Executive Briefings

Shouldn't Free Shipping Simply Be Made Standard? Here Are Some Pro's and Cons.

When L.L. Bean announced it would offer free standard shipping to all U.S. and Canada addresses, it caused an uproar in the direct marketing industry. Should - or can - merchants try to compete with free standard shipping policies?

Debra Ellis, president at Wilson & Ellis Consulting doesn't think so. "Merchants are already reticent to invest in improving customer service because operations are considered an expense," she notes.

This latest move towards free shipping will result in a reduction of services, Ellis adds, "because shipping income and costs are typically allocated to the operational budget. In the past, an efficient operation could be a profit center, but not anymore."

Shipping is the second largest cost center for most direct merchants, with labor being number-one, says Bill Kuipers, president of operations consultancy Spaide, Kuipers & Co. But if a merchant has a handle on its shipping contracts, it can make such free shipping offers work, he says.

"There's a balancing act involved as companies look to eliminate or reduce shipping costs," Kuipers says. "If they can manage their carriers tighter and make some other budgetary sacrifices, they can offer free shipping without a lot of internal damage."

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When L.L. Bean announced it would offer free standard shipping to all U.S. and Canada addresses, it caused an uproar in the direct marketing industry. Should - or can - merchants try to compete with free standard shipping policies?

Debra Ellis, president at Wilson & Ellis Consulting doesn't think so. "Merchants are already reticent to invest in improving customer service because operations are considered an expense," she notes.

This latest move towards free shipping will result in a reduction of services, Ellis adds, "because shipping income and costs are typically allocated to the operational budget. In the past, an efficient operation could be a profit center, but not anymore."

Shipping is the second largest cost center for most direct merchants, with labor being number-one, says Bill Kuipers, president of operations consultancy Spaide, Kuipers & Co. But if a merchant has a handle on its shipping contracts, it can make such free shipping offers work, he says.

"There's a balancing act involved as companies look to eliminate or reduce shipping costs," Kuipers says. "If they can manage their carriers tighter and make some other budgetary sacrifices, they can offer free shipping without a lot of internal damage."

Read Full Article