Free Shipping Makes Holiday Buyers Loyal: Study

Free shipping offers were more common than ever this past holiday season, according to new research done on the 40 leading Internet e-commerce sites by research firm ForeSee Results and FGI Research. And customers who got them reported feeling greater satisfaction with the Web site and a greater likelihood to buy from that site the next time they were in the market.

Studies by the Ann Arbor MI-based customer measurement firm found that 68% of some 9,000 shoppers studied said they could recall seeing some type of free shipping offer during the holidays just ended. That’s up slightly from the number who could remember the same offer in 2007 (65%) and a further increase from 2006 (63%).

Those who got the free shipping offer indexed higher on the American Customer Satisfaction Index for measures including Web site satisfaction, brand commitment, the likelihood to return to the site, likelihood to purchase next time they came, and likelihood to recommend the e-commerce retailer to someone else.

Although the differences in satisfaction were relatively small, ForeSee reports, they could be very significant in a down economy. “If product prices can be adjusted so that free shipping has a smaller overhead impact, it seems clear that free shipping results in positive bottom-line impact for the e-retailer,” a note on the research states.

Shipping costs were more decidedly a factor when customers came to decide whether to buy from a retail brick-and-mortar outlet rather than a Web site, the report found. Almost one-fifth of all shopper respondents (18%) said avoiding shipping costs is their main criterion for buying in-store rather than over a merchant’s Web site. The only factors more important were the ability to get the product immediately (31%) and the need to examine the item before buying (19%).

Compelling shoppers to travel to a store to avoid ship charges is not a good long-term strategy, the ForeSee note said. “Retailers should want to make it possible for shoppers to buy from their preferred channel. Shipping costs should not be a major factor in this decision for shoppers.

Once shoppers chose to buy online, the availability of free shipping heavily influenced three out of five shoppers to purchase from the e-tailer they selected rather than from a competitor, ForeSee found.

The firm’s research also revealed little difference in customer satisfaction and buying between Web merchants who offered unrestricted free shipping and those who imposed limitations on the offer—as long as those limits were revealed up front. While the imposition of limits on free shipping has made a big difference in customer site satisfaction in the past, those differences are eroding—perhaps through lowered expectations, or because customers are getting savvy about working around the restrictions.

“The trouble comes when the restrictions are a surprise, i.e. when a shopper goes to a site expecting free shipping but finds out there is a minimum order of $100, or that free shipping only applies to certain items and not to others,” the ForeSee report points out.