free Shipping promotions also give you another reason to market to your customers and allow you to promote new features of your store. For example “Download our App and receive Free Shipping on your next order” or “Subscribe to our newsletter and receive Free Shipping on your next order”.

There are many more ways you can use Free Shipping as a promotional tool, the above only serving as some examples, and if you already have a blanket Free Shipping offer across your site you lose these tools.

3. It doesn’t make money
Based on my discussions with online retailers that offer blanket Free Shipping most acknowledge that the additional volumes generated from the offer are not paying for the postage costs they are incurring. Many justify it as a customer aquisition tool and therefore attribute the cost to marketing. Moving beyond 2014 I believe we are going to see less of these blanket offers as retailers establish themselves and no longer require Free Shipping to acquire new customers.

But remember, there’s no such thing as Free!
On a number of the larger international sites shipping may appear to be free but in reality it isn’t. Rather based on your location these sites are including shipping in the cost of the product. The added amount is usually based on the retailer’s average basket size meaning that if you as a customer place an order which is larger than the retailer’s average basket size, you actually end up paying more for shipping than you would if it wasn’t free.

So what do you think about offering Free Shipping? Is it working for you? What do you think the future is of blanket Free Shipping offers?

3 Reasons for Online Retailers NOT to offer Free Shipping

Do you really need support for your website?

Before you read this and think, “but my website isn’t big enough for all of this”, think what will happen if your site is down for an extended period of time, the door to your store is closed. Not only do you lose sales, but also potential customers who may never come back and may even go social on the matter (think Click Frenzy). The below tips are for websites of all sizes, and should be read in the context of your site’s needs, however I do believe the following relates best to a new site starting from ground zero.

One of the things most commonly forgotten when launching a new website is support. And its never thought about until its too late.

It’s that frantic “My website is down!” call to your developers on the busiest day of the year only to be told, “The application looks fine, there must be something wrong with your servers”.

Now this may seem absurd to you that the person who wrote the code is taking no responsibility for the site being down, but rightfully so, if they have done their job correctly your infrastructure should be decoupled from your application. That is, the application is in no way tied to the infrastructure. So if they tell you the application looks fine, what they are really saying is they can see no errors on the website relating to the code they wrote.

So what can we do about it? How can we make sure this doesn’t happen to you?
Based on my past experiences I have come up with the following list of do’s (and don’ts) when launching your new website and thinking support.

Don’t rely on your developer to setup your production environment’s infrastructure unless they will be supporting it, and even then make sure you get a second opinion.
What a developer uses on their development environment in “single-user-land” doesn’t always suit the real world of concurrent users. The people supporting you should know your infrastructure inside and out, before problems arise. It should be your support team who is designing and building your infrastructure so that when the problems do arise (and they always do), they know what to look for and more importantly can’t pass the buck.

There are two types of support: application and infrastructure.
As I have already alluded to above different people have different areas of expertise and in my experience your infrastructure support team will not take on the application support, it’s a different skill set. Make sure you have a support agreement in place with your developers at the time you sign off the website which outlines their responsibility should there be any problems with the website code.

Make sure backups and maintenance are part of your infrastructure support agreement.
Backups are obvious and understood by everyone but for some reason many people don’t think servers require regular software updates. Servers run on Operating Systems (OS) just like your personal computer does. Now think how often you are being prompted to update your computer’s OS. Servers also require these updates otherwise it leaves them vulnerable to all kinds of issues most importantly security vulnerabilities. Any support agreement should include the regular maintenance and software updates of your servers.

Know your Service Level Agreements (SLAs).
Your SLA is the agreed amount time your support company will take to respond to different types of issues. The time normally is dependent on the severity of the issue and can range from hours to days. SLAs can also include the hours that support will be available. Eg. 9 -5, 24/7 etc. Some support companies may offer significantly cheaper support than others, but this normally comes at the cost of worse SLAs. Think about the cost to your business in lost revenue if your website is down and then check to see if your agreed SLAs match your expectations.

Don’t put a Ferrari engine inside your Datsun.
Infrastructure support teams love to over engineer. It’s the way they can be sure your site will “never go down”. While it’s hard for non-technical people to know what they need and don’t, getting a second opinion is always useful. In general if you are starting up a new site and start hearing terms like “auto-scaling”, “multi-availability zones”, “replica databases”, “reverse proxy cache” you are probably venturing down the over-engineered path. Remember there’s no such thing as a free lunch and these features come at an additional cost. Again, you need to make sure the cost of your infrastructure is relative to the revenue that will be lost should your site have a problem. My advice, if you are just starting up a new site and have no idea what these terms mean, it’s probably too early to be implementing them.

Size matters!
The size of the team / company supporting you matters. When you are first starting out, a single operator who charges by the hour may be the most cost effective way to have “peace of mind” support, but as you grow you will need to be looking for a larger team / company to help support your site. Having the support of a larger team / company means that you have access to a greater brain trust on a wider variety of technologies. Remember a database issue is very different to a web server problem and requires different skill sets.

As you can see I am a big believer in being proactive and having what I call “preventative support”. I see support as more than just insurance that’s there when something goes wrong. It’s better to not have the problems in the first place, than to have a team who can solve them.

In general when selecting the right company for your support make sure they have experience in supporting your application “stack”. Whether your site is written in Java, PHP, Ruby or any other language, ask them about other applications they are supporting that are similar. While cost is obviously another important factor, make sure you trust the company you choose and that their values and professionalism match those of your website.

So who does Booktopia use for support and why?
At Booktopia our infrastructure is supported by Anchor who always go over and above to help us out. We use them because of their experience in hosting applications like ours and because they have a large team whose brain trust has helped us get out of a wide variety of tricky situations in the past. They are also constantly maintaining our servers and advising us of improvements we can make to our infrastructure. We were one of the few major websites that stayed up during Click Frenzy and that’s a tribute to the relationship we share with Anchor.

Do you really need support for your website?