October 10th 2016

Free Shipping- the New Standard

If you need a new bike tube, you can go to Amazon, use Prime, and you're riding again in two days.

If you need camping gear for the weekend and it's Monday, you can use Prime, too. Just to ensure your stuff gets to you in time.

That reliability feels good, and people are getting used to free, fast shipping.

Therefore, if you're about to pay $11 for 5-8 business day shipping from a smaller ecommerce site... you look for that product on Amazon instead.

This pattern is common, because we're getting trained to expect that online purchases are no different than physical purchases.

Amazon can afford to offer free two day shipping, because they're enormous and because Prime members pay a yearly fee. That fee is tiny compared to what people save in shipping over a year, and it results in a lot more purchases (and ultimately profit) for Amazon.

This is genuinely great for Amazon and the consumer.

If you're a smaller ecommerce business, it's not great for you.

Free two day shipping is actually a ridiculous expectation considering there are people that pack and fulfill orders, drivers that drive them, and tons of logistics people that need to get paid. We all expect it nonetheless. We're legitimately disappointed when we have to pay or wait.

Thank you, Amazon.

As a smaller online seller, what can you do to compete?

First, offer free shipping. I don't mean to eat the shipping costs, though. Work the shipping into the cost of the product like you would materials, labor and licensing. It's not as tricky as it seems, but as sellers, we need a small mental shift. We're used to pricing products by what they should cost in a physical location, but selling online is a different beast.

So factor that in. Charge a little more to cover average shipping, boast "Free Shipping" all over your website, and play with the numbers until they add up at the end of the month. Truthfully, this may not work for all products, but before you concede that it doesn't work for yours, consider that 90% of products can build shipping into the cost without issue.

Now, about the two day turnaround. As smaller sellers, it might be hard to match that. USPS actually has some cheap, 2-3 day flat rate options, but right now, two day shipping is still pretty fast. I think that's more reason, however, to make the shipping "free." Most people won't be upset to wait five days if they're not paying anything.

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Challenges with free shipping as a smaller business:

  • Harder to price products overall
  • Profit fluctuation
  • Competition may seem cheaper

Benefits:

  • Less friction in the checkout
  • Seller feels more current to the buyer
  • Potential profit on cheaper shipping routes
  • A more solid pricing model that's ready for the near future of ecommerce

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My goal is to improve ecommerce usability one site at a time. For another ecommerce user experience idea, see My Biggest Checkout Pet Peeve - I've Only Seen 2 Websites Do It Right.