November 07, 2011

Free Shipping Will Be Mandatory

In late October, we talked about things that we learned in 2011.


Without doubt, we learned that many of us are going to be forced to move to a Free Shipping model, in the near future.


Oh, I can hear the moans and groans already.
  • "We can't afford to do this."
  • "We lose the ability to use free shipping as a promotion to goose sales."
Honestly, we "can" afford to do this.


We'll do this by executing two important tactics.
  1. Let's say that free shipping, no hurdle, gets you a 25% productivity bump.
  2. We'll cut marketing expense (catalog mailings), significantly, by 20%, by not mailing online-centric, social-centric, and mobile-centric customers as many catalogs.
  3. The circulation cuts will cost us a 5% top-line sales hit.
The combination of tactics yield a profit and loss statement that looks something like this:

For some of us, it will look like this.  For some of us, we'll lose a ton of money, but the file will grow, eventually offsetting our losses.  For some of us, we'll even make a little bit of money in the short term.

Eventually, most businesses will shift to free shipping, eliminating the 25% sales bump.  That's when things get really interesting.

In the next three years, we will begin the transition.
  • We will pay for free shipping by not mailing as many catalogs to online-centric, social-centric, and mobile-centric customers.  Catalog marketing will ultimately pay for free shipping.

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