A university study concludes that paid, membership-based free shipping (MFS) programs can compensate for delivery costs, reduce customer churn and be a significant revenue source.
Researchers from North Carolina State University and Texas A&M University calculated that MFS programs deliver a monthly average increase in net customer revenue by 12.75 percent, or $19.93.
Initially, the unlimited free shipping benefit is often exploited as consumers break down large orders into smaller ones without increasing their total spending. As a result, retailers may not immediately gain incremental revenue due to the reduced profit margin caused by increased shipping costs.
