The End of The Free Shipping Era Greatly Exaggerated
With margins getting tighter, you see reports about the end of the free shipping era. That may be true on an affordability basis (who can afford to pay for this?). That doesn't mean that they don't want it though.
PYMNTS and Adobe Survey: The Role of Free Shipping in Customer Loyalty
A recent survey from PYMNTS and Adobe highlights a simple truth.
66% of consumers consider free shipping key to customer loyalty
In short, retailers must figure out a way to subsidize free shipping if they want to grow. The (finally!) changes to Walmart+ in the last couple of years and the recent revamp of Target's loyalty program point to one thing: consumers are still willing to pay for shipping loyalty, at least when there is a wide assortment and fast delivery involved.
With the decline of retailer-based private label credit cards, loyalty membership, retail media programs and - for the big players - fulfillment services are the most logical way to subsidize this. Extended warranties factor in too, providing some retailers critical margin dollars. (I can't buy an airline ticket without being forced to not select third-party purchase protection which the airline already provides - is this why Boeing's planes keep breaking? My declining this coverage?).
GenZ Preferences and the Brand-Retailer Divide: Unveiling Shopping Patterns
Another interesting point brought out from the survey. The difference in shopping between a brand and a retailer was also surveyed. The youngest generation surveyed, GenZ, expressed a 43% preference for a brand than a retailer, whereas the average of other generations was at 28%. Still, the majority prefer marketplaces and retailers.
Why?
The answer is competitive prices and wide selection. Again, that pesky Amazon formula which keeps showing up. Walmart does a good job here also. It's almost like we keep trying to reinvent a new way to attract consumers to shop but keep ending up at the starting point we found 20 years ago.
What's that?
Back in the stone age of eCommerce, eBay ruled the roost. One analyst even called it "indestructible," thinking auctions were the future of all online purchases because of its efficient price discovery.
Amazon, and even eBay's own internal teams, discovered a new generation of buyers coming onto the internet. eBay even had a fancy MBA-style name for it: "COBs" - convenience-oriented buyers. The problem eBay had, they could not figure out what the heck to do about them.
Amazon had no such problem. Jeff Bezos bet that low prices and unlimited selection was the key to the whole equation, which propelled the growth. Prime in 2005 gave him a consumer subsidy for shipping but more importantly - loyalty.
The market still has not caught up with Amazon's execution of this formula. And in some ways, this report just confirms what you already think about why everyone shops at Amazon.
The report also highlights that if you prefer shopping at brands, TRUST is the primary reason. Which, has always been the issue with wide selection and marketplaces.
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