Andrew Walmsley on Digital: Losing cash on delivery
A view from Andrew Walmsley

Andrew Walmsley on Digital: Losing cash on delivery

Delivery charges, and the way they are presented, could be costing retailers dear in terms of lost sales

Last week I took part in two online retail seminars. In each one we asked marketers what they thought were the key barriers to people buying online. Generally, they ranked delivery charges fourth out of the five options we offered them; just 13% cited these costs as the most important.

This is interesting, because there is so much evidence that consumers view delivery charges as the most significant obstacle to making purchases online. In a survey of Oxford Street shoppers conducted by i-level's sister company, Generator Consulting, for the seminar, it was the most important factor for 35% of those questioned.

An online survey I ran came up with similar results: 35% of respondents named delivery costs as 'the biggest thing that stops me buying stuff online', ahead of 'can't see/touch before I buy' (29%) and 'trust/security issues' (25%).
Last month, Verdict Research published its 'UK e-retail 2009' report. While it predicted a 13.3% increase

in online retail to a total of £21bn this year, it also cited delivery costs as driving C2DE consumers offline. It reported 28.5% of all online shoppers saying delivery charges were 'a problem' and 59% referring to them as 'an important consideration'.

Moreover, in Snow Valley's recent 'Online Retail Delivery 2009' report, of the 123 retailers surveyed just 11% offered free delivery as standard.

Why is there this gulf between what consumers say and marketers believe? The answer may lie in the organisation. For some retailers, the decision doesn't lie with the marketing department, but with a separate online team. As far as the marketing team is concerned, it's off the table - they're not able to affect policy in this respect, so it's low on their list of priorities.

Pressure is growing in the market. According to Snow Valley, sectors such as entertainment, electronics and wine commonly offer free delivery, but it's still rare in gifts, clothing and DIY. However, experience shows that expectations built in one sector inevitably transfer to others.

Is that bad news? The head of online marketing for John Lewis was asked, six months after the retailer introduced free delivery across its entire site, whether it had been a success. 'I can't comment,' he said. 'Though I will say that we're still running it, so draw your own conclusions.'

John Lewis uses 'free delivery' as a title tag on many of its webpages. This means the message is driven home through the site's listings on Google, turning it into a marketing tool.

As free delivery becomes an increasingly prominent part of the online retail mix, the commonest strategy is to segment - offering free standard delivery with enhanced options, such as express or timed, charged at a premium. Amazon pioneered this approach in the UK, with free 'Super Saver' three- to five-day delivery on items costing more than a minimum amount, with faster delivery options offered at additional cost.

However, in ethnographic research conducted by Generator over the past two years, another picture has emerged. While there's no doubt that delivery costs are a real and persuasive factor for consumers, the way these charges are presented is crucial.

Specifically noted time and again in research sessions is the tendency of retailers to 'spring' costs on buyers at the checkout. As one interviewee put it, 'you think you're spending £10 and suddenly it's £13'. Retailers who are perceived as being 'not straight' about their charges leave a bad taste in the consumer's mouth.

Given the importance of trust in online retail, delivery charges could be creating a significant invisible barrier.

Andrew Walmsley is co-founder of i-level

30 seconds on John Lewis

  • The department store chain opened as a drapery shop on London's Oxford Street in 1864. The founder, John Lewis, was then a silk-buyer at Peter Robinson.
  • In 1905, Lewis bought Peter Jones in Sloane Square, London, to form the John Lewis Partnership. In 1914 he passed control of the company to his son.
  • The Gazette, the partnership's in-house magazine, was first published in 1918.
  • It relaunched in 2006 and continues to run as a weekly.
  • The original Oxford Street shop was fully refurbished in 2007. It now has two glass atriums, several restaurants, and a food hall supplied by Waitrose, another member of the Partnership.
  • The Partnership operates 27 John Lewis department stores across the UK, as well as 213 Waitrose supermarkets and, a direct services company.
  • John Lewis was voted Britain's Favourite Retailer in 2008, and in 2009 the UK Customer Satisfaction Index showed it to have the best customer service in the UK.