Is There A Future For Free Shipping?

The decision to buy is made, the online order is placed, and the customer is ready to check out. It's now time to calculate the shipping charges, and surprise! The shipping cost to the consumer is zilch, zero, a giant goose egg. Are e-tailers giving away the store?

Billion-Dollar Business

With the advent of e-commerce, shipping has become big business. In fact, according to Bill Zollars, President of Yellow Freight Transportation Systems, "The e-commerce transportation services market is about $500 million (US$) today and will be in excess of $1 billion in about four years."

Still, many shoppers would rather trudge to the mall than pay these fees, and several e-commerce retailers are trying to accommodate consumers by experimenting with free shipping promotions.

Holiday Sweetener

Virginia-based electronics retailer Circuit City is offering free shipping on orders placed online during the holiday season. The company's offer is designed to make their products competitive in an industry that is already considered to be one of the most treacherous.

Online malls are also dipping a toe into the free shipping pool. MSN's eShop announced that its merchants will feature free shipping during the holiday season, citing high shipping costs as one reason why some potential customers avoid shopping online.

Microsoft (Nasdaq: MSFT) claims that the new service has already attracted over five times as many visitors to MSN eShop since the site's launch.

"The tremendous increase in traffic to MSN over the last year was a primary factor behind our decision to participate in MSN eShop's free shipping promotion," said Hilary Billings, president and CEO of Red Envelope Gifts Online.

"We believe that customers will more easily discover our products due to MSN eShop's search and find tools, and free shipping is a great way to thank them for shopping with us this holiday season."

Free Shipping Year Round?

While a seasonal promotion is nice, free shipping for the other eleven months would be even nicer. However, many companies are unsure about how to make this idea a reality.

One traditional retailer has taken a step closer. Payless Shoes, the discount brick-and-mortar chain, is boasting that it is now offering free shipping all year round.

However, the shoes are shipped directly to one of the real-world stores, and the shopper must then drive to the outlet and pick the items up.

According to Rhonda Wells, Director of E-Commerce for Payless, the hybrid approach is working well. "The company expected many customers to take advantage of the new shipping option, but we have been pleasantly surprised by the tremendous response to date. We're beating our projections hands down."