It’s no secret that customers love free shipping.
91% of them are ready to leave an eCommerce store if they don’t offer free shipping during checkout. It’s a business tactic used by top brands such as Target, Adidas, H&M, and more.
However, don’t let the word ‘free’ fool you — there are cases where free shipping might cause you to lose more money than you’re gaining. Keep in mind that you’ll have to cover the shipping cost, which may hurt your total revenue.
So what do you do? In this blog post, you’ll learn about the benefits of free shipping, what to consider before setting it up on your store, and the tactics that can turn losses into additional sales for your business.
The Benefits of Free Shipping
There’s a reason why offering free shipping is a gold standard in the eCommerce world. Here’s how free shipping influences the purchasing behavior of customers:
Free Shipping Boosts Your Sales and Average Order Value
Everybody loves to get free stuff, and free shipping is no different. According to statistics:
- 61% of customers are “somewhat likely” to cancel their order if it doesn’t come with free shipping
- Orders with free shipping average around 30% higher in value
- 93% of customers are encouraged to buy more if free shipping is available
Increase Your Brand Loyalty
Your success in eCommerce depends on your ability to adapt.
Free shipping from brands is now an expectation for the modern customer. A recent survey proves that 8 out of 10 consumers prefer free shipping than getting their items faster.
By offering free shipping, you meet your customers’ needs and give them a reason to come back for more.
Decrease Cart Abandonment
Put yourself in the shoes of the customer for a couple of seconds.
Let’s say that you find a product you like and add it to your cart, only to find out about the high shipping rates. What would you do? Chances are, you’d likely leave the cart.
That’s where free shipping comes in. By covering the cost of shipping yourself, you’ll encourage customers to follow through and reduce cart abandonment.
What to Consider Before Offering Free Shipping
With that in mind, however, there are cases where free shipping isn’t the right fit for your business. Here are a couple of factors you need to consider before setting up free shipping on your store:
Your Supplier Offers Free Shipping
Whether or not you should offer free shipping also depends on your supplier.
If the supplier you choose offers free shipping, it’s ideal to offer free shipping to your customers. In this case, it won’t be fair to charge them for shipping costs.
However, if they don’t offer free shipping, it’s up to you to decide whether you want to cover the shipping costs or make your customers pay for them.
The Competition Is Offering Free Shipping
If competitors in your niche are offering free shipping as part of their strategy, then it’s best that you do the same.
You don’t want your store to be falling behind everyone else. However, even if the competition isn’t offering free shipping, it could still be a way to make your business stand out from the crowd.
Online customers value free shipping during their purchase. If they explore their options and see that you’re the only one who offers free shipping, they’re most likely to pick you.
Your Customer’s Location
Ask yourself: where are your customers located? Are you only shipping to the United States, or do you have customers overseas as well?
The customer’s location has a significant influence on your shipping costs. It’s why it might be better for your store to offer free shipping only to specific areas.
You’ve Calculated Your Profit Margins
First, you’ll have to do some math to determine if free shipping is right for your store.
How free shipping will affect your margins depends on the type of product, where your customers are, and more factors. Keep in mind as well that you’re the one who’s going to have to cover the shipping costs.
Knowing the average order value and average margin on every order will let you figure out if free shipping can work for your business. Does the average order cost you $10 to ship? If your average order margin is greater than $10 you can cover the cost of shipping.
To make up for the lost money, you’ll have to develop an effective strategy, which we’ll get into later. You can also keep your shipping expenses down by investing in the right software.
How to Offer Free Shipping Without Hurting Your Bottom Line
As you can see, there’s a lot of thinking that goes into offering free shipping. You can’t just set it up on your store and hope for the best. Thankfully, there are strategies you can use to offer free shipping without going broke. Here are a couple of tactics that should help you:
Increase the Price of Your Products
An excellent way to win back the money you’re losing to shipping is to increase the price of your products.
However, you also have to be careful when raising your item’s price — you want the price to cover for shipping and marketing costs, but not high enough that it scares away customers from buying from you.
Customers find free shipping offers twice as compelling as discounts, so keep that in mind when you’re considering a lower price versus a free shipping offer.
Offer Free Shipping for a Minimum Order Size
Another way to cover shipping costs is to offer free shipping when customers pay a specific order size. The extra cash should help you cover the rest of the shipping costs.
However, just like with increasing the price of your products, you need to have a strategy in mind. You can’t just throw a random number around — customers will catch on to what you’re doing.
Let’s say that your average order cost is $22. To invite customers to pay more without feeling like they’re being tricked into buying more, you can offer free shipping for orders above $25.
Here’s an example from skin care company Frank Body, that offers free shipping for orders above $20:
Create a Membership Program for Free Shipping
An option that’s gaining in popularity is setting up membership programs. To qualify for free shipping, customers will have to sign up and pay a yearly or monthly fee.
A great example of this in action is Barnes & Noble. On top of getting free shipping when customers sign up for their membership program, they also get exclusive perks and bonuses.
Offer Multiple Shipping Options at Checkout
Giving customers more than one option will increase their perceived value. When you display rates, include the estimated delivery date. Customers will be able to select a faster option (and choose to pay for shipping themselves) versus selecting the standard, slowest, and low-cost option for your business.
Your Shipping Rates are As Low as Possible
There’s no doubt that getting access to cheaper rates makes offering free shipping easier. The problem is that small and mid-sized businesses can’t access the same discounts as their bigger competitors – or Amazon. A lot of platforms promise better rates, but what they’re really offering is a discount below retail (what you would get at the USPS or UPS store). Any business can access better than retail by setting up a business shipping account.
There are more tools available, however, and that’s where a company like Essential Hub can help. We leverage our network of software partners to get customers the best rate and program for their particular needs, and our experts craft a custom shipping profile to leverage the strengths of each carrier. Check out some of our shipping tips, and if you’d like to learn more about how we can help, fill out the contact form below.
Wrapping Things Up
Whether or not you can offer free shipping depends on various factors. These include the type of product you’re shipping, your customer’s location, and what others are doing in your industry.
When free shipping is done correctly, you’ll be able to boost sales and create loyal customers. It’s all about having the right strategy to make it work.
Keep Your Costs at a Minimum with a Great Shipping Program
Shipping is more than just low rates. A great shipping program gets you the best rates for the service you need for each and every shipment. Essential Hub helps all of our customers with strategy, software, and a rates, so their business can win more customers and grow!