Online retailers scrap free shipments

Free delivery of online orders is becoming a thing of the past, with big names such as H&M and Zalando increasingly following the example of smaller online stores. For example, Zalando recently announced that it will charge a delivery fee for small orders in a number of countries. The general expectation is that more webshops will follow suit in the longer term.

At H&M, members of the retailer’s loyalty scheme have so far been eligible for free delivery of online orders, but the fashion chain has now announced that even its members will have to pay a delivery surcharge for orders with a value of less than €20. Meanwhile, Zalando has revealed that it will add shipping costs to orders below a certain value in Spain, the Republic of Ireland and the United Kingdom (where the cut-off point is £20).

Trend reversal

Speaking to Dutch business broadcaster RTL Z, Cor Molenaar, professor of e-marketing at Erasmus University, described it as a trend reversal: “Online retailers are reviewing their revenue models. Until now, companies like Zalando were focused only on customer loyalty. Turnover was high, but profits were slim.” According to Molenaar, online retailers have until recently been too afraid to charge shipping costs out of fear of driving the customer into the arms of the competition, but we are now seeing a shift in the industry.

Now that Zalando has gained a strong foothold in the market, the group can afford to be less generous to its customers. Molenaar: “Now they can pass on shipping costs, for example, and in the future customers might also have to pay for returns.” It is not yet clear in which countries consumers will have to pay for deliveries. A Zalando spokesperson told RTL Z that the situation is being reviewed on a country-by-country basis: “Every market is different, and we manage each one accordingly.”

Huge increase in logistics costs

Walther Ploos van Amstel, a lecturer in logistics at Amsterdam University of Applied Sciences, expects that online customers everywhere will end up paying for deliveries eventually. He predicts that Zalando will first look at the impact of delivery charges on sales in a few countries and then roll out the policy in phases. According to him, there has been a huge increase in logistics costs for online retailers in recent years. “At Amazon, the costs rose from 11 to 24% in the space of eight years, and at Zalando the logistics costs currently account for 27%.”

Whereas in the past some 70% of customers decided against placing an order when they realized they would have to pay extra for delivery, Ploos van Amstel thinks that Zalando will now get away with charging for shipping. As a growing number of big names change their policies, consumers will gradually become accustomed to paying for delivery and other online stores will then follow suit according to Ploos van Amstel. Like Molenaar, he too expects that free returns will also soon become a thing of the past: “Returns are a real margin killer. Almost half of the goods shipped by retailers like H&M end up being sent back.”

Source: RTL Z