Shipping Promise Badges: Don’t Believe the Hype

Checkout options continue to proliferate ecommerce:

At last count, at least a dozen fintech / payment firms are competing for real estate on the merchants checkout page, each vying to persuade CX and marketing leaders that their respective “checkout / pay with us” buttons will drive an increase in conversion rate.

Offering payment options is clearly an ecommerce mandate-but there’s significant complexity from all angles of the purchasing experience:

- For vendors, it’s a cash cow that allows them to either take market share away from conventional credit card transactions or earn lucrative card processing fees by processing the credit card transaction through their own network. The challenge for the vendors is persuading merchants to add yet another payment option to an already busy alternative checkout bingo card.

- For retailers, it’s a necessary evil and an integration nightmare. In our research we found that 23% of consumers have abandoned a recent online purchase because their preferred payment method was not offered. Adding PayPal, Apple Pay and BNPL options in the checkout offers transactional flexibility for the unbanked and opens up new customer segments, especially with Gen Z shoppers. Unfortunately, each integration typically requires a heavy integration lift, so few retailers have the technical bandwidth to go beyond adding a few alternative payment methods to their checkout.

- For consumers, it can be just plain confusing. If a consumer has a trusted brand affiliation with Paypal, Amazon, Apple, Google, Shopify, Affirm, Klarna, etc., then having the convenience of an expedited checkout by using that firms payment method can be a win – but with so many options in front of them, many consumers can be overwhelmed with choice paralysis that ultimately backfires on the merchant and causes cart abandonment.

As if the checkout was not complicated enough, we are now on the cusp of a new phenomenon (or evolution) of the checkout bingo button.

Enter 3rd party “Shipping Promise” Badges:

SHOPRUNNER

ShopRunner (owned by FedEx) can be credited with conceiving the concept of the shipping promise button. However the business model (a glorified affiliate marketing program) has meant that adoption by retailers has been anemic and limited to luxury merchants with high product margins. Through ShopRunner’s network of (high value) members, they bring incremental traffic to the merchant and in return, the merchant pays a referral commission for any completed sale. However, the merchant is also contractually obligated to fulfill ShopRunner referred orders within 2 days and honor the ShopRunner free return benefit for eligible orders. This means the merchant must provide a prepaid return label and cover the cost of return shipping for items that are eligible, in addition to funding any associated expense of upgrading the outbound standard free shipping to a 2-day expedited service.

BUY WITH PRIME

In January Amazon announced the expansion of Buy with Prime, a checkout experience that merges Amazon’s FBA fulfillment platform with Amazon Pay to provide Prime customers with access to free and fast shipping on orders placed “off Amazon” on a brand or retailer’s own website.

To participate in Buy With Prime, merchants must:

Have a Professional Selling Plan on Amazon, which requires a monthly subscription fee
Use Amazon’s fulfillment services to handle orders, which means holding product inventory at Amazon’s fulfillment centers for storage, packaging, and shipping
Price their products competitively to ensure that Prime members are getting the best value
Maintain high seller metrics, including low order defect rates, timely shipping, and excellent customer service
Fulfill “Buy with Prime” orders using Amazon’s Multi-Channel Fulfillment service (i.e.: beholden to Amazon’s fulfillment & shipping fees and timing for processing, shipping and delivery)
Have payments processed by Amazon Pay (which means incurring Amazon’s transaction processing fees)
Pay a 3% Prime Service Fee on every order
Be approved by Amazon to participate in the Buy with Prime program

Amazon cites that early adopters have seen up to 25% increase in conversion rate from offering Buy With Prime.

SHOP PROMISE

Not wanting to be left out, Shopify has also jumped in on the game, with the expansion of Shop Promise. On the surface, Shop Promise appears very similar to ShopRunner and Buy With Prime. In the example above the delivery estimate is 2 days, but this is misleading as the badge is available for any merchant offering delivery in 5 calendar days or less.

Specifically to earn the badge, merchants must:

Fulfill orders using Shopify’s Fulfillment Network
Have the Shop channel installed and Shop Pay activated
Maintain a shipping volume of at least 25 orders within a 28 day period
Ensure that 25% or more of total orders are delivered in 5 calendar days or less
Deliver 90% of Shop Promise orders within the communicated delivery expectation
Offer shipping prices of $20 or less on 90% of total orders shipped domestically in the US

This all sounds pretty complicated for both the merchant and for Shopify to administer. While Prime and Shoprunner clearly provide a free, 2 day delivery promise, Shop Promise is a vague 2-5 day guarantee that may or may not be free (cost and service level is determined by the merchant) making the experience inconsistent and confusing for consumers. One upside of Shop Promise is that Shopify does provide a limited delivery guarantee for shipments that take longer than 5 days; however the shopper has to make a claim and the refund (paid shipping fees up to $50 or a flat $5 if shipping was free) is distributed in the form of Shopify’s new digital currency “Shop Cash” which must be redeemed in Shopify’s App Store.

In addition to the 3 solutions outlined above, you can bet that Bolt, PayPal, AfterPay, Affirm and other alternative payment providers are all asking themselves how they can bake in a fast shipping value proposition as part of their offerings. Without a fulfillment network it will be challenging, but some may try to copy ShopRunner’s business model.

Merchants considering these programs must carefully consider whether they want to become further beholden to FedEx, Amazon and Shopify. While all three programs bring the potential lure of higher conversion rates, all have downsides. Shopify and Amazon require the merchant to move their inventory away from their existing 3PL (or in-house warehouse), as well as move away from their existing carrier pricing and relationship(s). While this might be easier for SMB brands, capex investments and long term 3PL and carrier contracts may make this unfeasible for mid-sized and enterprise retailers. In the case of Shopify, refunds for shipments that fall outside of the 5 day SLA will be made in Shopify’s digital currency which can then be spent on another (Shopify) merchants store – such a restriction can make an already frustrated customer walk away from redemption and future purchases. Furthermore the fully loaded costs of all three solutions may in many scenarios, be significantly higher than the current fulfillment and shipping costs that retailers have in place with their existing free shipping programs.

Perhaps the biggest downside is the further erosion of the retailer’s own brand. While retailers are used to “outsourcing” their post-purchase experience to FedEx and UPS, putting Amazon and Shopify badges all over their site is likely a step too far that few in the c-suite are willing to embrace.

3rd party Shipping Promise badges will not be right for many brands and retailers. At Maergo, in addition to providing a fast and cost-effective alternative to the legacy shippers, it’s our core mission to let retailers own and provide that great end-to-end brand experience they’re looking to deliver to every consumer. We enable our customers to own their brand, own their inventory, and make standard shipping fast (and free) for all.

Shipping Promise Badges: Don’t Believe the Hype

Checkout options continue to proliferate ecommerce:

Offering payment options is clearly an ecommerce mandate-but there’s significant complexity from all angles of the purchasing experience:

As if the checkout was not complicated enough, we are now on the cusp of a new phenomenon (or evolution) of the checkout bingo button.

Enter 3rd party “Shipping Promise” Badges:

SHOPRUNNER

BUY WITH PRIME

SHOP PROMISE

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