Does unlimited delivery promote customer loyalty?

Does unlimited delivery promote customer loyalty?

Monique Holtman

Monique Holtman
7th June 2019

With the number of High Street stores closing at an alarming rate, you’d be forgiven for thinking that we’re no longer a nation of shopaholics.

Quite the contrary, an incredible 87% of UK consumers bought at least one product online in the last 12 months and 48% of us now purchase our groceries via the Internet. The market for online shopping is growing at a remarkable rate and the success of some of the UK’s biggest online retailers over the last year proves this.

  • Amazon’s revenue has grown by 19%
  • Online sales at Ocado have jumped by 12%
  • Revenue at ASOS has increased by 16%
  • Tesco has become the world’s largest online grocer with web sales totalling an impressive £3 billion

The lure of online shopping is pretty obvious – it’s convenient, it’s cheaper and there’s a greater selection available to us. There are huge money-saving benefits to be enjoyed by retailers too. Supermarket giants like Tesco pay up to £700 million in rates, while Amazon paid £63 million despite sales of £8.8 billion last year. Speaking about the issues this presents to retailers operating on the ground, Sainsbury’s chief financial officer, Kevin O’Byrne commented:

“We start the year £500 or £600 million behind Amazon before we’ve even opened our doors. We’re fighting them with one hand tied behind our back.”

In a world where the Internet is the most logical place for both consumers and retailers to conduct their business, how are organisations fighting to attract new customers and ensure they stay loyal?

A new way to promote customer loyalty

Over the last 12 months, a new customer loyalty scheme has surfaced – unlimited delivery. This usually entails the customer paying a one-off fee and in return, they get unlimited delivery for a whole year.

The move was originally intended to target younger audiences who shop in a completely different way. They think nothing of ordering five different outfits, taking photos, asking their friends or even social media followers what they think and then sending three of them back.

Interestingly however, older shoppers have embraced the trend as well. Next, whose average customer is in their thirties, has enjoyed a large uptake of their Next Unlimited service. For £20 a year, shoppers can enjoy free standard delivery for a year with no minimum order value and free returns.

As a result of the scheme, the retailer has found that customers are ordering small amounts but on a more regular basis. While they are returning more of what they’ve purchased, to date, these costs have been more than offset by the overall increase in sales.

ASOS also introduced Premier Delivery last year. Subscribers pay £9.95 a year and consumers can enjoy free and unlimited next day, precise or standard delivery with no minimum order value for a whole year. With free returns already standard with ASOS, it’s unsurprising that consumers have been quick to take up this offer. By the end of last year, the number of ASOS premier customers increased by 53% to 1.3 million. 

While unlimited delivery is still a relatively new concept to most of us, the model was actually pioneered by Amazon who launched Amazon Prime way back in 2005. Offering shoppers free delivery as well as some other attractive benefits, it has since garnered more than 100 million subscribers. What’s more, it has been reported that Amazon Prime reached a break-even point within just three months because customers spent an incredible 150% more after subscribing to Prime.

Interestingly, not only were people buying more often, but they also started purchasing things they wouldn’t have before. The former VP of Amazon Prime, Robbie Schwietzer commented:

“In all my years at Amazon, I don’t remember anything that has been as successful at getting customers to shop in new product lines.”

How can SMEs embrace this trend?

With unlimited delivery subscriptions at the height of their popularity, how can SMEs embrace this model when they simply don’t have the cash flow available to them that the likes of ASOS and Amazon do?

Set a minimum threshold

While most of the big retailers are now offering unlimited delivery with no minimum spend, for SMEs, this simply may not be feasible. For example, if a customer orders something for £5 and gets free delivery, this is going to hurt your profit margins. Setting a minimum order value to qualify for free or unlimited shipping however, is a great way for smaller businesses to encourage customers to make larger orders.

Pick certain times of the year

If you don’t want to offer unlimited delivery all year round, trial it at peak times such as Christmas, Mother’s/Father’s Day, Valentine’s Day or when you’re running a promotion. This helps you to compete with the bigger players at a time when demand is high but you don’t have to worry about your profit margins suffering at quieter times of the year.

Add shipping to your product cost

A clever way to add free or unlimited shipping without eating into your profits is to embed the cost of delivery into your product price. Be careful when executing this strategy however. A steep overnight increase in price will turn customers away and it’s important that your price remains in-line with what your competitors are charging.

Research what your closest competitors are charging and what delivery options they’re offering. Shoppers are very much drawn to the idea of getting something for free (such as delivery) so if you can afford to scrap delivery charges and incorporate them into your product price instead, this can really help to boost sales.

Shop around for the best courier

As online shopping continues to gain in popularity, it means that there are a lot more couriers available. From FedEx, Parcel Force and DHL to Hermes, DPD and smaller, local firms, there’s plenty to choose from which means that you can often get some great prices.

As well as cost, remember to factor in reliability because this is crucial. If customers can’t rely on their packages to turn up on time or even at all, it’s unlikely that they will ever order from you again.

Incorporate other perks

A big advantage that smaller businesses have over their larger counterparts is the fact that they have the ability to get closer to their customers and their business operations. Because of this, you get a lot more clarity and visibility of the issues that are holding back your growth. Critically, you also get to spot emerging opportunities faster so ensure you’re using this to your advantage.

If you really can’t afford to offer free or unlimited delivery, promote the perks you can provide. Whether it’s excellent customer service, delivery tracking, plastic-free packaging, a peace of mind guarantee or something else your customers have expressed an interest in, this is a method you can use to draw customers in that your larger competitors simply wouldn’t be able to manage.

Cut costs in other areas of the business

SMEs often think it’s too difficult to mirror the kind of customer experience offered by bigger companies because there’s a belief that the technology required is expensive, highly complex and difficult to implement. While this may have been true ten years ago, advancing technology means that this is no longer the case.

The introduction of cloud-based solutions means that SMEs don’t have to invest huge amounts of money in hardware, software and other technology. If you haven’t already, find out the ways you can use technology to reduce the running costs of your business so that you can use these savings to offer competitive delivery solutions.

The evolution of customer service (and expectations) continually imposes new challenges on smaller companies as they fight to avoid being squeezed out of the market by larger competitors. By following the steps above, however, you can implement the newest and most innovative ways to match and even exceed customers’ delivery expectations which will help to drive loyalty even if you don’t have millions in the bank.

Learn more about delivery and fulfilment here and explore ways your business could extend online delivery beyond the home here.