Reuters has a story about a number of online retailers that have used "free shipping" as a tool to generate sales and loyalty now "are scrambling to keep it from draining profits as costs climb and e-commerce contracts.
"They are adding fees for faster service, raising minimum purchase requirements and making other changes that shift more costs to consumers who are struggling with financial issues of their own."
It is, the story says, "an open secret that most retailers raise product prices to subsidize free shipping. Still, product inflation and soaring shipping costs are making the service unsustainable as the prospect of recession threatens to wallop already-flagging online spending."
"The days of free delivery are numbered," Ken Morris, managing partner at Cambridge Retail Advisors, said of the fast-changing retail marketing tool, arguing that "retailers are beginning to look more like some airlines, which charge for better seating, transporting luggage and also restrict use of frequent flyer points."
- KC's View:
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I think it makes perfect sense for retailers to give the best terms and service to their best customers. It was understandable that in the gold rush early days of e-commerce, it was a land grab as much as anything else, with less attention paid to profitability. That, e-tailers thought, would come later, with volume. Many were wrong, and the post-pandemic economic headwinds only served to underline that fact.
Still, it is hard to take away a benefit to which so many customers have become addicted. Expectations are high, and shopper relationships can be fragile.
If it were me, I'd be surgical and data-centric about my approach. Look at deciles of customer groups, and clearly establish the lines for where specific benefits are offered. Be transparent. Provide some runway so people don't get whiplash. Be especially generous about benefits to longtime and high-volume shoppers. Give people a reason to spend more.
