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Freeshipping.com:  A Simple Idea Done Right

 by Tom Bunzel

By the time you read this, folks will be scrambling to get the best deals for their holiday online shopping. One of the items they will probably want to examine, in terms of potential savings, is the inevitable delivery charge.  Is anyone not charging for shipping? So, suppose you decide to do an ``advanced" Yahoo search for ``free shipping" AND ``shopping."  What you would find, as of this writing, are a total of four sites–one for comics, one for beer and wine, one for roses and another for collectibles–so if you were looking for books, computers or apparel, for example, you'd be out of luck.

Of course, you might be out of luck anyway, since the price might be too high, the policy discontinued, or the product you want unavailable.

All of this occurred to D.J. Vallauri, the head of the leading purveyor of free shipping information on the Internet. But when he first opened Freeshiping.com last year, he had a problem convincing merchants to list with him; now they're beating a path to his portal.

          Vallauri likes to quote a Forrester Technographics survey of 5,831 online shoppers that found that shipping costs factor into purchase decisions for 82% of shoppers.  Furthermore, 62% of shoppers pay close attention to shipping costs, and 31% pay at least some attention. ``Everyone knows free shipping is a great attraction," Vallauri says. ``It's just hard to make it work on a mass scale."

Now the numbers are getting serious. Freeshipping attracts 150,000 unique visitors a month, a figure that has doubled in the course of this year.  The visits average 12 minutes, an eternity in ecommerce time, and the average order is $65.

What has made the difference?  Vallauri would be the first to tell you that the brand is everything.

When he ran a successful East Coast gourmet food site called The Mustard Seed.Com, Vallauri noticed that folks who really wanted a certain brand of mustard would actually pay as much as $4 to ship a $1 jar across the country.  (An ex-New Yorker from San Diego just had to have Hebrew National).  And of course if the site could reduce or eliminate the shipping charge, sales would increase. 

          In the spring of 1999, Vallauri started ``freeshipping for you."  It was a membership service based on a subscription model in which shoppers had to join for the privilege of avoiding shipping charges.  It was rough going, mainly because of the costs involved in site promotion and the limited selection.

          This made the light bulb go off for Vallauri–he changed his focus from a traditional shopping site to a technology driven, search enabled portal.  Instead of a site that just offers products for sale without shipping, Vallauri decided to make it a search-and-compare site that aggregated free shipping information. Vallauri bought the domain name Freeshipping.com from a broker, and then, partnering with a technology expert and some ad agency creative whizzes, he launched the current version of Freeshipping.com to offer what he calls ``a proprietary, patent-pending search technology within a 100% free shipping environment."

          A little more than a year later, the site features more than a million products in its database, and a shopper looking for a book, a computer or apparel can compare the relative prices and terms of five or six different merchants.

          Although Freeshipping.com uses an Oracle database, Vallauri's technology team has created custom code and proprietary programs that constantly refresh available product listings.   This serves to ensure that the terms are kept up to date, and inventory that was available for no shipping charge half an hour ago, is still available when you hit the site.

          In addition, if a shopper requests a specific product, and it's not available through any of the merchants with whom Freeshipping operates, an algorithmic agent is sent out on the Web to find the product elsewhere. When internal search programs locate the product, Freeshipping attempts to reach an agreement with that merchant and bring it into the Freeshipping fold so that future visitors will find that item on the site.

          Obviously, this means that Freeshipping collects a lot of information on its users, but the privacy policy assures shoppers that it won't be used except to improve service to customers. Building on the membership model he originally devised, Vallauri provides users with regular newsletters featuring special deals on the latest items, often with merchants that have offered Freeshipping an exclusive.

          Currently the site is divided into at least 13 different departments, featuring a wide spectrum of items such as apparel, technology and books.  (A new-look site recently came online–see the screenshot).

          Although some of the merchants are modest outfits that rely on Freeshipping to drive traffic to their sites, more and more major retailers are finding that savvy shoppers have come to rely on Freeshipping for merchandise, and that it's a great way to attract customers.

          Recent additions to the Freeshipping fold are the Outpost and bargainclothing.com–in most cases even when a shopper leaves the Freeshipping site to consummate a transaction he or she is still under the brand banner–landing on a page that says something like ``Welcome Freeshipping Customers."

          On the back end, Vallauri keeps his merchants happy, so they let his programs search their sites to keep the latest information online, and make items available on the main site through direct connections between merchant servers and those of Freeshipping. ``The merchants are in control," Vallauri explains. ``They can make items available or not from their inventory or even shut down the feed.  It gives them power, but it ensures that we have the most current information."

