Free ship­ping dur­ing the Hol­i­days has evolved over the past sev­eral years to where it is now table stakes for remain­ing com­pet­i­tive; an expec­ta­tion from con­sumers all around the coun­try. It is a con­cept that can take a retailer’s online sales to new heights, but can also make them cringe. After all, some­body has to absorb those ship­ping costs, and our friends at UPS and FedEx aren’t being that gen­er­ous! This blog post focuses on cre­ative ways to use Site­Cat­a­lyst to under­stand and opti­mize the impact free ship­ping can have on your business.

Two of most com­mon forms of free ship­ping, which we will focus on today, are order-level (i.e. free ship­ping on orders over $75) and site-wide (i.e. free ship­ping on every­thing, no restric­tions). We’ll also review how Site­Cat­a­lyst can help inform product/category-level free ship­ping (i.e. free ship­ping on iPods). It is impor­tant to note that in the absence of a test­ing tool, it is imper­a­tive to do pre/post free ship­ping com­par­isons dur­ing date ranges where pro­mo­tional cycles are sim­i­lar, or at least be cog­nizant of the pro­mo­tions run­ning dur­ing your com­par­i­son time­frames. For exam­ple, if dur­ing your pre-timeframe your web­site is offer­ing 10% off all TVs and dur­ing your free ship­ping time­frame you offer 25% off all TVs, the dif­fer­ence in pro­mo­tions will dilute the true impact of the free shipping.

Exam­ple #1: Order-Level Free Shipping

One way to eval­u­ate the effec­tive­ness of free ship­ping is to sim­ply mon­i­tor your website’s com­merce met­rics. In the exam­ple below, we see that when free ship­ping was offered, there was an uptick in both AOV and con­ver­sion rate. Vis­its increased too, but to sim­plify this exam­ple we don’t want to take credit for that increase. As a result, I strongly rec­om­mend using RPV (Rev­enue Per Visit) to nor­mal­ize the traffic.

 

From the data above, you can quickly esti­mate the rev­enue lift from your free ship­ping pro­mo­tion. First, cal­cu­late the rev­enue that would have been gen­er­ated dur­ing the lat­ter 7 days in the absence of free ship­ping (RPV dur­ing first 7 days x Vis­its dur­ing later 7 days) and sub­tract the total from the recorded rev­enue gen­er­ated dur­ing the free ship­ping pro­mo­tion to derive rev­enue lift. From there you could do even more due dili­gence by cal­cu­lat­ing the ship­ping cost to the com­pany (Ship­ping Costs Per Order x Orders) and sub­tract fur­ther to cal­cu­late a net lift. Please note the exam­ple does not fac­tor in impacts to profit mar­gin, so it would be best to part­ner with Finance to paint the full pic­ture from a P&L standpoint.

Exam­ple #2: Site-Wide Free Shipping

Cus­tomers love site-wide free ship­ping; no min­i­mums, no fine print. How­ever, the real­ity is that some of your prod­ucts and prod­uct cat­e­gories will likely sell regard­less of your ship­ping pro­mo­tions (such as high-demand low-supply prod­ucts, which dur­ing the Hol­i­days include things like Wii U, the new iPad, etc). Con­sider the exam­ple below where site-wide free ship­ping is offered in the period. After the pro­mo­tion launches, we see an uptick in the mix of web­site orders from the Home and Media cat­e­gories. Busi­nesses can use these insights to inform future free ship­ping pro­mo­tions by focus­ing on spe­cific products/categories that over-perform dur­ing your site-wide free ship­ping pro­mo­tions, and con­versely save your com­pany money by not offer­ing free ship­ping on the products/categories that sell well regard­less. You can also use a testing/targeting tool to offer free ship­ping to spe­cific seg­ments, such as new visitors/customers.

7 Days Pre Site-Wide Free Shipping

7 Days Post Site-Wide Free Shipping

Exam­ple #3: Store Pickup

For multi-channel retail­ers, in-store pickup can be a pow­er­ful sales lever and dif­fer­en­tia­tor dur­ing the Hol­i­day sea­son or year-round. It offers ben­e­fits for both the con­sumer and the retailer: a true win-win! For con­sumers, the abil­ity to pick up prod­ucts within the hour at a nearby store can help close the sale, espe­cially for pro­cras­ti­nat­ing gift-givers (not to men­tion it’s free).

Con­versely, store pickup can be a retailer’s best friend dur­ing a free ship­ping pro­mo­tion. First, it elim­i­nates ship­ping costs the com­pany would oth­er­wise absorb. Sec­ond, it helps alle­vi­ate inven­tory headaches by tak­ing excess inven­tory out of stores that would oth­er­wise be shipped back to a ware­house or heav­ily dis­counted even­tu­ally to clear shelf space. And third, it helps drive incre­men­tal sales in-store dur­ing pickup. Thus, every cus­tomer you can con­vince to choose store pickup instead of free ship­ping is ben­e­fi­cial on mul­ti­ple levels.

One way to help increase your mix of store pickup orders is to actively mes­sage this value propo­si­tion through­out the web­site. This mar­ket­ing con­cept lends itself to A/B test­ing the most effec­tive real estate for deliv­er­ing this mes­sage, though test­ing isn’t required. In the exam­ple below let’s say the first 7 days you only pro­mote free ship­ping, while dur­ing the next 7 days you place a ban­ner in the check­out process for store pickup. Using a mer­chan­dis­ing Cus­tom Con­ver­sion eVar to cap­ture ful­fill­ment meth­ods, the results show a decrease in the % of orders choos­ing ship­ping and an increase in store pickup, a win all-around! Not only did you save ship­ping costs, but you can part­ner with your finance team to mea­sure the incre­men­tal in-store sales that result from the increased store pickup orders.

7 Days Free-Shipping Only

7 Days Free Ship­ping + Store Pickup Messaging

Con­clu­sion

It would be remiss if I didn’t say that the best way to mon­e­tize the impact of free ship­ping with hard num­bers would be to A/B test or part­ner with your finance orga­ni­za­tion, or both. Nonethe­less, Site­Cat­a­lyst offers some great ways to mon­i­tor these efforts and pro­vide direc­tion for optimization.

Free ship­ping in one form or another can almost always ben­e­fit your busi­ness, since at the very least it should increase your website’s con­ver­sion rate. How­ever, if you are not mon­i­tor­ing and mea­sur­ing the details the busi­ness is likely not offer­ing it in the most effi­cient man­ner. Don’t hes­i­tate to use Site­Cat­a­lyst to opti­mize your free ship­ping efforts this Hol­i­day season!

 

Nate Sperry is a con­sul­tant in Adobe Con­sult­ing, focused on dig­i­tal strat­egy, ana­lyt­ics & opti­miza­tion for retail & travel clients. This is one of a series of posts cov­er­ing tips from our retail experts in Adobe Con­sult­ing related to Hol­i­day ecom­merce analytics.

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