December 10, 2013

Free Shipping: A Major Change In Strategy

This Christmas represents a major change in how our peers are shipping merchandise to us.

Nearly every free shipping offer I've accepted has been received in between ten and fourteen days ... ground shipping, folks.

The goal, of course, is to demand that customers pay something for shipping, so that our peers make profit on a 30% off plus free shipping promotion.

We've been through several shipping cycles in the past decade.

  1. Amazon gives free shipping on orders > $25, gets you merchandise in 3-5 days. We charge $14.95 for shipping, we get you merchandise in a week.
  2. Customers pay Amazon $79 a year for 2 day shipping. We offer free shipping, we get you merchandise in five days. We took a bath, from a profit standpoint, meanwhile, customers loved pre-paying Amazon $79 for 2 day shipping.
  3. Amazon partners with the USPS to get large market customers exclusive delivery of merchandise on Sunday. We partner with UPS / FedEx on free ground shipping that arrives in nine business days - which, as it turns out, is nearly two weeks of real days. If you want it fast, pay $14.95.
In other words, businesses are almost taunting customers ... if you want it free, be prepared to wait ... forever.

There are two trends that are worth thinking about.
  1. The service disconnect between urban and rural customers is exploding. If you live in urban Los Angeles, Amazon and just about any retail brand will jump through hoops to get something to you immediately. If you live in Burlington, Vermont, well, your service level isn't the same, is it? Sounds like a business opportunity for catalogers. Hmmmm.
  2. Will free, two-week shipping anger customers? Maybe not yet. But in time, a customer is going to ask how a retail brand can offer an urban customer same-day shipping (free) when a catalog brand takes nine business days to get the customer something for free?
This is one of those major bifurcation points ... in a world where shipping gets exponentially faster and cheaper, our industry decides to slow shipping way, way, way down, unless the customer offers $$$, in which case, merchandise is still delivered slower than Amazon but faster than nine business days.

The customer will decide if this is a smart way to generate profit. What do you think will happen?

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