Free Shipping is the Holy Grail of eCommerce, Survey Shows

July 28, 2015 11:01 AM EDT
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In an extensive AlphaWise research report from Morgan Stanley Tuesday, the firm's latest survey concludes that online consumers prefer free shipping to same-day shipping. In addition, signs point to budding demand for Smartphone eCommerce.

Respondents to the firm's survey showed that nearly 80% indicated they would buy more online if offered free shipping. Further, only about 45% of consumers indicated they would buy more online if offered same-day shipping and only about 23% would pay for faster shipping. Data showed 62% of global consumers value "free shipping/delivery" above all other offerings. In comparison, same day delivery is the 2nd least important criteria, with only 3.4% saying it is important when making purchases online.

"The importance of free shipping, in our view, speaks to Amazon's entrenched position and behavior modification – causing customers to expect free shipping – though there is still a dichotomy between Amazon's same-day investment spending and consumer demand," analysts including Brian Nowak and Katy Huberty comment.

In China and India it is a different story. "Expedited shipping is a priority for China and India consumers, as their willingness to buy more if same day shipping is offered and willingness to pay for faster shipping increased since our last
survey," the analysts note. This makes competitive inroads versus Alibaba (NYSE: BABA) in China and Flipkart in India extremely difficult.

Meanwhile, mobile eCommence is continuing to grow with penetration now at 23% versus 20% in Q4. "Our survey shows that consumers globally are increasingly comfortable transacting on mobile devices, and specifically smartphones, where eCommerce penetration rose to 13%, from 9%," the analysts commented.

Over time the firm believes an increased willingness to purchase items on mobile devices will drive faster overall eCommerce growth. This increase will drive more ad dollars onto mobile ad platforms, benefiting Google (NASDAQ: GOOGL) (NASDAQ: GOOG), Facebook (NASDAQ: FB), Twitter (NYSE: TWTR) and Pinterest, they said. The firm views Google as the biggest near-term beneficiary as more smartphone-driven purchases would help close the company's mobile-to-desktop 50-60% monetization gap.

For traditional retailers in the U.S., the survey showed that the ability to return at physical stores has increased in importance significantly (+420bp) for online shoppers. This, they say, presents an opportunity for traditional brick & mortar retailers. They see it as a particular advantage for Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Best Buy (NYSE: BBY) and Bed, Bath and Beyond (NASDAQ: BBBY), give their large number of stores and the inherent complexity of size, fit, and quality when making a purchase online.

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