"Our annual 'Top 30 UK Online Retail Satisfaction Index' has indicated that free delivery is still a critical factor in both the channel customers choose (online versus offline) and the retailer they choose (one company over a competitor)," says Larry Freed, president and CEO of ForeSee Results
. "But does it drive short-term sales and long-term loyalty? What is the true cost of free delivery to an online retailer?"
Foresee analysed over 7,000 visitors to the top 30 online retail websites during the Christmas shopping weeks and, Freed says, "we found that the answers are more complex than e-retailers may realise."
Key findings include:
- Free delivery is becoming increasingly common and highly satisfies shoppers when available: 66% of online Christmas buyers said they received free delivery offers, 23% said free delivery wasn't offered to them, and 11% couldn’t recall if free delivery was offered.
- Free delivery has limited value as an acquisition tool. It is slightly more effective when it doesn't involve restrictions, though the researchers note that free delivery with restrictions impact customer satisfaction less than they once did, as shoppers become more accustomed to limitations on offers.
- Delivery costs are a huge factor in whether people choose to buy online or offline. Almost one-fifth of all shoppers (17%) report that when they choose to buy something from a retailer’s store instead of website, avoiding delivery costs is the main reason. When they choose to shop on a retailer’s website instead of in the store, 31% report that the availability of free delivery encouraged them to buy online.
- The availability of free delivery is a key reason shoppers choose one online retailer over another. Free delivery heavily influenced almost half of online purchasers in their decision to purchase with the internet retailer they chose instead of from a competitor.
- In a difficult economic climate, each retailer needs to weigh their own goals and satisfaction profiles. If a primary goal is laying the groundwork for loyalty down the line, these incremental advantages of free delivery may be justified. In addition, individual online retailers may find different factors encouraging their visitors or certain customer segments (such as first time visitors versus repeat visitors).
"Delivery costs still really matter to shoppers," Freed concludes. "High delivery costs (or perceptions of high delivery costs) drive people to buy in stores and low delivery costs drive people to buy online. Not only do delivery costs influence what channel shoppers choose, they influence the retailer they choose. Only when e-retailers understand the behaviour of their own customers can they really understand the true cost to their company of offering free delivery — or the true cost of not offering free delivery."