Free shipping – customers love it, online retailers are skeptical of it. In today’s market, retailers feel like free shipping is something that they need to offer, but should they?
Offering free shipping will increase conversion rates greatly for your store, but the reality is is that someone has to pay for the shipping. Either you as the retailer has to be responsible for the shipping or you have to include that cost in the product price which makes your customers pay a higher price for the product. But, in many cases, it’s a mixture of both.
There are several factors that eCommerce stores should consider before using free shipping for your business. Below is a list of pros and cons of free shipping so you can decide if free shipping is right for your eCommerce business.
Pros of free shipping
Helps stop abandoned cart problems
Customers often abandon their shopping cart because they find out after typing all their billing information in, that the shipping cost is high. Most customers buy online because they can get their products delivered to their doorstep and receive a discount at the same time. But high shipping costs increase the price and take away their motivation.
Increase customer order size
Free shipping is a huge incentive for customers to spend more at your store. Free shipping is seen as an added bonus when offered and encourages customers to spend more.
Helps retain customers
Offering free shipping is a great way to help build customer loyalty. 60% of consumers say that free shipping is a very important factor when considering an online store. By offering free shipping it encourages customers to return to your online store and not to go to other competitors that do not offer the same buying incentives. Up to 70% of customers said if the online store does not offer free shipping, they would consider switching to a competitors site, proving free shipping puts you ahead of your competitors and helps retain your existing customers.
Cons of free shipping
Effects on profit margins
The biggest and most obvious cost for merchants is the loss of profit margin due to absorbed shipping expenses. The cost of shipping has risen significantly over the past few years. There are other options that retailers have to get products to their customers, for example, economy shipping, which can significantly reduce delivery costs. But the downside to these options is slower delivery times and a greater chance at shopping cart abandonment.
Impact on customer service
Customers believe that free shipping is a priority when making a purchase online but great customer service is also something they want, and free shipping may affect this. To be able to offer free shipping, eCommerce stores find that they need to take less expensive routes, which include slower delivery times. Customers, however, still expect prompt service with a delivery of the product within 3 to 7 days. Therefore businesses and customers may have to compromise on which they feel is more important.
Strategies to consider if Free Shipping on Everything isn’t an option for your business:
Set a qualifying minimum order
If you are unable to offer consumers delivery for free, consider creating a threshold in which shipping will be free. To implement this shipping model, you will have to find your average order value and adjust the threshold accordingly. For example, if your eCommerce store has an average order of $50, consider creating a free shipping threshold of $60 to encourage customers to spend more.
Free Shipping on Returns
If you are unable to have free shipping on products purchased, you could offer free shipping on returns. This is particularly appealing for buyers if your company is apparel or footwear. Customers want the option to be able to return the product if it doesn’t fit properly.
Free Shipping at Certain Times of the Year
Many retailers choose to offer free shipping only certain times of the year; when competition is more aggressive. Some retailers will only offer it during the holiday seasons because consumer expectations are to have free shipping or they will go elsewhere.
Bake Shipping Fees into Product Price
This really isn’t free shipping but many online retailers will add the cost of shipping into the product price so they can promote a “free shipping” offer. Some shoppers may catch on, but it will most likely generate more traffic to your website and likely increase sales from it as well.
How businesses are offering free shipping
Zappos’s believes that the consumer should never have to pay for shipping or returns. From day one, the company offered free shipping on all purchases and a 365-day return policy, which also includes free shipping.
Amazon offers free shipping over $35. Customers also have the option to sign up for their Prime membership, for $99 a year, which allows free 2 day shipping.
Lands End offers free shipping over $50 everyday. Lands End also send out emails to their customers that subscribe to offer discounts and free shipping on everything often.
All3sports is a sporting company that offers triathlon gear. All3sports offers free shipping on purchases over $100.
The bottom line
While free shipping may not be suitable for all eCommerce stores, it is proven that shipping costs are correlated with conversions.
If you are unable to offer free shipping, make sure your customer is aware of your shipping costs as early as possible. It will make your company confident about your pricing. Customers will show their gratefulness when it comes time to purchase.