Is It Really INSANE to Offer Unlimited Free Shipping on Black Friday?

Retailers had to get creative this year for Black Friday. 

There are two main challenges they're facing:

1) Customers are not shopping as much this season; and when they do shop, they’re not spending as much per cart. 

2) Black Friday is mostly driven by in-person crowds and in-store sales. But many people will be staying home this week due to rising cases of COVID-19.

For these reasons, retailers knew that they could not follow the same template as they'd used in prior years. Anything they tried this year would have to be experimental. It was also, in most cases, going to be crucial. 

Holiday sales make up a bulk of the year’s profits for many retail brands. 

In 2020, with continued economic decline, and with the pandemic still raging, this holiday season will make or break many businesses that have been just getting by.

So it’s not surprising that many stores are choosing to stay open. They’ll likely let a limited number of people inside and enforce social distancing, in accordance with local laws. They’re also offering a lot of sales—and starting those promotions earlier than ever. Thankfully, this means that people don’t necessarily have to crowd together on a single day to get the special prices.

But not too many retailers are offering unlimited free shipping—for all orders, with no minimum.

Here’s Why:

• They’re afraid of change. For example, they might be worried about upsetting customers if they don’t offer their annual in-store sales. They might be worried about missing out on foot traffic. They might not want to gamble on the outcomes of driving people online during a critical shopping day if they aren’t 100% certain of the results. “This isn’t how we usually do it.”
• They’re worried about absorbing the cost. Free shipping is never free. Someone always needs to pay for the costs, including packaging materials (boxes, padding, labels), labor (warehouse workers, packagers, couriers), and transport (fuel, drivers, vehicles). If customers aren’t paying for items to be shipped to their homes, then the company pays for it.
• They don’t think they can keep up with the volume of orders. This one is especially true for Black Friday. Deliveries are exponentially higher between November and December. You don’t just need to incorporate a new delivery system into your existing operations; you need to dramatically scale it for the holiday surplus. While onsite workers might be able to handle one day of moderated (for social distancing) influx in the store, given a limited quantity of stock and store hours, that moderation wouldn’t exist as volume quadruples online. Then, you need to consider the extra traffic with third-party couriers, the extra traffic on the roads, and potential for delays—which means you will be responsible for any customer unhappiness.

Those are all fear-based reasons. They react to shortcomings, rather than solving them.

So, if you put fear aside: Is it really INSANE to offer free shipping for Black Friday?

After all, it allows you to send customers to your website and can boost online sales.

Customers might be pleased to know you’re looking out for their safety—and the safety of your own employees. It means you’re aware of the pandemic rates and responding appropriately.

Plus, we know that it’s the No. 1 thing that today’s customers request from retailers. Even a dramatic discount rate can’t compete with a much smaller savings when it comes to free shipping. 

For example: If you usually offer 25% off on Black Friday, you might offer 30% off this year to an added incentive to participate in 2020. However, just eliminating an average of $5 in shipping per order would make customers happier and bring them to your site, or keep them on your site, and is equal to or lower than 5% of orders—so you’re actually saving money.

You will, however, have to let customers know that you’re shifting your focus to online this year, which might not be what they’re expecting. 

You’ll have to consider the fact that some employees won’t be working the same number of hours and making the same amount of expected income during the holidays, which might be something you can generously offset due to the added income that the company might predict with a successful boost to sales with a well-promoted free shipping offer.

And, of course, you need to worry about the shipping method itself: Traffic and shipping routes will be more clogged during this peak holiday time. Rates might be higher for some shipping methods. You will want to guarantee your customers the same high standards they are used to from your stores (if not higher). So you’ll need to provide accurate quotes for time and price.

Lastly, you might need to shift your operational focus and resources to your warehouses and distribution channels, as opposed to your local stores. This is one of the details that frightens companies the most. They’re usually willing to lose money and keep things the way they are, rather than restructure their human talent, budget, and operational structure to accommodate a different customer service system. 

But it’s important for financial leaders, marketing leaders, customer service leaders, and operational leaders to get together and use their combined expertise to acknowledge the gains from this scenario: growth in the volume of shoppers, growth in the size of their shopping carts, likelihood of completing a purchase, likelihood of retention/return visits, and lifetime value.

If nothing else, this is an opportunity for your company to do some big-picture planning.

If you want to offer free shipping, you’ll quickly learn that it’s possible—for any store.

Here’s How:

• Advertise Widely. Get ahead of yourself and promote your free shipping along with any other deals and sales. If you’re going to close your doors on Black Friday (or make substantial changes to the way you usually do things), let customers know in advance. Use your social media channels, email, mailings, and in-store signage. Don’t let fear of the unknown stop you from doing something new: Just introduce it in advance and make sure that your customers, and your employees, are well prepared for the changes. However, if your big highlight is unlimited free shipping with no minimums—this should be front-and-center of your ads. This is very important to customers, and they’ll want to know!
• Make Every Effort to Expedite Shipping. If you can offer same-day free shipping, do it. This might be harder during the long weekend, since some delivery services aren’t running on weekends and holidays. But if you can promise it during business days, it will still give you a competitive edge. Next-day and two-day shipping also stands out in today’s retail landscape. Anything beyond that simply won’t compete. However, no matter what you do, try to be specific to and accurate about your delivery dates—down to a specific window of time, if possible. People love to know exactly when their package will arrive; rather than a quote of “3 to 5 days” they want to know “between 3 and 5 tomorrow."
• Close Your Stores & Save Money. We’ve mentioned why retailers might not want to shut down their stores nationwide. It’s a risky move. But so is keeping physical stores open during the pandemic, and encouraging people to crowd to those stores during a big promotion. That’s risky from a PR standpoint, as well. And for the health and well-being of your workers. On the other hand, you can make a really big statement by closing your stores and saying that safety is important—for everyone. You can say that people should stay home and enjoy all of the same savings and the exact same products by ordering from home. Best of all, you can say they’ll still get those items same-day or next-day. That’s going to require some restructuring and strategy from your team, but it’s possible. And it will have a huge payoff. Because you’re not operating your stores or paying staff (especially not holiday pay or overtime). You can make extra money by driving people online with this extra incentive, and use it to pay local couriers to get packages to people’s homes. They can work with a skeleton crew at your sites or distribution centers. And it’s a big promotion for ongoing free delivery for all orders, which will get your consumers very excited about the next time they’re ready to shop.

As you can see, it’s easy to execute a strategy for free shipping if you’re focused on giving customers what they want the most and looking out for your staff’s safety at the same time.

Therefore, it’s important to consider why so many retailers are choosing not to offer unlimited free shipping for Black Friday. 

It seems like they might be letting their fears outweigh the potential benefits to their business. 

Worse: They’re letting marginal profit gains outweigh their customers’ needs.

For one day, it might look like this will help their company the most. But in the long-term, it’s obvious that implementing permanent solutions that satisfy customers, can swiftly react to fluctuations in the economy, and offer agility across your stores and distribution channels, is actually going to be the strategy that pays off.

That’s the difference between a fear-based reaction and a technology-informed solution.

With the holidays upon us, we’ll see which choice keeps retailers in the black after Black Friday.

For your next holiday promotion: You can compete for bigger sales margins and edge into an overall higher market share by taking advantage of strategic technology insights provided by BigLynx.

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