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212 Collective Blog

The Soapbox

Free Shipping - Isn't Free

One of “retails” crazy trends was to introduce free shipping. On the surface this seemingly harmless short-term offer was a great way to add a competitive edge over the opposition. But fast forward 10 years to now and it’s all but standard practice and has created a rod for many retailers backs with many more follow-on consequences other than just internally carrying the cost of shipping. I understand some retailers try to combat free shipping with spend thresholds but if we are honest it’s commonly positioned to sit just below the average dollar range and does little to drive increased key metrics or offset the money out scenario. Following on from that bear a thought for the free returns as well, certainly a smart CS play for sure as it keeps the customer engaged and loyal but in many cases offering free returns costs you triple in shipping. By carrying the cost internally, it has to come from somewhere, and that’s margin. Depending on the size of your operation it could add thousands, hundreds of thousands or even millions to your expenses and this all results in an erosion of your margin. With many businesses working on skinny margins a few percentage points drop can hurt profitability and even viability of a business. But let’s look past margin and talk about product manufacture, the natural place to look to grab back lost percentage points is squeeze the manufacturer/supplier for a better price in order to keep the existing and/or historical margin in place. Again, not a horrible idea but at what consequence, remember it can be a slippery slope as a “better” price can lead to inferior materials, cheaper labor facilities and overall lack of quality being the result. I’m certainly not saying don’t drive your manufactures/suppliers for better pricing but be very aware not to jeopardize the DNA of what made your product great to start with. As this will drive your customers away from you to the eager check out screens and cash wraps of your competitors. It’s an unfortunate truth but there is no coming back from free shipping in it’s current form, it’s like saying retail wants to roll back hefty discounts - nice in thought but pure fantasy in reality as everyone is desperately chasing growth in an extremely tough environment. My advice is get smart with your approach to shipping, dive deep in to your analytics and make some good value driven decisions.

Sean HuntComment