What Could Free Shipping Mean for Your Logistics?

Every customer knows the frustration. You add a few items to your online shopping cart and proceed to checkout. Once you reach the final screen, you absorb sticker shock when you realize how much shipping will cost. It’s a frustration for retailers as well. You know how much business is lost due to shipping costs. How different would your logistics look if shipping were free, though?

Solving Abandoned Cart Woes

Image via Flickr by The Nick Page

Online shopping is projected to increase from 2012’s $231 billion to approximately $370 billion in 2017. Despite the explosive growth, roughly three out of every four shopping carts are abandoned. What is the predominant explanation for this? Ninety-three percent of potential customers suggest that free shipping is their favorite enticement.

More Savings, More Money Spent

Why do companies offer discounts to customers? The basis for this business tactic is to make up the difference in volume. A person may intend to save 20 percent off the cost of something, but if they purchase 50 percent more items, a correctly priced retailer will earn more money due to the profit margin on the individual items. The same logic applies to free shipping. Since customers believe they are saving money via free shipping, they spend more while shopping.

Customers Pay More for Free Shipping

On the surface, this statement sounds crazy, yet research suggests that customers are willing to increase their minimum purchase price in order to qualify for free shipping. Rather than pay 10 dollars for shipping, a person is willing to spend the same 10 dollars to purchase an item that takes them past the threshold for free shipping. This behavior explains why so many retailers have recently bumped up the limit for such offers.

Capitalizing through Logistics

You can entice customers to spend more and complete purchases rather than abandoning carts through free shipping. How do you take advantage of these consumer trends? You must demonstrate the strongest ability to provide goods and services quickly.

You can manipulate customers into a desired behavior through free shipping, but you must have the logistics to ensure that they receive their purchases in a smooth and timely manner. This is true whether you are delivering directly to an end-user or a supplier. Having the goods readily available for shipping is the underlying mechanic of the free shipping promise. You should employ a proven specialist in the field such as The Apparel Logistics Group to guarantee that the customer’s needs are met.

Maximizing Logistics

There are three basic tenets to maximizing logistics. You need to have ready access to inventory that can ship to a customer in a timely manner. Keep fulfillment centers in centralized hubs to achieve this goal.

You also should offer varying shipping options for customers, as more than half of them prefer choices beyond the standard ones such as Amazon’s free shipping for purchases of $35. Finally, consider international free shipping as a way to expand your customer base. It won’t be cheap, but the potential revenue is exponentially higher.

Understanding customer behavior and logistics are the ways to dominate in business. Understand the issues above, and you will gain a huge competitive advantage in your industry.

Posted: 3/26/2015 3:00:07 PM by Global Administrator | with 0 comments

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