Inflation, competition, labor costs and related factors are eroding profits, bringing merchants to rethink — and in perhaps even roll back — the free shipping free-for-all that broke out over the past two years.
Used as a customer acquisition tool or member benefit even before the pandemic, free shipping is a major COVID convenience and one of the perks that pushed Amazon Prime past the 200-million-member mark, pressuring the launch of Walmart+ in 2020, shipping free on orders of $35 or more.
Beginning Friday (Feb. 18) Amazon Prime membership prices for go from $119 to $139 — $12.99 up to $14.99 as a monthly billing — but few believe the $2 increase will diminish Prime’s appeal, particularly that of unlimited free two-day shipping on eligible items with no minimum spend for members.
Much of this has been literally driven by the platform delivery aggregators like DoorDash, whose DashPass delivery subscription service now has over 10 million members and “subscribers are responsible for more than half of DoorDash’s domestic gross food sales and are roughly 40% of its monthly active users in the U.S.,” The Wall Street Journal reported on Thursday (Feb. 17).
“Some 90% of DashPass members joined by paying full price on a monthly or annual basis or by starting with a free trial, while just 10% joined through a credit-card loyalty program. DoorDash said Wednesday that DashPass members have higher retention and order frequency than nonmembers,” per WSJ.
See also: Consumer Satisfaction With Online Merchants Directly Linked to Availability of Free Shipping
As COVID measures appear to be vanishing ahead of the onset of spring/summer — the lifting of indoor mask mandates in former COVID hotspots is a big signal — there’s a sense that 2022 will see changes in consumer behavior punishing merchants that begin charging, or charging more, for delivery.
According to the PYMNTS study, Consumer Choice At The Checkout: How Online Shopping Experiences Build Customer Loyalty, “Merchants may have weakened customer satisfaction by scaling back the availability of free shipping and their websites’ help functionality in the first half of 2021.”
Researchers found that close to half (48%) of online shoppers see the absence of free shipping as a “significant source of friction,” with 7.5% calling it the most decisive friction they encounter.
Despite this, PYMNTS found merchants dialing back on free delivery in recent months. For example, in Q2 2021 63% of merchants offered free shipping, whereas 79% were doing so just months earlier.
That study observed low fractional decreases in customer satisfaction starting in Q4 2020 and trending downward through 2021, stating, “data suggests that consumers have preferences for certain features, and merchants may be undermining customer loyalty by scaling back these features’ availability.”
Get the study: Consumer Choice At The Checkout: How Online Shopping Experiences Build Customer Loyalty
Delivery services like Shoprunner, which charges a $79 annual fee for same-day delivery in some areas, is also offered as a member benefit by American Express, Chase, Mastercard and PayPal.
Showing the power of free two-day delivery, Shoprunner — which was acquired by FedEx in 2020 — went on a deal-signing spree in 2021 lining up brands from American Eagle Outfitters to ProFlowers.
With the industry facing a possible slowing of ecommerce and online ordering in 2022, expect more free shipping offers from marketplaces and merchant sites, using convenience to keep conversions up.
See also: Merchants Must Look Past the Checkout to Improve Online Sales
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More