In the e-commerce sector, there's a perception that increased shipping costs can lead to abandoned shopping carts and lost sales. This same concern existed for a long time at the department store chain Åhléns, which operates 52 physical stores in addition to its e-commerce platform at ahlens.se.
Previously, the company worked with a fixed threshold for free shipping, but recently chose to fundamentally overhaul its delivery strategy. This comes at a time when Ehandel.se previously reported that Åhléns is approaching five billion Swedish krona in turnover while the chain works to strengthen profitability and keep costs down.
Challenged Old Assumptions
Behind the change is an initiative where Zubair Bhatti, responsible for Åhléns' deliveries from checkout to customer, wanted to test whether the fear of increased shipping fees actually corresponded with customers' real behavior.
It's easy to assume that customers will cancel their purchase if delivery becomes more expensive. But without testing, you can't know if that's actually true. We wanted to let customer behavior show what works, rather than relying on our own assumptions, says Zubair Bhatti.
Through ongoing tests via the delivery and analytics platform Ingrid, Åhléns began adjusting prices on a smaller scale. The first step was taken on deliveries to parcel lockers, where the free shipping threshold was raised. The results showed that customers did not cancel their purchases when shipping became more expensive, but instead chose other delivery methods or added more items to reach the free shipping level.
We saw that the delivery price affected the customer's choice of delivery option, but not the willingness to shop. That was an important insight. We were able to start working more actively with pricing without assuming that a higher delivery fee automatically leads to fewer purchases, says Zubair Bhatti.
Dynamic Pricing and Upselling at Checkout
Based on the test results, Åhléns replaced its permanent free shipping offers with dynamic shipping levels that are adjusted throughout the year, for example, by lowering the fee when the shopping cart exceeds 999 Swedish krona. To help customers who are just below the free shipping threshold, a product carousel with beauty products in the range of 50 to 100 Swedish krona was also introduced at checkout, which has helped to increase the average order value.
At the same time, the chain has focused heavily on directing more online customers to the physical stores. Store pickup is listed as the default delivery option at checkout, and with the help of AI-powered ranking, the order of shipping options is adapted based on how close the customer is to a store.
Both Conversion and Average Order Value Increased
Overall, the change resulted in Åhléns increasing its average delivery fee by 29.9 percent. During the same period, conversion increased by 1.4 percent, while the average order value increased by 2.3 percent. In addition, the proportion of customers who choose to pick up their orders in the stores increased by 15.2 percent.
Many would probably see an almost 30 percent higher delivery fee and assume that conversion must have decreased. But for us, it increased by 1.4 percent. That shows why you have to dare to test your assumptions, says Zubair Bhatti.