THIS year might go down in history as the end of free and fast shipping.
The good old days were sweet.
Nearly any online good – big or small – could arrive at your door within a couple of days for free and often could be sent back at no cost. It was exhilarating.
For a time, businesses were willing to eat the cost of shipping, which can take as much as 10% to 15% of a company’s profits, because they were in a fierce fight for e-commerce dollars.
But over the last year, retailers have been quietly rolling back options that would get orders to your front door within days as their operating margins suffered.
To cut down on costs, retailers, including Amazon.com Inc, Walmart Inc, Chewy Inc and Wayfair Inc have closed or cancelled the opening of distribution centres this year.
At the same time, retailers have followed the lead of companies such as L.L. Bean Inc by adding new minimum order values for free shipping after years of requiring no minimum.
Some companies, including eCommerce behemoth Amazon, have increased the minimum amount of spending for non-subscription members to qualify for free shipping, and it’s now common to see companies charge a fee to expedite deliveries.
The truth is shipping was never free. At some point, customers were going to lose the upper hand.
Gone are the days when brands and retailers of all sizes were scrambling to keep up with the impossibly ambitious free two-day and then one-day shipping standards set by the Amazon Prime programme, the eCommerce business’ premium subscription programme.
Shoppers had all the power to influence brands to bend to their need for convenience and affordability – no matter how costly it was to business.
It introduced a new crop of venture capital-backed eCommerce shipping companies that promised to speed up delivery times through sophisticated programmes that find the fastest and cheapest routes.
New investor-backed last-mile companies, firms that travel that final distance between a distribution centre or store to your home, competed for business to deliver online orders.
For retailers, it was a costly service that was more of a marketing ploy than a long-term business strategy.
And now, as online shopping has proven that it’s here to stay, there is not much to lose by making shoppers cover the cost of fast shipping.
It turns out we don’t care too much about getting our online orders within one or two days anyway. Shipping costs are 2.85 times more important than speed to online shoppers, Claire Tassin, retail and eCommerce analyst at Morning Consult, told me.
About a quarter of shoppers completely abandon their purchases when they see shipping prices, according to a survey by the eCommerce platform BigCommerce shows.
If there is a shipping fee, shoppers might consider paying if they’re offered incentives such as rewards points or if the charge helps reduce the business’ environmental impact, says Tassin.
Besides, the invention of curbside pickup is a real game changer for the most frugal of shoppers.
Many retailers, including Target Corp, Best Buy Co Inc, Walmart Inc and Home Depot Inc, offer free curbside and in-store pickup for online orders as another way for shoppers to manage their budgets.
It’s also a sales driver for companies. Walmart chief financial officer John David Rainey told investors last month that in-store pickup led to a 24% increase in US eCommerce sales.
The urgency around overhauling retail businesses around free and fast shipping turned out to be an expensive reaction to a momentary trend.
Of course, the Internet has dramatically changed shopping, and Amazon has increased expectations among consumers.
But there is a case for sticking out the variable swings that push the retail industry in one direction or another. — Bloomberg
Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. The views expressed here are the writer’s own.
