No doubt that when it comes to competitive necessities, free shipping leads the list. In some cases, startups pay from their own pocket for faster shipping. But, can free shipping option really offer multiple benefits without any strings attached? Experts suggest there are some disadvantages along with financial burden.
Free shipping is a highly debatable topic. It offers benefits such as increasing overall sales and better customer satisfaction rate. However, these benefits do not come without strings attached to them. There are multiple studies that point out the same. The most reliable one was released in May last year by Barclays Bank (Barclaycard) in the UK.
Online retailers are facing the heat due to free shipping and free returns
A study conducted by Barclaycard has pointed out that as many as 31 per cent of the British online retailers witnessed impact on their profit margin due to returns process. People order more than what they need and then return the products back.
As a part of the study, bank's researchers interacted with both, online retailers as well as customers who order stuff online.
As many as 30 percent of the consumers agreed that they often over-purchase and then simply send back unwanted stuff via courier service provided by the retailer.
Overall, 47 percent of the customers who participated in the survey clearly said that they won't order anything unnecessarily if asked to pay additional charges for shipping. The decision regarding purchasing anything is based on shipping charges and returns policy.
Some of the online retailers who participated in Barclaycard study said they need to increase the prices for items sold online in order to recover the losses incurred due to free delivery and returns.
Delivery related cost keeping small businesses away from e-commerce?
The study also exposed the fact that many bricks and mortar retailers in the UK prefer not to sell on e-commerce sites due to the costs associated with the free delivery of goods.
There are several stories on the internet that show how entrepreneurs are slowly realizing the side-effects of free shipping.
Tech startups from India also believe in charging customers for delivery of products
In India, most of the startups charge delivery charges for orders that are below Rs. 100. Even Amazon India charges Rs. 40 as delivery charge for orders that are below Rs. 499. So does eBay India. Their charges vary, depending on the product.
Many entrepreneurs have highlighted 'delivery cost' as the reason behind the thinner profit margins. Some of them offer free delivery of goods due to competitive reasons. Experts suggest that this may not be feasible way to attract customers.
111 Startups Pune is an initiative into empowering tech startups through funding, mentoring, co-working, and validating. Vikrant Bhujbalrao, the head for 111 Startups interacted with us and shared his opinion on this issue.
Vikrant stressed on the point that there are two sides which everyone needs to consider. First one is customer's point of view and the second is the startup's side.
"Customer is the king; startups exist because of customers' demand for that particular service or product. Thus, one needs to understand if the target customers for the startup would be comfortable paying delivery charges or not," said the head for Pune based 111 Startups.
"On the other hand, startups/founders struggle really hard while turning great ideas into their products/services. Some of them take huge risks for the sake of customers and offer free delivery for benefiting them. These days, running business venture is itself a costly affair due to rising costs in almost all functions like-HR, production, marketing, etc. So, logically, startups need to recover delivery charges from the consumers," said Bhujbalrao.
He also pointed out that while at the shopping mall; people don't mind paying extra for buying products from a renowned brand. Tech startups offer a better range of products compared to the regular mom and pop stores and malls. Thus, customers may not mind paying delivery charges.
Vikrant believes that initially, startups may offer free delivery to reach to the market and attract customers. But gradually, they have to take delivery charges to be consistent in the market and keep delivering better products and services.