How Prepaid Shipping Benefits Consumers and Retailers

By Claire Fennessey

Consumers know how much they'll pay. Whether shipping is free or provided for a nominal fixed fee, consumers can factor that cost in beforehand and make purchase decisions with greater speed and accuracy.
Retailers can fund their shipping services up front. They also enjoy a steady revenue stream to help them deliver purchases to their customers.
Subscribers to pre-paid shipping programs have higher sales frequency and average order values (AOV). Program members essentially invest in shopping at the retailer on a recurring basis, and studies have shown that pre-paid shipping programs can triple a customer's AOV. For example, before joining Amazon Prime, customers spent an average of $24.98 per order; after joining, they spent an average of $75.31.
It enhances the consumer experience with the retailer. A better experience heightens customer satisfaction, which increases the likelihood of repeat business.
Consumers become more receptive to the retailer's messages. According to a Forrester Research study, consumers are more willing to read retailer emails than ever before, especially when the emails are personalized. Pre-paid shipping programs allow retailers to gather in-depth customer data that can be used to tailor communications and create additional benefits that can cement their audience's purchase habits for years to come.
It builds brand loyalty among customers. Brand loyalty increases when customers believe they're receiving extra value through special offers, for example, or even via an exceptionally smooth and easy checkout process (as Amazon and iTunes provide with their one-click payment methods).

In an era when many consumers consider free shipping a prerequisite to shopping online with any retailer, a pre-paid shipping program can create a virtuous cycle that rewards both the retailer and its most loyal customers. A well-designed, well-tended program can even become a profitable revenue source in the long run.

Claire Fennessey is the chief marketing officer at Clarus Marketing Group, which creates and markets high-value subscription websites designed to save consumers time and money.