          This can lead to problems–small ``Mom and Pop" merchants have been known to play tricks and post items for a day or so at Freeshipping, in an effort to generate traffic, and then rescind the offers.  But the Freeshipping agents are on the case–if this happens egregiously the merchant will be cut off.

          To avoid misunderstanding, Freeshipping always tells its customers that terms can change, and that while it makes the best effort to ensure product availability for no shipping charge, it can't guarantee it 100%.  But customer service is Vallauri's passion, so that in rare cases when a customer expresses disappointment, the site either intercedes with the merchant on the customer's behalf or attempts to make good on the transaction.

          The site basically operates on a four-prong revenue model.  As you might expect, there is affiliate revenue, where merchants pay Freeshipping a certain percentage of sales derived through links from the site. Some stores also pay Freeshipping to list specific items strategically on the site and are charged based on the positioning. A navigation bar also highlights certain merchants that have paid for the privilege (See screenshot–Featured.JPG)

          Finally, in a foray into the B2B market, Freeshipping syndicates larger orders to other sites–soliciting bids for volume sales featuring the no-cost shipping perk from its network of merchants.  Vallauri explains that the syndication model, now available at the Web site, is ``optimal for sites with moderate to high traffic that would like to increase revenues as well as offer advanced sticky content."

          In one dizzying year, the Freeshipping brand has grown fast enough to power other sites.  Besides the value of the ``Welcome Freeshipping customers" tag line, Vallauri will be launching co-branding deals with financial institutions, where online bankers, for example, will be greeted with ``free shipping merchandise" offers as they check their statements, and can click directly to a free shipping mall under the bank's name.

          Merchandise in this scenario will be served up on a page that belongs directly to the bank, but the ``powered by freeshipping.com" logo will further enhance the value of the brand.

          One final note about this scenario–when customers use the bank's credit card, more perks accrue, giving the entire package a cachet of total service and fulfillment offered by the bank, but provided by Freeshipping.

          What is really remarkable is the fact that Freeshipping has come this far, this quickly, primarily with private funding from Vallauri himself and one or two partners. 

With the current difficult climate for public offerings, they are happy to maintain their strong equity position until the time is right to make a change. ``We have a very low cash burn rate," he says, ``because we have no inventory.  We can ride out any rough periods because we are basically a search engine."

          Vallauri says it was relatively inexpensive to acquire the domain name that set all of this in motion. Equally significant is a management team and advisory board that promotes the brand effectively without costly advertising. Instead, people such as Mike Becker, an ad executive who had done creative work for the Bill Cosby show, came up with viral promotions and giveaways.  Everyone in the company pitched in to seed news and discussion groups and online forums to get the word out.

          ``It was guerilla marketing at its best," Vallauri says, describing one contest that induced visitors to the site to register, and awarded the huge sum of $25 in a drawing to one winner each week.  It all worked, with registrations mounting every month.

          The positive word of mouth, and commitment customer service, got the traffic going. Vallauri also credits his PR firm for its aggressive press releases, which got the company television time in New Jersey (where the company is based), and articles in the New York Times and Business Week.

          The Times article boosted traffic 6000% the week after it appeared, but scalability has not been an issue for Freeshipping, which co-locates its servers and has not suffered any downtime due to high volume.

          ``We've learned a lot in the one year we've been operational," Vallauri says. ``Mainly that our middleman status enables us to keep a low burn rate on cash, which has us well positioned for the holidays."

          He is always looking for exclusive deals with merchants, along with possible frequent shopper incentive promotions, and affiliate referrals for sending friends to the site. Perhaps surprisingly, auctions have not been a highly requested item. But computer products sell well online, and free shipping is a great perk for pricey items such as monitors  (See screenshot–monitor_search.JPG)

          While Vallauri is eyeing the B2B arena, with the syndication model of creating an exchange environment which includes–what else?–free shipping, he is still mainly focused on the core component:  B2C–serving the consumer.

          ``Our big edge is our proprietary search engine, which will even let shoppers dynamically build and personalize the site.  And our other programs which `baby-sit' our merchant sites are key–because they ensure that free shipping offers remain available and will be honored."

          Vallauri continues, ``I thought our tech guy was crazy when he first projected our computer costs, but he has been able to scale to meet each challenge, and it's the fact that we are 100% technology based that gives us our margin, and has new merchants knocking on our door every day."

