It’s why Amazon Prime is a soaring success.
Last month I was shopping for a specific pair of shoes online. The array of colors available in the style I wanted was considerably larger on the brand’s website than on Zappos.com, which offered only two colors in the style.
But the brand’s site didn’t offer free shipping and returns. And I’m an Amazon Prime member, so I’ve become accustomed to free shipping and returns. Of course, in the case of Amazon, shipping is never actually free. Prime members pay for the privileges of free shipping and two-day deliveries in a $99 annual membership fee. But, for me at least, the sting of that annual transaction always feels firmly in the past around 10 minutes after it happens. I’m getting things shipped to me for “free” all year long! Woohoo!
Where did I end up buying the shoes? I talked myself into a buying the shoe from Zappos in a color that was really my second or third choice, of course. All to save around $9 on a pair of $120 shoes.
The point is: The lure of free shipping and returns is a potent one for most consumers these days. And, like me, they will even pay to eradicate shipping costs from their lives for a time.
According to a report released by Consumer Intelligence Research Partners last week, Amazon Prime has 54 million members in the U.S., up a whopping 35 percent from 2014. Forty-seven percent of Amazon’s total customers are Prime members. And here’s the astounding number—Amazon retains 95 percent of Prime members after one year of membership. That’s a program with serious legs.
There’s an avalanche of psychological research that explains how the offer of free shipping impacts consumer behavior positively for retailers.
“If you are an ecommerce business, optimizing your free shipping threshold works because [it] taps into how we rationalize our shopping behaviors…and the value we place on the concept of ‘free,'” wrote Anna Kegler on Data Point.
In an article on UPS’s Compass blog last year, UPS’ senior director of marketing, Bala Ganesh, wrote, “The notion of zero cost not only has hefty emotional and impulsive implications for consumers, but it can also lead to increased sales revenue. The savviest retailers, however, know that “free” isn’t just an advertising tactic–it’s a powerful psychological trigger that helps businesses better predict customer behavior and boost bottom lines… ‘Free’ gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.”
Proof that shipping costs stop purchases dead in their tracks is demonstrable: Nearly half of all shopping carts are abandoned online when customers see shipping costs.
And requiring consumers to pay to return items via FedEx/UPS/USPS is, in my opinion, a complete turnoff. It’s why, after many years of buying fashion on J.Crew’s website, I no longer do. Around a year ago, I had to pay around $12 to ship a full return back to the company—something that would have been commonplace five years ago. But as I shelled out $12 in exchange for exactly nothing, I felt cheated—I had also paid to have it shipped to me. And when you’re buying something online and you can’t touch or try it on, it seems reasonable to expect that returns, at the very least, are free.
“By offering free shipping, you eliminate the most common reason that people leave an online store after adding items to the shopping cart,” wrote Dan Gray on Jimdo last year. “When you identify and remove the barriers that stopped them from completing their purchases, your sales will increase.”