Sep 4, 2008

Despite higher fuel costs, retailers cut shipping ratesBy Jayne O'Donnell and Sarah ButrymowiczUSAToday.com

Over the past few years, retailers have increasingly discovered a powerful way to entice shoppers to buy during the crucial Christmas season: slash shipping costs.

Much higher fuel costs this season raised fears that free or cut-rate shipping would go the way of $2.50-a-gallon gas. But as retailers grapple with the shaky U.S. economy, many have calculated that they can’t afford to put off shoppers with hefty shipping costs, even if it means eating higher fuel costs.

Case in point: Harry & David. For the pricey pears and gift baskets in its holiday catalog out this week, the retailer has trimmed shipping charges by up to one-third from last year’s rates. That’s despite the fact that the fuel surcharges that retailers pay big shippers are now about twice the level of last year. Harry & David isn’t taking any chances that shipping fees might scare off would-be buyers during the season when the gift company generates two-thirds of its business.

With consumer confidence skirting historic lows and most retailers’ sales flat or slipping, shipping promotions might be as necessary as they are costly. Many consumers turn to online shopping for convenience or to save on gas. If retailers charge them more for shipping because of fuel surcharges, it could offset the money consumers save by shopping online.

More than 40% of people who abandoned their online shopping carts said they did so because of high shipping costs, according to a recent survey by the online payment company PayPal. Nearly 60% of those polled by BIGresearch said free shipping was a “very important” factor in their decision to shop online. The National Retail Federation’s digital division, Shop.org, says eight out of 10 online retailers offered free shipping during the past two holiday seasons, up from about 60% in 2004.

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