In ecommerce, there’s no such thing as free shipping. Somebody has to foot the cost. Increasingly, it’s the merchants.
With 60% of consumers choosing one ecommerce store over another due to better delivery options, free shipping is no longer a desirable perk; it’s fast become the norm.
As competition and expectations for free shipping increase, it’s easy to feel like this is a race to the bottom for merchants. Yet free shipping can be an exceptionally powerful marketing tool for online stores - so long as you know how to do it right.
This is exactly what Whiplash is here to cover. In this post, we’re going to dive into the art of offering free shipping; the pros and cons, free shipping strategies, and what you should consider in order to maximize revenue opportunities.
The so-called ‘Prime Effect’ has a real impact on shaping expectations for free shipping, with merchants racing to keep up with the rising standards set by Amazon. As free delivery grows more ubiquitous, consumers become more sensitive to paying for it - and falling behind can make your brand look irrelevant. By offering free shipping, you can avoid the risk of competitors gaining a strong advantage.
Cart abandonment is still one of the biggest puzzles in ecommerce. Out of the thousands of shoppers who put items in their shopping carts, only a fraction will actually end up purchasing. Shipping costs are one of the biggest barriers, with over half of consumers saying they have abandoned a cart due to ‘extra costs’ being too high.
Remove shipping costs, and your conversions will increase.
Given how much consumers prioritize free shipping, this is fairly self-evident. If you offer this perk, prospective customers are far more likely to support your business over costlier alternatives. If you make a good impression through a satisfying delivery process, you’re far more likely to retain customers for future purchases - which means better business growth.
Someone needs to take responsibility for shipping costs, and the onus is increasingly on merchants. With carrier fees having risen significantly due to the COVID-19 pandemic and unprecedented demand for shipping services, online stores are taking on a major financial commitment. This is a major disadvantage for dropshippers in particular, who typically rely on cheaper, slower shipping to sustain their business model.
Free shipping isn’t going to cost your business a uniform amount throughout the year. Certain periods such as the holiday season see the addition of seasonal surcharges that push up carrier rates. Although you can compensate with higher order volumes, this can also mean a bigger hit to your profit margins.
Many merchants have to stick to economy parcel options to be able to offer free shipping. This presents a difficulty when many consumers want shipping to be free AND fast, as several days’ wait could persuade them to shop elsewhere.
Free shipping can cause your profit margins to take a big hit, which has a major influence on what level of service you can offer customers. This means that you need to factor in
Free shipping is one of the most common talking points in the delivery experience. But there are many other shipping options that your business can explore.
While consumers show an overwhelming preference for free shipping, there remains a lot of tension between price and speed.
As the desire for instant gratification grows, consumers are showing an increasing preference for choice. 70% of consumers say that they would be willing to pay extra for expedited delivery options, such as two-day or same-day delivery.
With this in mind, offering a range of shipping options can help to ease the pressure on your shipping costs. If the choice is between slower, free shipping or fast, paid delivery, some customers will opt for the latter.
This should always be a major consideration when offering free shipping. The cost you need to absorb will vary significantly depending on where your customers are located. For example, whether they are based domestically or internationally - or even between urban and rural areas. This might require you to set geographic criteria for free shipping, such as the U.S. mainland only.
When analyzing your shipping costs, you also need to factor in the additional cost of returns. Consumers today expect the returns process to be easy and seamless - which doesn’t include paying for return shipping.
Covering both outbound and potential inbound costs could be a massive strain for your business, so it’s worth thinking about which is most beneficial. Your returns volume will be lower than your order volume, meaning that free returns will cost you less than initial free shipping.
Offering free shipping on all your products year-round might not be the best option for your business. The cost might be too much for you to absorb. Furthermore, making free shipping the norm takes away valuable marketing and promotional opportunities.
Here are some other ways to offer free shipping that also help to boost your sales strategy:
Using a threshold that customers must reach to qualify for free shipping is a common tactic in ecommerce. It rewards your high-value customers and encourages new customers to spend more. In fact, nearly two-thirds of consumers have placed extra items in their cart to reach free shipping thresholds.
Moreover, higher order values are more likely to contain multiple items. This allows you to save money by shipping items together, rather than as separate packages (a common issue for stores with blanket free shipping policies).
When consumers grow accustomed to having free shipping available at any time, it’s harder to persuade them to take action. But offering it for a limited time only as a promotional deal creates a much greater urgency to purchase!
Some items in your online store will be easier to offer free shipping for than others. Certain SKUs will have higher profit margins or will be cheaper to ship owing to being smaller/lighter items. This is a valuable tactic when you’re trying to boost the movement of certain SKUs, especially seasonal products which have a limited shelf life.
However, it’s important to note that ever-changing criteria for free shipping can be very confusing for consumers. Good communication is vital to avoid putting prospective customers off from purchasing.
Loyalty initiatives are hardly new in the world of ecommerce. Programs are a brilliant way to increase the value of repeat business and add an aura of exclusivity to your brands.
By setting an annual spending target that customers must reach to qualify for free shipping, it creates a major incentive for customers to commit to long-term spending with your brand. Because it’s a less common loyalty perk than product discounts or ‘points’, this also helps to give your brand a bigger competitive edge.
For brands with brick and mortar store locations, BOPIS (Buy Online, Pick-Up In-Store) offers an appealing alternative to free shipping. It gives customers the added advantage of being able to test/try a product before bringing it home. This avoids having to make a separate journey to return/refund unsuitable items.
This is the easiest way to compensate for high shipping costs. All you need to do is work out how much shipping is going to cost you on average and then calculate the necessary markup. However, this does run the risk of setting your prices higher than competitors, which could lose you more customers than free shipping will gain.
We only have to look at the success of Amazon Prime to know how attractive this model is to consumers. A paid program allows you to pass the cost of free shipping onto your customers in a way that feels much more palatable than having them pay per online order. To boost value perception, it’s a good idea to throw in some other perks too, such as early access to promotions.
Creating a sustainable free shipping strategy is a major challenge, especially for emerging brands who can’t rely on high order volumes to compensate. Partnering with an ecommerce fulfillment provider gives you access to lower carrier rates, as well as experienced teams with sophisticated workarounds to reduce shipping costs. This includes combining different service levels for periods of peak demand and streamlining packaging for lower DIM weight.
Free shipping can be a minefield to navigate in ecommerce. The need to balance consumer expectations against your profit margins and fulfillment capabilities makes it a headache for many merchants. Our guide has covered numerous actionable strategies to implement free shipping at your online store without hurting your bottom line. This sets the scene for better sales, compelling promotions, and stronger brand loyalty - one parcel at a time.