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Gas Prices Not Affecting Free Shipping Promotions

October 7, 2005

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High prices at the pump won't keep retailers from offering free shipping this Christmas season, according to results of the 2005 Shop.org/BizRate Research Online Holiday Mood Study, conducted by BizRate Research.

This year’s most popular online promotion will be free shipping with conditions, which 79 percent of online retailers plan to offer during the Christmas season. The promotion is in line with consumers’ desires, as four out of five online shoppers (79%) said that free shipping offers are an important factor when deciding where to buy.

“Online shoppers are clearly motivated by promotions like free shipping, gifts with purchase, and special online offers,” said Scott Silverman, Executive Director of Shop.org. “These promotions will enable customers to save money while helping retailers maximize their holiday sales. And, because companies have planned for them as part of their overall marketing strategy, these promotions will not come at the expense of profits.”

This year, online retailers are expecting a very jolly Christmas, as all of the companies surveyed expect to see online sales increases from 2004. Some retailers are expecting big gains, with 19 percent of online retailers expecting sales to double from 2004. Another 54 percent of online retailers expect to see growth between 20-99 percent.

Many multichannel retailers will begin their marketing earlier this year, timing their promotions with the shopping patterns of their customers.

According to the survey, 28 percent of online retailers will start their marketing earlier than last year, with a majority (60%) planning to begin by the end of October. This is closely in line with consumers’ shopping habits, as half of consumers surveyed will start their online holiday shopping by the end of this month. More than one-fifth (21%) of consumers surveyed acknowledged that they started their online shopping earlier this year than last.

More than half of consumers (56%) surveyed said they typically begin shopping for a particular item or gift at a specific merchant’s website, but other savvy shoppers will start with a search engine (37%), comparison shopping site (18%), or an auction site/shopping portal (19%).

In addition, some online shoppers will start their shopping at other channels, with 29 percent of consumers planning to start their online shopping via stores or catalogs.

Recognizing that consumers are using a variety of tools to research products and compare prices, retailers are raising their investment on search engine marketing this season, with 70 percent of companies planning to increase their emphasis on paid listing search engine marketing.

“Consumers are getting smarter when it comes to how they use the Internet. Shoppers not only buy merchandise from specific retailers, but they increasingly research and compare prices using aggregator sites,” said Chuck Davis, Chairman of Shopzilla. “Retailers understand that they need to focus some of their marketing efforts on online shopping tools, where many consumers start their shopping.”

Online retailers will not only rely on the Internet to market their websites during the holidays. According to the survey, 92 percent of pure play retailers will advertise offline this year, compared with 93 percent of multichannel merchants. Most online retailers will use catalog mailings (63%) and in-store materials (61%) in addition to direct mail (59%) to drive traffic to their websites. Many online retailers will also be investing in magazine (54%), newspaper (41%), television (35%), and radio (32%) advertising.

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