Fact: It costs money to ship merchandise to a customer. Think about the last time you sent Christmas gifts to your family in Florida, or Oregon. Did you get to do that for free, or did the USPS, UPS or FedEx demand to cover their costs and earn a profit to ship your gifts to your family?
Fact: Many companies profit from shipping and handling. Obscene profit from shipping and handling probably is wrong, we can all agree on that. Let me ask you a question ... is it wrong for Apple to markup the iPhone at levels far greater than competitors markup their phones? Brand experts seem to love the fact that Apple really hammers the customer because they have 'brand equity'. Every company picks and chooses how it prices items. Some companies make their money on gross margin, others on shipping and handling, others on volume. The customer ultimately decides 'what is right', she votes with her pocketbook.
Fact: Customer loyalty is fickle. Really, really fickle. Pundits and bloggers proudly proclaim how they will change their own behavior and no longer support these awful companies that charge for shipping and handling. Customers sometimes act differently.
- In 1999 at Eddie Bauer, we tacked on a $3.00 'handling' fee, on top of wildly expensive shipping fees. Customers never flinched. A few complained. Annual online/catalog retention rates did not change. Customers did not change their behavior.
- In 2005 at Nordstrom, we reduced shipping and handling from an average of $10 to $17 per order, down to a flat fee of $5.00 per order. That seems reasonable, doesn't it? Go ask somebody at Nordstrom if annual online/catalog retention rates increased, stayed the same, or decreased.
Free shipping is a shell game. A brand that truly leverages free shipping is hoping that the increased brand loyalty offsets the loss in shipping/handling revenue. As customers, we get to vote for our favorite scheme with our pocketbooks.