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Gas Costs to Limit Some Free Shipping

Posted on: Sunday, 9 October 2005, 15:00 CDT

By Joel Berg, The Patriot-News, Harrisburg, Pa.

Oct. 9--Internet shoppers love free shipping.

That's why Valarie Moyer offered the perk last year when she wanted to boost holiday sales at her new shop, Valarie Moyer's Dolls & Handbags. Online customers got free delivery if they ordered a doll priced at more than $150.

"It does help as people are searching for gifts," said Moyer, who opened the store in October 2004.

Nonetheless, Moyer is unsure whether she will offer free shipping this year. She is concerned about high gasoline prices that raise the cost of sending and receiving merchandise.

"It may actually cost me if I don't do free shipping," she said. "But I do have to play it by ear to see which way we're going to go."

Most online retailers, despite soaring gas prices that could crimp profits, are expected to continue free shipping this holiday season.

According to a survey by the National Retail Federation, 79 percent of online stores plan to offer the service, with conditions, as part of their holiday promotions. Many may limit free shipping to specific items or set a minimum purchase amount.

The survey covered 119 online retailers, defined as any company that sells consumer goods on the Internet, regardless of whether they have brick-and-mortar stores.

"Retailers know that free-shipping offers are very important to their customers," said Ellen Davis, a spokeswoman for the retail federation, a trade group based in Washington, D.C. "Even though retailers are just as affected by higher gas prices as their shoppers, they're not going to let it get in the way of the holiday promotions they're planning."

Costs are rising because retailers must pay more to third-party shippers, such as UPS and FedEx, Davis said. Early next year, the U.S. Postal Service intends to increase its rates.

But retailers won't raise prices to offset expenses related to higher energy costs, Davis said. Most likely, they will try to cut in other areas. Companies might negotiate new contracts with their shippers, make do with less staff at distribution centers or keep less inventory on hand.

"There are a variety of ways that retailers can scale back," Davis said. "But raising prices is not an option for most stores or Web sites."

Gas prices aren't the only factor that affect decisions on free shipping, said Jeffrey R. Hennion, senior vice president of marketing for Dick's Sporting Goods. The Pittsburgh-based retailer sells merchandise online and has several stores in the midstate.

Companies also look at sales trends and customer preferences, Hennion said. Fuel costs, however, are sure to weigh more heavily in the months ahead.

Nationally, the average cost of gasoline over the last week was $2.93 per gallon, up nearly $1 from a year ago, according to the federal Energy Information Administration.

"Everyone's cognizant of the fact that gas prices are much higher," Hennion said. "So, I think it's clearly a bigger impact this year than it has been in the past."

Hennion declined to discuss Dick's plans for holiday promotions. However, he added that Dick's periodically offers free shipping during the year, generally on specific items or categories. He couldn't say whether those promotions had been affected by higher gas prices.

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Source: The Patriot-News

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