Supply Chain Trends

Are Customers Going to Require Free Shipping?

With the retail marketplace growing more and more competitive, are customers going to increasingly demand free shipping and other benefits when deciding between retailers? This is question facing many in the logistics industry. Considering the massive success of Amazon in the 21st Century – a company that offers free shipping on every order over $35 or with no spending limit for Amazon Prime subscribers – obviously other organizations are following the lead of Jeff Bezos’s company.

Of course, there is a fine line between creating new sales by offering free shipping and the costs incurred during the order fulfillment process. Amazon themselves recently raised the spending limit for free shipping from $25 to $35. Let’s look more closely at this issue affecting the retail supply chain world.

Nearly Everyone is Offering Free Shipping to Customers

As of the end of 2012, nearly 90 percent of all retailers planned on offering some form of free shipping to customers, according to a survey by the National Retail Federation. Many of these free shipping offers also require shoppers to spend a minimum amount, which is good for business.

Customers’ expectations for this perk continue to rise. A survey by Deloitte and Touche noted that 71 percent of consumers placed free shipping from retailers at the top of their wish list for the holiday season. The bottom line is that customers are increasingly hoping for free shipping, and tend to prefer companies offering this deal provided that ultimately “the price is right.”

Alison Kenney Paul, vice chairman and U.S. retail and distribution leader with Deloitte notes that the devil is in the details – so to speak. “Retail is detail, as they say. If you dive in, you’ll find that it’s free shipping on certain items with certain modes of shipping or free on just certain categories. You see that big yellow flashing neon sign, and underneath you have to read the fine print,” commented Paul.

Retailers Need to Balance Customer Perks Against Profitability

Ultimately, retailers without a brick-and-mortar presence need to weigh customer perks like free shipping against the impact to their bottom line. Dan Davis, editor in chief of Internet Retailer magazine, notes this balancing act. “Retailers are in business, and shipping is not free to them, so they have to balance what they offer with the cost and how much it’s going to increase their sales.”

Consider investing wisely to make your supply chain operations more efficiently, so free shipping offers don’t adversely impact your firm’s overall profitability.

Hiring the best and brightest logistics professionals also helps to improve your supply chain company’s bottom line. As one of the top staffing agencies in the logistics industry, ZDA offers both the business insight and vetted candidates to help ensure your organization’s success. Schedule a meeting with us soon!

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