Small Merchants Drop Free Shipping and Risk Losing Customers

Dropping perks may seem like smart cost-cutting for small retailers, but one cut in particular could come at the expense of repeat business.

As consumer spending continues to slump following January’s seemingly temporary bump, shoppers are seeking any small savings. This is especially true when it comes to discretionary purchases, as consumers must put aside an average 22% of their incomes on essentials such as food, clothing and shelter. In addition, rising interest rates have had a significant effect on shoppers’ spending habits. Per previous PYMNTS research, 70% of consumers have made at least one card management adjustment over the last 12 months to mitigate their debt, with better budgeting being the most popular adjustment.

This puts discretionary retailers, especially small businesses running on tight margins, in a particular bind. Affected by inflation and manufacturer-continued price hikes, formerly free perks such as online returns or free shipping have in many cases been dropped as retailers try to shore up revenue.

This has created a “features gap” between small and medium-sized business (SMB) retailers and their larger competitors, as noted in proprietary research prepared for the PYMNTS collaboration with Cybersource, “The 2023 Global Shopping Index.”

Less than half of SMB retailers offer free shipping for digital orders, but 73% of larger sector players do. For consumers seeking to cut costs wherever possible, the extra cost of shipping, especially for those who have come to expect free shipping options, may be enough to turn them away.

For SMB retailers that may be reconsidering implementing free shipping, solutions exist that may improve both efficiency and expense. In January, Shipium and Quiet Platforms announced a partnership to assist eCommerce businesses. Those using both Shipium’s eCommerce shipping platform and Quiet Platforms’ national delivery service network will get two- to three-day shipping and reduced shipping costs. Quiet Platforms, a wholly owned subsidiary of American Eagle Outfitters, gives brands and retailers access to nationwide network delivery coverage, saving them from the hassle of managing multiple integrations, invoicing and negotiations.

Shipium has also partnered with Passport Team when it comes to cross-border shipping services to combine Shipium’s shipping platform with Passport’s international parcel logistics service. Much like the partnership with Quiet, Shipium’s platform coordinates supply chain steps to optimize delivery speed and shipping costs, while Passport’s service manages international shipping complexities, providing consumers in 150 countries with package tracking and customer support.

Also aiding some SMB retailers is the partnership between ShipEngine and GoDaddy to streamline shipments for merchants hosted by GoDaddy. With ShipEngine’s shipping API, U.S.-based SMBs can create shipping labels from their GoDaddy accounts and get discounted rates from the U.S. Postal Service and other carriers.