March 29, 2012
Last week, market research firm ClickIQ detailed the rapidly changing interactions between consumers, brick-and-mortar stores, and the web. Specifically, we learn that the person blocking the aisle while typing furiously on their mobile device is likely deciding whether to make their purchase in-store or online. According to the research, 82% of consumers surveyed use their mobile devices to comparison shop while in brick-and-mortar stores.
An obvious and fundamental difference between these two purchase options is shipping, which most consumers immediately consider when evaluating the total cost of an online vs. in-store purchase. As such, shipping promotions can be an extremely valuable tool for online retailers. But, as Bulbs.com CEO Mike Connors notes, these offers must be tested to understand the full financial impact.
Here are three tests to consider when designing your shipping strategy:
1. Shipping Cost. If not free, then what? Every dollar counts, not only in terms of the customer's willingness to pay, but also in terms of your profitability. For example, one of our clients tested $5 vs. $10 flat-rate shipping in certain regions, and saw conversion rate lifts ranging from 14% to 35%. Test various shipping costs (from free on up) to find the optimal point at which the increased conversion outweighs the decreased shipping revenue.
2. Thresholds. What is the cart value threshold a customer must reach in order to receive free or discounted shipping? Start by testing a threshold slightly above your website's average order value. Note that for retailers with products in disparate price ranges (i.e., low value and high value), the overall site AOV might be biased high or low; in this case, consider using multiple shipping thresholds attainable by both segments of customers.
3. Delivery Times. Remember, you may be competing against a delivery time of zero (an in-store purchase), so test different presentations of shipping/delivery estimates. Try telling customers when orders placed at a certain time will ship, or assure them their order will arrive by a certain holiday. Want to get more sophisticated? Target customers within certain distances of your distribution centers, and let them know exactly when their order would arrive!
The bottom line is that shipping is not unlike any other product—it has a price and a perceived value. Savvy online retailers can use tests like these to work both levers, increasing conversion without sacrificing profitability.
There are certainly many more shipping tests and promotions retailers can consider to help win business from brick-and-mortar shoppers. What shipping strategies have you found successful that I missed?