The term “free shipping for eCommerce store” has an effect on purchasing behavior. Free shipping is becoming less competitive and more table stakes as eCommerce continues to grow. This can be challenging for many merchants, especially smaller merchants or those whose profit margins aren’t very high.
There are many eCommerce shipping solution or software available. You will also find article on how to offer free shipping on ebay, free shipping on amazon, how to offer free shipping on shopify etc. But, in this article, we’re going to discuss the different aspects involved with shipping discounts, and review some of different options.
Should You Offer Free Shipping?
Let’s start the discussion with an obvious question: Should you Offer Free Shipping for your eCommerce store? We’ll get to that, but assuming that it does in fact work for your eCommerce business, let’s first talk about whether or not you should offer free shipping.
It’s hard to argue the significance that shipping discounts can have impact on eCommerce sales. Study after study has shown that higher than expected shipping and handling fees is one of the top reasons that customers abandon shopping carts.
You may already offer free shipping for your eCommerce store. Or you may be debating whether or not free or discounted shipping is something you can use to offer. Simply put, free shipping doesn’t work for all eCommerce businesses, at least when it’s truly free shipping across the board, meaning that merchants absorb 100% of the shipping and handling costs for all online purchases. But, while all-inclusive free shipping may not be an effective option for you, there may be ways to offer meaningful shipping deals that do work for your eCommerce business.
Benefits of Free Shipping
If you’re a consumer, the benefits of free shipping for your store are obvious. But for merchants, there are a couple of ways to look at it.
Short-Term Gains: A common rationale for offering free shipping is that it will immediately boost your online sales, leading to more orders and more profits. Free shipping can also lead to larger orders, particularly when retailers set minimum thresholds meaning an amount, level, or limit on a scale.
Long-Term Gains: A large chunk of online buyers will only buy from merchants that offer free shipping, so, when it’s offered, merchants should reasonably expect to acquire new customers. Beyond any profit gained in the short-term, it’s important to consider repeat purchases and the overall lifetime value of those customers that you wouldn’t have otherwise had if it weren’t for free shipping.
Competitive Staying: Free shipping is necessary to simply remain competitive in today’s marketplace. Unfortunately for many online sellers, the sacrifices made in order to offer free shipping don’t seem to good result in a competitive advantage, nor do they lead to increased sales. In this eCommerce business climate, free shipping plays like a vehicle to level the playing field and maintain existing sales levels in the wake of more aggressive competition.
The Costs of Free Shipping
Profit margin: The most obvious cost for merchants is the loss of profit margin due to absorbed shipping expenses. The cost of shipping parcels has risen significantly over the past five years. But there are also more options that retailers can reach the products into the hands of their customers, including economy shipping options which can significantly reduce the delivery costs. The downsides of these options, however, is slower delivery times, and in some cases, a loss of order tracking.
Programming and marketing: Other costs involved with free shipping include programming and marketing cost. Depending on your shipping offer, it may require a substantial amount of programming time by your IT team in order to make it functional properly on your website. Additionally, while marketing your free shipping offer can lead to more sales, the costs involved with generating awareness of your offer should be considered, including the design and advertising expenses.
Unneeded incentive: You might also consider the losses on orders from those customers who would have bought from you anyway, even if you hadn’t offered free shipping. This can be difficult to measure, but the more widespread the offer, the more likely it is that retailers will be unnecessarily discounting on shipping and handling in certain cases.
How to Evaluate Your Shipping
The approach to free shipping is nice for buyers, but not always an option for sellers, especially small and mid-sized retailers that may not have the negotiating power that big sized stores do with wholesalers and manufacturers, and thus have less margins on the products they sell.
Don’t be anxious. You don’t necessarily need to offer free shipping on everything in order to increase the sales or become more competitive. Here are some few important considerations:
- Consider Your Profit Margins. Your profit margins will be an important consideration when it comes to the type of discounted shipping you can offer to your customers. In all likelihood, your profit margins vary by product, which can also play a vital role.
- Consider Your Niche Products. Beyond profit margin, consider the size and weight of your products. Larger and heavier products are more expensive to ship, which is the reason many retailers have certain restrictions with their free shipping offers.
- Consider Your Products Orders. A common goal among sellers is to increase average order value by offering free or discounted shipping with certain thresholds. For example, if your average order value is $60, you may decide to test free shipping on orders that are a bit higher, such as $70.
