Online retailers cling to free shipping promotions

The debate about whether free shipping is a short course to ruin, or an important driver of sales, rages on. Many believe that free shipping belongs in the realm of the 'big boys' and that it's nigh-on impossible for small to medium sized businesses to compete, especially in light of increased transportation costs.

by Helen Leggatt

However, over three-quarters (78%) of retailers surveyed for Shop.org's annual pre-holiday eHoliday report plan to plow ahead with popular free shipping promotions, although many will offer the service with conditions attached such as a minimum order value or product-based promotions.

According to AdAge.com, 45% of retailers have increased their free-shipping budgets either "significantly" or "somewhat higher" compared to last year, despite increasing transportation costs.

Some are tailoring their free shipping offers and applying safety brakes in the form of conditions. One-fifth (21%) of retailers involved in the Shop.org survey said they will increase the order value amount that customers must spend before being eligible for free shipping, and 10% will cut the number of non-conditional free shipping offers.

So how are retailers compensating for increased transportation costs being passed on to them by suppliers? Many are renegotiating with their existing carriers (40%), a third are closely monitoring the number of people they employ (33%) and 16% are decreasing the number of other types of promotion they run.

Retailers who are including the phrase "free shipping" in title tags are also benefiting in terms of SEO due to the increase in searches containing the term over the holiday period.

"[Retailers] are looking to save costs wherever they can," said Scott Silverman, executive director of Shop.org. "And they're investing in some of the tactics that they know are going to pay off."

Tags: conditions, free shipping, online retailers, order value, promotion, transportation