23 May, 2015The Importance of Free Shipping and the Harsh Canadian Reality
Which online store will you buy from? Importance of free shipping
Why would a shopper buy something on the computer? After all it is only virtual until it arrives, you can not touch or feel it and you have to rely on your imagination on what it will be. Considering all these limiting factors eCommerce grows has skyrocketed in the last five years and only getting bigger with mobile devices overtaking traditional storefronts.
There are three main factors that drive purchases online: convenience, price, and selection. It saves us a trip to the store, and we can spend the time doing other activities. Shipping cost is a big factor in why people shop online. If the shopper has to pay for shipping, it will often eliminate the 3rd advantage of pricing. If you are only saving 10%, shipping cost will often bring that to 0%. Would you then buy online or just stop at the store on your way home from work?
83% want free shipping, similarly, 58 % of US online shoppers have added items to their shopping carts to qualify for free shipping. These studies show that offering free shipping can lead to greater sales revenue since people are willing to buy more to get free shipping. 3, 4
Online shopping is very beneficial to the retailers as it creates an additional revenue source to their existing model at a minimal cost, as they already sell the goods at their physical store.
So why Canadians have not embraced eCommerce at the same rate as it has in the US, which is just south of the border? One of the main reasons is the cost of shipping for the retailers.
There are two models commonly used by the retailers today: Free shipping over a certain amount or set shipping price no matter what the basket size is. Walmart was the only big retail that offered unconditional free shipping, but that was eliminated recently due to rising shipping costs.
The problem with free shipping with specified cost is that the amounts are very high, often at $99-150. Anything over $50 is forcing shoppers to accumulate more items they need over a longer period and often by that time they will just go to another store. Not many people will collect items in their basket for two weeks and then wait another week to get it shipped.
Canada Post is the only main shipping provider in Canada besides couriers like FedEx that are premium priced. Canada Post is government owned vs. US postal services that are not fully owned by the government. 5, 6
Canada Post announced a 5-point plan for growth and revitalization called “Five Point Action Plan.” Unfortunately the same plan cost businesses more and more money with annual increases, most recently shipping cost was raised by 4%. This increase was directly passed to the consumers by increasing the shipping minimums. The same plan will also eliminate jobs and remove the convenience of home delivery.
Canada Post could choose a different method of increasing parcel volume and reach the same revenue targets that would also benefit the overall Canadian economy. Raising pricing is an easy way out.
Not only everything in Canada is 20-30% more expensive, but we also need to spend more to get the privilege of free shipping. Talk about fairness. 2
Why should it cost few times more to mail the same package to the same address in Canada vs. the United States? 1
Our priority should be reducing the cost of shipping, increasing Canadian eCommerce and growing our retail industry in the new retail era of shopping.
Let’s examine the shipping costs in Canada and the US from the same retailers and brands.
Top 10 Retailers that sell both in Canada and United States-Minimum purchase for Free shipping
|#||Retailer||Minimum Purchase for free Shipping in Canada||Minimum Purchase for free shipping in US||Winner|
|2||Home Depot||Included with products/product specific||$45||US|
|4||Bed, Bath & Beyond||No free shipping||$49||US|
Top 10 Brands that Sell Both in Canada and United States-Minimum Purchase for Free Shipping
|#||Brand||Minimum Purchase for free Shipping in Canada||Minimum Purchase for free shipping in US||Winner|
|1||Uggs||No free shipping, fee -16% of the total order amount||Free||US|
|3||Armani Exchange||No free shipping $18- Flat fee||$99||US|
|8||Tiffany||No free shipping $20- Flat fee||$99||US|
We will review shipping cost of Canadian only stores for a greater understanding of the problem.
Canadian Only Retailers
|Name||Min Purchase Required for Free Shipping|
|1||Shoe Company||$35 with site registration|
|3||Canadian Tire||No home delivery|
|8||Shop.ca||Shipping cost included in the product price|
Consumers and retailers should join forces and fight against the current Canada Post monopoly driven by our government so that our retail industry could grow. We need to encourage online shopping within the Canadian borders so that more people can get jobs that are getting eliminated from the brick and mortar stores. Online and integrated retail is the present and the future; we should embrace and nourish digital commerce so that it thrives.
- Pricey parcels: Why does it cost so much to ship from Canada, http://bc.ctvnews.ca/pricey-parcels-why-does-it-cost-so-much-to-ship-from-canada-1.2213878
- The Real Reason Canadians Pay Higher Prices Than Americans For the Same Products, http://www.huffingtonpost.ca/mark-milke/canada-us-prices_b_6357438.html
- Why Free Shipping Is a Must, http://www.inc.com/peter-roesler/why-free-shipping-is-a-must.html
- Walker Sands’ 2015 Future of Retail Study, http://www.walkersands.com/pdf/2015-future-of-retail.pdf
- Canada Post Corporation 2014 Annual Report, canadapost.ca/cpo/mc/assets/pdf/aboutus/annualreport/2014_ar_financial_en.pdf
- Parcels Price and Services Overview of Changes, https://www.canadapost.ca/cpo/mc/assets/pdf/business/parcel-ra-ooc_en.pdf
- Unlocking the Consumer Mindset with Online Shopping Statistics, https://www.trueship.com/blog/2015/04/07/unlocking-the-consumer-mindset-with-online-shopping-statistics/#.VTlw1PnF-Lk