Tag Archives: free shipping

A Non-Techie’s Guide to the Internet Commerce Trade Show (IRCE)

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This year was the 10th anniversary of the Internet Retailer Conference and Exhibition (IRCE) and my first year of attendance.

IRCE logo

Trying to neatly summarize this sort of confab without a experience as an e-commerce operator is sort of like assuming you can translate Portuguese based on having watched the World Cup.  The show was large, chaotic and alien – sort of like walking into 100 Star Wars bars simultaneously.

So while I have decent e-retailing experience, I will not attempt to make sense of all of this.

But I do have some observations.

E-Commerce is based on a few simple objectives, not too different from the marketing funnel used for any other product marketing, but with different terminology:
– gain the right customers’ attention  (‘engagement’, ‘click thru’, ‘open rate’)
– encourage purchase (‘conversion’)
– efficiently delivering (‘fulfillment’, ‘final mile’)
– establish a relationship (‘customer experience’)
– encourage repeat purchase (‘loyalty’, ‘retention’)
– encourage WOM, referrals (‘evangelism’)
– etc.

Simple, no?  I mean, we all shop online, how difficult could it be?

Well, let’s illustrate some of the complexities using a typical grocery store as the template.  Imagine running this store.

This is a store where:
the store itself serves the entire world — yet it needs to be built to serve the right volume of customers profitably
– finding the store requires a guide — yet the description that will lead to your store changes every 6 months
– your most loyal customers can be lost if a competitor offers to carry the groceries to the car for free
one of your big vendors (i.e. ISP) can have a bad day and you are unable to open, with no control
competitors can pop up virtually next door – instantly – and go away just as fast
– about 4 in 10 customers fill up their carts and then exit the store, leaving the cart in the aisle
a person with bad intent could lock the doors of your store –  from thousands of miles away
your loyal shoppers are barraged with promotional messages from stores right next door – and around the world
your competitors’ customers don’t necessarily live nearby – – but you still have to find them
– some of your competitors sell products to an enormous store that’s in every market, and which sells them cheaper (hint: starts with an ‘A’)
– and all of this is changing at light speed — Yikes!

On the other hand, all is not lost.  Imagine if your store could:
remind customers when important events are, and even suggest items to buy for the occasion
– send customers totally personalized communications, including catalogs – – as often as you want, for almost nothing
make recommendations to your customers about what they might love, based on what they’ve already bought
– send customers not just promotions, but at the exact time that you know they typically buy, and the deals that they respond to
enable your customers to tell all their friends about your great store – – instantly, when they’re most excited
follow up every single purchase to make sure everything is ok
dress your store up for the holidays or another event – – instantly
change what your store offers based on what your customers are buying elsewhere
enable customers to order merely by touching the picture in the ad

This is the magic of e-tailing.  The ability to reach and influence is remarkable, and the rules are constantly changing.

Here are a few companies whose products looked interesting:

Ship 2 My ID – – from their website: “Ship2MyID is a social commerce enabler that will allow users to buy items online and send them to others without needing to know the receiver’s physical address. Both the sender and the receiver’s physical addresses are kept hidden from each other, and the receiver has to accept the shipment, ensuring security.”  Got it?  You give them your email or social media ID, they help someone ship something to you without their knowing your address.  yes, me too.

ShipToMyID

 

OrderGroove – encourages all-important loyalty by enabling subscription ordering (i.e. they figure out when you run out of vitamins, diapers, dog treats, whatever, and facilitate having the manufacturer send to you.)

Ordergroove

Bitpay – Still don’t understand bitcoins?  Doesn’t matter.  With these guys, your store can still accept them.

From their site:  “Instant conversion, no transaction fee, and bank deposits in US Dollars, Euros, GBP, CAD and more. We take the bitcoin exchange rate risk, your customers get the best rate on the market, and you get a payment you can count on, every time.”

Sounds pretty low-risk to me.

Bitpay

FeedVisor – Algorithmic Repricing for Amazon Sellers!   I will admit – – not 100% sure what these guys do.  Maybe not even 50%. There was a crowd of intimidating techies crowded around the booth so I just gave them wide berth and moved on.

Algorithmic Repricing

 

The IRCE show is one trade event that is actually worth attending every year, because you know that in a year everything will be completely different.

 

The Final Mile is The Toughest

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One of the great things about online shopping has been the free shipping, often via retailer promotions (‘free shipping over $50’) or programs like Amazon Prime.

Isn’t it terrific?  You can be prancing around doing whatever one does when one prances, and should a random thought pop into your head like “man, I really need a Teflon fly-swatter”, you can just go online, order it, and before you know it, like Bugs Bunny waiting at the mailbox for his order from Acme, a Teflon fly-swatter arrives at your doorstep, typically in a box big enough to hold a microwave oven.

Screen Shot 2014-05-13 at 11.25.58 AM

Long Haired Hare (1949)

Well, you may want to get your impulse shopping Jones satisfied now, because the sad news is that free shipping as we know it is likely to be changing.  Reality bites.

This past week FedEx announced it was changing its freight policy to include not only weight, but also the dimensions of the shipped product.  This will result in increased shipping costs on about 1/3 of items, particularly large but lightweight products (e.g. toilet paper) that fill up trucks or planes but don’t represent as much revenue (or profit).

Similarly, Groupon, which also sells a few things from time to time, has increased its free shipping threshold from $20 to $25.

Why the changes?  Well, the short answer is that you can’t download stuff you order online.

Amazon might have the most amazing distribution centers, but stuff still has to be shipped with pre-internet technology like TRUCKS and AIRPLANES and HUMANS.  And the cost of fuel of all of these mechanisms is going up, as are fees, taxes and everything else.  Like a bridge that goes 99% across a river, that final 1% really makes or breaks the whole program.
– there are related impacts as well:  retailers will likely now need to stock more box sizes (to reduce over-sizing), which carries inventory costs.

overpackaging

SO – someone has to pay for these increased costs.  And ultimately you know who that is:  you and me.

It’s well known that there’s a high rate of cart abandonment – by one measure about 65% – -and that 44% of these are due to high shipping costs. (cool infographic here).  So retailers are loathe to add or increase shipping charges.

Shopping Cart

What is likely to happen is that costs will be increased throughout the system, for example:
– Shippers like FedEx incorporating package dimensions to increase fees (and UPS likely to follow)
– Retailers raising thresholds for free shipping (like Groupon)
– Retailers increasing prices in other ways (Amazon Prime going from $79 to $99)
– And plain old increased costs of merchandise to cover shipping

There will very likely be increased use of shipping as a promotional tool, but over time costs will inevitably need to increase.  There’s just not enough profit in the system right now.

Until some equilibrium is reached, however, you may still notice overt signs of covering costs – – like $50 for a $2.50 order of screws (actual cart total – – and yes, it was abandoned).  So keep your eye on the ‘shipping cost’ line for the time being.

Screwed!