- Consider Your Potential Customers. Where are your customers location? Do you ship internationally, or locally? If so, you’ll have to consider more costs with shipping to these locations, that is why many retailers will exclude all areas outside of the contiguous United States with their free shipping.
Effective Ways to Offer Free Shipping for Your eCommerce Store
Here are are the commonly-used ways to offer your customer free shipping.
- Free Shipping on All Products and Orders: Some retailers offer free shipping on all orders, regardless of the products included. This is generally more viable for retailers with smaller and lighter weight products. In this case, it is still common for retailers to have stipulations relative to the delivery method and destination. For instance, home delivery might be required, and only within the contiguous U.S.
- Free Shipping with Minimum Thresholds: Compared to free shipping on all products and orders, this is a much more common and realistic tactic for retailers to boost sales. Setting minimum order value thresholds is a great way to encourage larger orders and reduce the risk.
- Free Shipping on Certain Products: It’s the most common for retailers to offer free shipping only on certain products, those for which their profit margin is higher, and they’re able to easily absorb the shipping cost. Rather than only choosing the high-margin products, which may include a range of SKUs from a variety of product categories, you may want to make some exceptions for lower-margin products so that your offer can be more easily communicated to your customers.
- Free Shipping at Special Times of the Year: Many retailers choose to offer free shipping periodically, rather than round the year, and some will only offer it during the holidays or on specific occasions when their competition is more aggressive and when consumer expectations for free shipping are at a peak. Depending on your products, it is also a good idea to test free shipping offers at other times of the year, such as Valentine’s Day, Mother’s Day and Father’s Day.
- Free Shipping to Specific Locations: As mentioned a bit earlier, many sellers offer free shipping only to buyers within the contiguous U.S. Taking it a step further, many larger retailers are now offering “free shipping to eCommerce store,” where consumers can pick up merchandise at their local brick and mortar store, a tactic that can lead to store as well as purchases.
- Membership Programs: An increasingly popular method among retailers is to offer a fee-based membership program, in which merchants charge customers an annual fee in exchange for free shipping on some or all products.
- Loyalty Programs: Some retailers provide extra incentive to encourage repeat purchases from their customers, such as offering free shipping to their most loyal customers. This can be a great way to experience the long-term gains of free shipping by increasing the lifetime value of your customers.
- Bake Shipping Fees into the Product Price: This isn’t actually free shipping. Nevertheless, many online sellers will add the shipping cost into the product price so, that can promote as “free shipping” offer. While some buyers will catch on, this can be an effective way to increase sales and generate more traffic to your website.
- Free Shipping on Returns: If you’re an apparel or footwear retailer, this one is particularly appealing for the buyers. And if you have a high rate of returns, offering free shipping on those returns should be considered and tested, as it’s very common and expected for many products.
- Flat-Rate Shipping: This is another one that isn’t also really free, but by offering flat-rate shipping, you will encourage higher orders, and in many cases your customers will pay less for shipping than they would have otherwise. A downside, however, is that it can discourage small orders and become a barrier to those that simply want to buy small products or less quantities.
Testing different offers is key to finding the most profitable free shipping strategy for your eCommerce business. It is also important to first look at areas where expenses can be cut down. For example, if you are currently handling fulfillment in house, you may try to get a better negotiated rate from shipping carriers. You may also consider outsourced fulfillment as a way to reduce the shipping costs and get closer to your customers.
How to Offer Free Shipping: Best Ways to offer Free Shipping to Your eCommerce Store
Let’s be real in this section – you’re not doing this because you enjoy it. Nobody loves to pay for shipping, especially for small products. You’re doing this because it will bring you more customers and it will bump your average order value at the same or higher profit margins. But this will not just come out of the blue. You have to perfect your marketing strategy and milk the “free shipping policy” for all its worth.
Display your free shipping policy in a way that ensures the maximum visibility. Customers need to know that there are no hidden shipping charges at checkout as soon as they visit your store. If you’re shipping internationally or you offer premium two-day shipping – make it clear! Make the shipping policy visible on your landing page, in your header, your footer, next to the shopping cart on your product pages, in your email promotions, everywhere!
Lastly, optimizing your shipping operation shouldn’t be so difficult. You should definitely be professional about it and at the same time, try not to over-complicate things. Free shipping is a powerful marketing tool that’s been proven to boost conversion rates, decrease cart abandonment rates and increase customer satisfaction. Just keep testing different approaches extensively, and sooner or later, you’ll find what works best for your eCommerce business and for your customers!
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