Everyone knows there’s no such thing as a free lunch, but shoppers have come to expect free shipping for their e-commerce purchases.
However, direct-to-consumer sales have a supply chain cost up to three times as high as in-store sales, Fast Company reported. Stuck with shouldering those costs, e-commerce retailers are looking for ways to turn free shipping from a loss leader into a true competitive differentiator.
It looks like consumer demand for free shipping is here to stay. One recent survey from Digital Commerce 360 found that free shipping was more important than fast shipping. Consumers are willing to wait an additional day for their purchases to arrive if they don’t have to pay for the shipping. Buyers are more likely to abandon a shopping cart when they see shipping charges, leading to lost revenue.
Eventually, someone has to pay for that “free” shipping, even more so when customers return items they bought to qualify for no-cost delivery.
As retailers embrace e-commerce, it’s vital to re-align the supply chain to reflect the unstoppable growth as well as the new shipping environment. To support the free shipping expectations, retailers must optimize their supply chains to extract costs.
Retailers seeking to extend their e-commerce capabilities alongside their existing store network can make the transition by partnering with an experienced supply chain resource that provides analytical prowess to help the company make informed strategic decisions.
Developing a data-based strategy will help answer questions about realigning the distribution network. Are smaller distribution centers located closer to major cities more effective than traditional regional DCs? Should fulfillment practices be aligned with parcel shippers’ networks to lower costs and reduce delivery schedules? Should free shipping be limited to purchases over a certain amount ─ often $100? Offering free shipping at purchase levels high enough to cover at least a portion of the cost is one way to stake out a reasonable return on meeting customer expectations for the service.
One way to streamline e-commerce fulfillment is transforming from a multi-channel model to full uni-channel fulfillment. The critical difference is that the channels – online, mobile, store – are managed independently in a multichannel environment. For uni-channel, the channels are integrated. Orders may be fulfilled from stores or warehouses, breaking through siloed operations in the name of customer service.
Today, buyers expect uni-channel visibility into your supply chain. They want to be able to view the same inventory on mobile devices, desktops and in-store to make their purchase decisions. Internally, that same information supports decisions about optimal sourcing for individual products and the best to-the-door delivery options. Advanced metrics will help drive decisions, looking at the real cost-to-serve analysis and other strategic insights.
To succeed in transforming the supply chain to make e-commerce profitable, retailers benefit from collaboration with an Enterprise Logistics Provider that has deep expertise in Extended LEAN® continuous improvement for the supply chain and cloud-based Insight TMS® that seamlessly integrates with existing applications to deliver multi-modal intelligence. Rigorous cost and service compliance controls, based on freight and parcel invoice auditing technologies, ensure the optimal return for your shipping spend.
As more companies see the power of free shipping for everything from mattresses to groceries, retailers who succeed will be those who understand how to make free shipping work for their business.