E-commerce sales are booming. According to Emarketer, global online sales will reach an all-time high of $1.5 trillion this year. Despite this record high, approximately 88% of all shopping carts are abandoned. That means that, this year, more than $11 trillion worth of sales will be lost due to shopping cart abandonment.
Clearly, online shoppers can be finicky, and difficult to convert. How often have you browsed online, filling up your shopping cart while watching your favourite TV show, only to abandon a $400 cart without a second thought? I know I’m guilty of doing exactly this, on many an occasion, for many a reason.
But, what is the main reason for shopping cart abandonment?
According to a recent survey conducted by global business advisory firm AlixPartners, the two main reasons that online shoppers chose to abandon their carts are:
- That they need to see or touch the item before purchasing (37%)
- That the cost of delivery is simply too high (36%)
Given that free shipping completely wipes out the second hurdle, wouldn’t it be safer to offer this to your online shoppers? Isn’t it better to wear a $10 shipping charge, to secure a $400 order? To cover the cost of shipping to potentially increase conversions by as much as 36%?
What is Free Shipping?
The definition of free shipping tends to differ from website-to-website, and company-to-company. So, for the purposes of this post, we thought we’d take a minute to define what we mean by free shipping.
We’re going to stick with the Wikipedia definition of free shipping: a marketing tool used by e-commerce websites as a sales strategy to attract customers and buyers. Our definition includes no qualifications. If you buy anything at all, it is shipped to you for free (regardless of whether you’re a member, a VIP shopper, or whether your shopping cart hits a certain dollar figure amount, or not).
Free Shipping in the US
In its latest survey on e-commerce shipping, Stamps.com (the US equivalent of Australia Post) found that a whopping 64% of respondents reported that free shipping is the most effective tool for driving online sales in the lead up to Christmas. In fact, 53% of the survey respondents (who did not offer free shipping last year) indicated that they will offer free shipping on all their products this year.
Coming in at second place in the Stamps.com survey, as the most effective tool for driving online sales was yet another shipping-related promotion; 26% of the survey respondents indicated that discounted shipping (as opposed to free) was their most effective tool for driving drive sales.
Not only does free shipping drive sales, it tends to increase the amount that customers spend per purchase. According to the Stamps.com survey, 52% of retailers that used free shipping enjoyed an increase to the average order spend of $4, and 37% of respondents saw an average order increase of more than $7. Clearly, when customers don’t have to pay for shipping, they spend extra cash on your products.
Here are a few other interesting stats when it comes to free shipping:
- According to a CouponCabin.com survey, 73% of US adults are more likely to shop online at sites that offer free shipping.
- According to a Compete.com survey, 93% of US adults said free shipping would encourage them to buy more.
- 85% of US consumers rate free shipping as the number one purchase incentive.
- 61% of US consumers will cancel their order if free shipping is not offered.
Free Shipping in Australia
Unfortunately, for the Australian market, there is nowhere near as much data available when it comes to customer behaviour, conversion rates and shipping. There are a number of reasons for this. According to a comprehensive investigation into online shopping, undertaken by PWC:
- 75% of Australians who shop online do so through overseas websites. This means that data regarding shipping rates simply isn’t available, nor representative.
- The Australian online shopping market lags behind the US and the UK markets, making market research opportunities much more limited.
We did manage to dig up a recent to a joint study by the Australian Retailers Association and e-commerce solution provider ChannelAdvisor. More than 400 Australian online retailers completed this survey. Of these 400 retailers, approximately 65% confirmed that there were using free shipping as a vital way to ensure customer satisfaction.
It is also clear that lower price is the key driver for Australians when it comes to shopping online. In fact, 55% of online shoppers in Australia, and 51% in New Zealand, indicate that lower prices than in physical stores is the most important reason why they shop online. It seems unlikely that bargain hunters would be willing to pay for shipping if the whole reason that they are shopping online is to save pennies.
Almost overwhelming, it seems that the large majority of e-commerce giants in Australia are choosing to offer free shipping in order to increase profitability and conversion rates. These retail giants include ASOS, Myer, The Iconic, Microsoft, Apple, Amazon, StrawberryNET and even BONDS. Even some smaller brands are getting in on the free shipping action. And, with shipping costs one of the biggest barriers to shopping cart conversion, it is no wonder that free shipping is becoming more and more commonplace.
Sources:
- http://www.emarketer.com/Article/Global-B2C-Ecommerce-Sales-Hit-15-Trillion-This-Year-Driven-by-Growth-Emerging-Markets/1010575
- http://blog.stamps.com/2010/11/10/ecommerce-holiday-shipping-survey/multiple answers
- http://en.wikipedia.org/wiki/Free_shipping
- http://blog.rejoiner.com/2012/05/free-shipping-online-retail-sales/
- http://www.slideshare.net/cshaffstall/buy-now-buy-more-buy-again?redirected_from=save_on_embed
- http://www.pwc.com.au/industry/retail-consumer/assets/Digital-Media-Online-Shopping-Jul12.pdf
- http://www.smartcompany.com.au/growth/43692-australian-online-retailers-need-to-embrace-effective-shipping-solutions-and-mobile-optimisation-report.html#