Dive Brief:
- Analysts from Brick Meets Click said in a webinar that retailers looking for a way to grow household usage or increase transaction sizes and share of wallet online should look at their fees and minimum purchase requirements, according to Progressive Grocer.
- A survey by the company showed that shoppers usually spend more than the purchase minimum when a fixed service fee is added. Even more tends to be spent when the fee varies based purchase amount; they buy enough so they don't pay fees.
- There are three main ways retailers deal with service fees and purchase minimums, according to Brick Meets Click. Some have a fixed service fee and minimum purchase requirement. Others have a variable service fee and hurdle; and still others have no service fee but a minimum purchase requirement.
Dive Insight:
As minimum purchase requirements increase, so do sales.
David Bishop, a partner with the retail consultancy group, noted it’s important how companies examine the various thresholds to accomplish sales goals. He has seen some retailers adjusting fixed fees and minimum purchase requirements upwards, and others looking closely at their hurdle rate and/or their service charges, and considering moving them up.
With online grocery sales representing the largest part of the U.S. e-commerce food market, and a report by Morgan Stanley showing they are expected to increase 157% and account for 6% of all grocery sales in the next year, these thresholds are important to continued success.
Research shows that adding free shipping to e-commerce sites — regardless of industry — is an effective way to increase sales and conversion rate. For example, Red Door saw orders increase 90% after adding a free shipping threshold to NuFACE; while 2 Big Feet saw sales increase more than 50% after creating a purchase threshold of its own.