Retailers need to test before offering free shipping
March 21, 2012 12:00 PM
When Bulbs.com began exploring free shipping, CEO Mike Connors knew the light bulb retailer had to test multiple minimum order thresholds and that such a program wouldn’t be free of cost. “If you offer free shipping you get more customers, but you just don’t pull the trigger without knowing the financial impact,” he says. “We did over a year of testing.”
Connors will talk about how Bulbs.com tested free shipping options during a session at the Internet Retailer Conference & Exhibition 2012 entitled “Turning shipping into a profit center—even when you’re offering free shipping.”
“We tested with promo codes including ‘buy up to $150 and we’ll ship free’,” Connors says. “To strike a balance between what the customer could bear and not going broke, we landed at $25.” The $25 minimum required a promo code, but since then Bulbs.com has evolved its program and is now testing a $50 threshold, with no promo code.
Keys to a successful free shipping program include understanding the cost of delivering a package so retailers know their profit margin and can sustain profitability, he says. It’s also less disruptive to test—and then take away—a promotion code rather than to announce free shipping to the world and then back down, Connors adds.
Another important factor is the retailer’s relationship with its carrier. “As much as we were aware of what our shipping partner could do, it really forced us to understand FedEx even better and know our options,” Connors says. Once Bulbs.com, No. 493 in the Internet Retailer Top 500 Guide, raised the possibility of more volume, the carrier showed a willingness to work more closely with the retailer and offered more sophisticated reporting.
Internet Retailer’s editors asked Connors to speak because of his experience with free shipping programs. As CEO of Bulbs.com, online light bulb supplier to 100,000 commercial and residential customers in over 300,000 locations, Connors implemented a full web site redesign that improved search and navigation, added multiple high-resolution product images, live chat, and product reviews. These enhancements, along with an increase in search engine optimization and direct response marketing efforts including a new free shipping program, enabled Bulbs.com to post record profits in 2011. Before joining Bulbs.com in 2000 as vice president of marketing and sales, Connors led sales and marketing activities for Boston Retail Products, a store equipment manufacturer, where he expanded its markets to Brazil and Chile.
The IRCE $200 early-bird discount expires March 31.