Free Shipping: Why You Should Offer it, And How to Stay Profitable Doing It
Published on May 13, 2019
In e-commerce, shipping and shipping fees is always an important part of the business.
Actually, it’s an important matter for customers too!
Think of it, who has never dropped a purchase at the checkout? I sure have! You see the product you want at a good price, add it to the cart, but when the shipping fees are added on, maybe you figure it’s just not worth it anymore, it’s not that good of a deal. It’s like an impulse buy deterrent.
Though you want traffic on your website, what you really want is to sell.
One of the best ways to increase conversion rate is undoubtedly to offer free shipping.
Why Offer Free Shipping?
- It’s an ideal lever to increase the number of transactions
Stats prove it: you will have a better chance of reeling in customers by offering free shipping as opposed to offering price reductions.
Everyone loves free stuff. If a potential customer shopping for an item on other websites lands on your site, discovers you have equivalent prices and offer free shipping, he will purchase from you.
Not convinced? Test it out! Launch a one-week promotion with discounted products, and the following week promote free shipping, and after, compare which marketing campaign will have driven the most sales.
- It prevents shopping cart abandonment
While everyone loves free stuff, no-one likes a bad surprise.
The main drawback with shipping costs is that you only see them once you check out.
So, analyze your statistics. Do your customers tend to add items to their cart only to abandon it once they realize the shipping costs?
If so, you need a strategy. Offering free shipping should be considered… but your goal remains to be profitable, so if you’re going to do it, it needs to be well done.
How to Offer Free Shipping Without Losing Money
- Build the shipping cost into the price
There’s no fooling anyone, many businesses offering free shipping have included the shipping cost in the price of their products.
They calculate the average cost of shipping for their products and add it to the selling price.
Funny thing is, even if most people know this happens, customers are still happy because at the very least, they know exactly what they will be paying for the content of their cart, and when comes the time to check out, there won’t be any hesitation.
- Offer free shipping with a minimum purchase
Another popular approach is offering free shipping only in a certain area, whether regional or national, and mostly, with a minimum purchase amount.
Only you know the cost of your products and your profit margin. You can therefore calculate when shipping free of charge becomes profitable.
This method is perfect when you’re able to analyze the activity on your online store.
Two important figures to look out for:
1) The average amount of the orders
2) The threshold amount where customers start abandoning their shopping cart
With these two figures in hand, you’re able to calculate the ‘minimum amount’ to add to the amount of the bill to include shipping fees.
So, for example, if the average amount of your bills is $70, increase the minimum amount to $80.
This is a common method that customers are accustomed to and it actually prompts them to buy more. If I buy a $70 shirt and I know that I will get free shipping at $100, I’ll be inclined to buy another shirt, a little cheaper perhaps, because I understand that even if I spend a little more, I will get two items instead of one.
- Offer free shipping to your top customers
I cannot stress enough the importance of building customer loyalty! A good way of achieving this is through perks.
Newsletters and subscribers are so important! A basic marketing strategy is to collect email addresses. This gives you an invaluable, direct access to your customers.
You could offer free shipping at all times to your subscribers or only during specific periods of the year.
Also, run campaigns during which all those who subscribe will get free shipping on their first order… or on ALL their orders! Up to you!
- Determine a flat-rate shipping fee
Another good strategy would be to set a flat-rate for shipping, but this requires careful calculations (good thing is, since you are in this business, you know how to calculate well!).
Not to say that all your products would have the same flat rate; you will need to categorize your products depending on weight, size, volume, etc.
What is the benefit to this method? Your customers know ahead of time what they will pay. Again, no bad surprises and no cart abandonment!
- Shop around for carriers
Perhaps I should have started with this point… Obviously, the first thing to do before starting to ship is to contact as many carriers as possible and deal with the most cost-effective, depending on your activity sector and delivery area.
In Canada, the most popular carriers are Canada Post, FedEx, Purolator, and UPS. Take the time to talk with your representative, negotiate your rates, and see what they have to offer.
Most of all, don’t forget to ask your carrier for his delivery guarantee!
Which brings me to my next point…
- Verify your package deliveries
It would be inexcusable if I omitted talking about package delivery tracking!
By dealing with a service such as busterfetcher.com, you will have a team dedicated to tracking all of your parcels, and they will detect any delays, wrong deliveries, or billing mistakes.
The same team will claim any refund you are entitled to, for you… You could get up to 20% of your shipping costs reimbursed to you, without investing anything at all!
Why not use this recovered money to offer free shipping?
Take the time to find out more about it!
One last word of advice: whatever you decide to do with regards to shipping fees, make sure all your terms and conditions, and shipping policies are clear for all your customers. Those are the rules. Clearly indicate shipment times and your guarantees in the event of a damage or late delivery.
If you have yet to make the move to free shipping, take the time to do the math…
In the long run, it just might be worth it.
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