L.L. Bean Free Shipping

http://www.usatoday.com/money/industries/retail/2011-03-24-ll-bean-free-shipping.htm?loc=interstitialskip

L.L. Bean has announced that they are giving in to customer demand and are going to have free shipping at all times. This is a big deal for customers but also for the company. Customers will be happier because overall their purchases will be cheaper because they don’t have to worry about the shipping price. The company might initially be against the idea because they are losing the money from charging shipping. The article stated that Steve Fuller, chief marketing officer of L.L. Bean, has been thinking about making this change for about three years. In the long run, this should produce more profit for L.L. Bean because they are now listening to the voice of their customers and now they are here to stay.
Customer demand is a big deal in economics. Consumption is ¼ of what makes up GDP. That is looking at the bigger picture for the U.S., but each company also has to break it down and determine which goods they will use. In class we discussed durable goods, nondurable goods and services. Durable goods are goods that last longer (generally 10 years) and nondurable goods are those that last less than that (food, clothes, etc). This relates to L.L. Bean because they have both durable and nondurable goods. Durable goods may include kayaks, carracks, tents, snowboards, luggage, etc. Nondurable goods may include clothing, shoes, etc. In order to keep selling, which means they can produce more, they need to listen to what the consumers what. If the shipping amount used to depend on how much you buy, it probably altered the mindset of some customers. I know I have wanted to order something before, but the shipping and handling was so expensive, I decided not to. There were a few customers in the article that said that is what they wanted (free shipping) and now they are going to be doing business with L.L. Bean for good.
L.L. Bean now also has a “one-up” on other companies that are still charging shipping. If a customer can get the same product for cheaper (because there is no shipping charge), then they are likely to get that product. L.L. Bean can act as a substitute for other products now because they don’t charge shipping. The customer is generally getting the same product, with a different label, but for a cheaper price overall. Those are the types of things that consumers look for in a company. They saw a 5.8% increase in sales last year so they are expecting an even greater increase now that they have granted the customers’ wishes and made the shipping charge $0.
This change in L.L. Bean will also likely cause their money supply to increase. They lose a small amount of money by not charging shipping on purchases, but they will get more customers, and those customers looking for a substitute, so in the long run they will have a higher profit. This will probably start a trend if other companies start to see that L.L. Bean is attracting a lot of customers.