Online sales are already breaking records this holiday, including desktop revenue that topped $2 billion for the first time on Cyber Monday, according to ComScore. But as more people make purchases online, retailers are saddled with higher shipping costs, particularly as consumers have come to expect free shipping offers.
According to a study by Pitney Bowes, which advises retailers on shipping practices, 82 percent of U.S. shoppers consider free shipping most important; by comparison, only 17 percent prefer fast shipping. Additionally, one in three respondents said they've abandoned an online order sometime in the past year due to prohibitive shipping costs.
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Many retailers over the past few months have either lowered their minimum order threshold, or offered free shipping. Wal-Mart, for example, offered free shipping for one day last week, while Target has offered free delivery for online orders for nearly two months. That offer ends Dec. 20.
"Shipping offers are critical to customers and are especially important during the holiday season," said Forrester Research analyst Sucharita Mulpuru. "However, these offers are costly and eat into retailer margins."
These costs will become even more significant toward the end of 2014 and into next year, when carriers UPS and FedEx will begin charging by size, not just weight. One way retailers are combating these costs is by offering buy online, pick up in-store options.