Online retailers have long used free shipping to encourage customers to buy more products. But a new study suggests that free-shipping promotions can reduce a company’s profits.
The paper, published in May by the Journal of Marketing Research, analyzed purchases made from a single large European retailer and found that free shipping did incentivize customers to buy more. But it also increased purchases of items that historically have higher return rates, such as clothing or products from lesser-known brands. Thus, returns…
