Growing And Lessening - How Free Shipping Reacts The Trend Of Online Shopping
Key Takeaways
- 71% of consumers consider free shipping as the most important factor for repurchases in the same store while online shopping.
- Smaller-size products tend to offer free shipping service more than larger-size products, with a difference of 4-5 times in ratio.
- The freight has shown a great and abnormal increase because of various reasons internally and externally. The freight peaked in 2021 and declined in the second half of 2022.
The Booming Online Shopping
When shopping online, it is important to know how much the shipping fee costs. Many consumers are more willing to pay for brands with “free shipping” service, and they search so on CouponBirds. However, as the impact of pandemic and complicated economic conditions continues, people’s shopping demand changes.
CouponBirds did a survey on both consumers and retailers in order to find out how their shopping decisions and preferences are affected by free shipping, as well as the factors that the retailers provide free shipping. How much have the free shipping conditions changed in the past two years? Are Americans tending to shop less because of the decrease in free shipping? Is free shipping continuing to change in the future? Follow this article to figure it out together with CouponBirds.
Increasing Shopping Demands
Did American consumers’ shopping demands change because of the unstable conditions? After the slight volatility at the beginning of the pandemic, consumers’ shopping demand tended to grow rapidly last year. According to the data of Statista, the total amount of online shopping sales in the US reached $905 Billion in 2022, which is about 4.9% compared to last year's $862.4 Billion. The data from the Bureau of Transportation Statistics showed that, in October 2022, the total amount of transportation in the US reached $133.8 Billion, which showed an increase of 24.1% compared to the same period in 2021.
With the continuous development of online shopping, goods transportation is also a very important factor in the whole process. It sometimes even has a decisive impact on the decisions of retailers and consumers.
Consumers' Shopping Preference
How does it affect people’s shopping preferences? We found that in a survey done by Jungle Scout.
They did a survey of 1,066 Amazon online shoppers. 80% of consumers were expecting free shipping in online shopping, while 66% of consumers said that they would expect free shipping on every order. Meanwhile, consumers also have expectations of the speed of transportation. 9% of the consumers were expecting to receive the goods the same day the order is placed. 91% of the consumers were expecting to receive their goods in a week. 80% said they would track the progress of the real-time logistics after placing the order. 70% said the speed of transportation would affect their shopping preference next time, and 47% said they might pay more in order to receive the goods faster than expected.
After the year-end shopping season in 2022, CouponBirds also surveyed a random sample of 1,000 American consumers to find out how free shipping affected their holiday shopping decisions.
The reason which is topping the list is 71% of the consumers consider free shipping as the most important factor for repurchases in the same store while online shopping. The rest of the reasons are as follows: 70% of consumers are attracted by reasonable prices or promotions; 54% made decisions depending on if they are familiar with or trust the brands and products; 52% are just buying things that are really in need, and 46% said others’ recommendations are important.
82% of the consumers think that whether the store offers free shipping will affect their shopping preference, while 12% don’t think free shipping will influence their thoughts at all. Among the consumers who think free shipping is important, 29% think it is the most important decisive factor; meanwhile 46% think that among the two products with similar prices, the one with free shipping will be given priority.
25% of consumers think that the freight is acceptable within a certain amount. Of these people, 90% will hesitate when the shipping cost is higher than $7.
Also, the number of retailers offering free shipping in CouponBirds has also fluctuated, with a minimum number of 83,384 in 2021.
Factors Affecting Free Shipping
In order to confirm whether the free shipping provided by online retailers is related to the size of the product, we selected four types of products that are generally considered to be small size (clothing, beauty products, accessories, and jewelry) and four types of products that are generally considered to be in larger sizes (household, furniture, tools, and electronics). We checked the ratio of these categories among all free-shipping brands.
Data showed that in all the brands that offer the free shipping service, clothing accounts for 14.0% in 2022, beauty products (including skin care products and cosmetics, etc.) account for 5.0%, accessories account for 2.3% and jewelry accounts for 2.2%. Meanwhile, the electronic products that offer free shipping account for 1.6% of all the free-shipping-offering categories. Tools and equipment account for 1.5%, furniture accounts for 1.3%, and household accounts for 1.1% of all the brands that offer free shipping. The ratio of smaller-size products offering free shipping has always been more than larger-size products in the past two years.
What causes this difference, and what are the factors affecting free shipping?
We always use the Baltic Freight Index to show the trend in ocean freight. Baltic Freight Index (BFI) is a leading indicator of spot dry bulk cargo rates. According to the official data by Freightos’ Data, the Baltic Freight Index increased from $2618 in 2020 to $12419.1 in 2021, which is also the peak recently. In 2022, the BFI went down to $8,875.6, which is still higher than before the pandemic but also shows a trend.
How about land freight? We checked the U.S. Energy Information Administration to find its trend from the price changes of gasoline and diesel. Both their prices have risen in recent years. The prices of gasoline have changed from $2.379 per Gallon in January, 2021 to $5.754 per Gallon in May, 2022. Meanwhile, the prices of diesel have changed from $2.379 per Gallon in May, 2020 to $4.593 per Gallon in June, 2022. The increase is 140% and 93% respectively. The freight rates peaked in 2021 and started to show a decline in the second half of 2022.
There are many reasons causing an overall increase in transportation costs. How do online retailers react to this increase then?
In our survey of the retailers, the total number of retailers offering free shipping for any purchase in CouponBirds has slightly decreased from 385 in 2021 to 356 this year. Among the brands that offer free shipping at a certain price, we compared how much this “certain price” is to learn about if there is an overall trend. The result shows that 182 stores offer free shipping at a higher price in 2021, while 104 stores’ free-shipping-offering price is higher in 2022. There are also 208 stores that offer free shipping services at the same price.
The reasons causing changes in freight may be various. Generally speaking, subjective factors like booming commodities from the supply chain and the great increase in shopping demands from consumers may affect them. Also, objective factors like the spreading pandemic, energy shortage, unstable international conditions, insufficient capacity, and containers can also cause fluctuations in the worldwide transportation fee.
Why does the fee tend to show a downward trend in 2022 instead? CouponBirds’ financial expert Natalie Warb says, “Due to the easing of the pandemic and unstable international condition, the economy overall is showing a positive trend. Booming demands and supply also make both sides of consumption become much more confident.” She added, “I also have confidence in long-term economic development, and so will online shopping. Not only the conflict of free shipping but also the problems between consumers’ demand and retailers’ service is going to be better solved in the foreseeable future.”