          You could say, ``It's the technology, stupid," that lets Freeshipping keep its expenses minimal and maintain no inventory of its own.

          The latest big step for Freeshipping is a redesigned home page, which has the added feature of letting customers ``browse through all the stores."

          This new site is the result of having customers fill out surveys to determine what they wanted most–the surveys told Vallauri that shoppers preferred to see all of the merchants grouped together in a visually compelling way.

          So, for example, if you're looking for shoes, the offerings of all the merchants featured on the site will be available visually to the shopper–it's the next wave in personalized shopping–make your own mall.

          This is once again an offshoot of Vallauri's commitment to total service.  He has somehow induced his customers to fill out the surveys with little or no incentive.  He is constantly requesting feedback on the process, the merchants, the products and how the site can improve.

          At the same time, he always points out to customers that Freeshipping itself is not the merchant, which minimizes the situations in which the company must get directly involved in disputes.  Each merchant posts its policy for returns, for shipping rates, and for which items qualify for the various reduced shipping charges.

          (While free overnight delivery is occasionally available even worldwide, most of the items are available for UPS or U.S. Postal Service ground rates at no cost.)

          Vallauri is obviously relishing his ability to quiet the naysayers, who told him when he started that the idea was ``so obvious that everyone will do it." Instead he has discovered that promoting a no shipping charge policy is not easy–since it's a significant cost that the merchant must account for. This means that if the merchant builds the cost into its pricing, the policy might backfire–the products come up as more costly in other comparison shopping sites, such as My Simon.

          Merchants also can't easily inform the public of delivery specials on a seasonal basis–while a site that is built around informing shoppers of the best deals with no shipping charge can and does attract savvy buyers who are looking for the best deal.

          Vallauri has found that since customers can't easily find a product that is offered without a shipping charge, and don't expect to find it at their usual merchants, they are truly grateful for a one-stop shop that eliminates the delivery charge.  That's what is driving the traffic to Freeshipping.   

          And, for the merchants it's a way to increase traffic back to their site in a way that definitely attracts customers. Shoppers also know that they need to move fast if they see an item on the site.  Merchants use the site to move product quickly and only make some of their offerings available at a given time.  Delia's apparel, for example, a newer top-line merchant, may list a specific product for a week and then move the no shipping-cost perk to another line.

          But Vallauri is emphatic that merchants are not using the site for close-outs and discontinued items. The ``mostly overwhelming satisfaction of customers" expressed in the more than 1,000 user surveys attest to that–and the items they request generally find their way onto the site as merchant offerings.

          Freeshipping intends to broaden the surveys into discussion groups, with the inevitable concept of a community of shoppers under the Freeshipping banner.

          One new community Vallauri has already welcomed into the fold is Great Britain.  A localized version of Freeshipping has already rolled out in the United Kingdom, with its own ``.co.uk" domain suffix.  Obviously this site profits from the similarity of language, but Vallauri also recognized the availability of the domain in the U.K., and took advantage of the fact that shoppers there know a bargain when they see it.  ``At freeshipping.co.uk visitors will find a 100% free shipping merchant guide, categorized by department and specifically reflecting a UK perspective."

          Asked whether the larger shopping sites are becoming competitive, Vallauri says he is confident that they pose no immediate threat.  While they are obviously aware of the studies of Forrester and Gartner Group as to the ``no shipping charge" factor, the larger sites can't easily feature or isolate certain merchants at the expense of others.

          Says Vallauri, ``Our most significant competitors are larger sites, like the Outpost, which may offer free shipping themselves."

          But in most cases, such as the Outpost, the free shipping tag gets lost within a big site, while it is the staple of Vallauri's business and the reason why shoppers find their way to Freeshipping.com in the first place.

          So what about the Yahoos and the AOLs?  ``Their most obvious tactic," Vallauri says, smiling, ``would be to partner with us." 

          Which brings us back to the original search–which on Yahoo yielded four sites, none of which offered such significant items as technology, apparel or even automobiles.  Trying to wade through the thousands of other sites to find one that did not charge for delivery would be a time-consuming effort–unless the search ultimately landed on–Freeshipping.com.

 Tom Bunzel works as ``Painless PC," a consulting and training facility in West Los Angeles, specializing in business, presentation and Web-authoring applications.  He can be reached at (310) 286-0969 or tom.bunzel@painlesspc.com. To find out more about Community Vision, go to http://www.painlesspc.com/cvi.html

 

 

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