L.L. Bean, Zappos lead free-shipping revolution
Online retailers make shipping charges a thing of the past. Will competitors follow?
Everyone loves a good deal when shopping online. But everyone also hates to find a bargain, only to get gouged on shipping.
L.L. Bean hopes those two factors will work in its favor as it launches a marketplace where online shoppers no longer have to suffer a dime in shipping fees. Like Amazon.com (AMZN) and its dedicated shoe site Zappos, L.L. Bean hopes the lack of fees is offset by the new customers it will win over with the deal.
It's a bold move. The question now, of course, is how many online retailers are going to follow. The answer may surprise you: Many.
Steve Fuller, the chief marketing officer at L.L. Bean, said his company came to the decision after examining "research after research after research" showing shoppers prefer to not pay for shipping. Specifically, the increased revenue that has come from shipping-free promotions is impressive. As many as 45% of online retailers offered free shipping throughout the holidays in 2010, according to research group comScore. And that, in part, helped lift seasonal shopping 4% overall -- including a 10% bump on Black Friday.
- Related Article: 5 things your smartphone will pay for soon
The free shippers over the holidays included brick-and-mortar giants like Wal-Mart (WMT) Target (TGT) and Sears (SHLD). Electronics and entertainment retailers Best Buy (BBY) and Gamestop (GME) offered similar deals.
There's a catch, though. A common factor among all of those retailers is that their shipping offers were limited. Wal-Mart offered free shipping only on specific items, while Target, J.C. Penny and others required purchases to be above $50. Amazon has offered the same shipping deal for years, but only recently through Zappos did it begin offering no-strings-attached free shipping on all online purchases.
- Related Article: 5 shock waves caused by AT&T deal with T Mobile
The aforementioned companies that have toyed with free shipping over the past year are likely to follow L.L. Bean and Zappos. Best Buy's Thursday earnings report stressed the increasing importance of the company's online retail business compared with declining in-store sales, especially for entertainment products. And given that Amazon.com is transforming its premium subscription service Amazon Prime from a shipping-fee service to a streaming video provider, the natural assumption is that free shipping is going to be the norm and not a special service for the online megastore.
So as free shipping sales are ringing up at L.L. Bean and Zappos in the short term, you can expect many online retailers to follow soon in 2011.
That's great news for consumers.
- Amazon's app store faces major hurdles
- 5 consumer stocks to load up on now
- 5 battle-tested funds for your 401k
Free shipping is never free...It costs money to ship so the cost has to be made up somewhere, You have to either add the shipping in to the price or lower the quality of the product, now factor in the loss and damage quotient and most will find that their bottom line will suffer.
eBay is a big proponent of free shipping, They encourage their sellers to offer free shipping because they know the sellers have to add the shipping costs in to the item price and that raises the final value/sale amount which eBay takes a percentage of.
If it sounds to good to be free it then it is.
As an ecommerce strategist for the past 8 years working with small ecommerce merchants - there are a couple issues here that I'd like to address:
1. There is no such thing as "Free Shipping" UNLESS the company is truly paying the cost of shipping out of their pocket.
UPS/USPS/FEDEX do not ship for free. There is a hard cost associated with delivering product to a customer.
In the majority of cases, the online merchant is raising prices to cover their shipping costs, and it is by MUCH more than 1-2%.
2. If a company IS truly paying the cost of shipping for the customer, they are subsidizing that cost with some other source of revenue .
3. Big companies like Amazon or Zappos get deeply discounted shipping rates from the carriers. Smaller merchants do not enjoy those rates. Big companies are better positioned to offer Free Shipping and mark up their products with a smaller increase.
Smaller online merchants cannot do this and end up working on thinner margins to remain competitive.
I wholeheartedly agree that companies who charge excessive shipping are wrong.
But the flip side of that is that more and more American consumers want to get something for nothing.
We want good deals, we want the best price AND we want free shipping.
The only companies that can survive on those margins are companies who sell in MASSIVE volume.
Not the millions of smaller, independantly owned online stores.
And then we wonder why our economy has tanked?
Small business is the fiber of this economy. We need to look at this picture holistically for the sake of our economy.
Rather than thinking about it from a "me, me, me" perspective...
i.e. "How cheaply can I get this item because I want to be able to afford my 43rd pair of shoes from Zappos."
Yes people's budgets are squeezed. But the answer is not in driving American owned online businesses OUT of business, by demanding an ecommerce model that is not economically feasible.
Let's get back to the model of "a fair price for a fair product".
From the early days of mail order catalogs, Free Shipping wa designed to be used as a PROMOTION not as a standard price model.
- It costs money to get in the car and drive to the mall and buy a pair of shoes.
- It costs money for an online retailer to ship a pair of shoes.
Gas is expensive. It costs more money to fill your tank. Carriers are charging etailers fuel surcharges.
We already saw what happened to our economy when people bought McMansions they couldn't afford.
Ecommerce is one of the strongest growth industries in our country. Let's not ruin the model because we want something for free that is NOT free.
Free shipping is not new; hence, not revolutionary. These companies deserve no special mention. This is cheap publicity foisted as news by the worse news group, MSNBC.
The value of the US dollar continues to wane while wages remain stagnant. How and why is news; this article is not.
No, you're not getting free shipping. But I've tried to order things in the past that put up a whopper of a shipping charge at the very end of the transaction. On top of that most shipping charges are per amount spent not necessarily size and weight. A huge shipping charge for a small, expensive item vs. a smaller charge for a large cheap one. And the expensive one is shipped the same way as the cheap one. Example ground service with no signature required at the end which would justify spending more for shipping on the small item.
Ordered from LL Bean; no shipping charges - pre shipping and handling charges.
Has something changed?
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The apparel chain takes a hard hit after blaming the weather for its quarterly sales decline. But cold temperatures don't explain the drop in full-year sales as well.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.