Customers love free shipping. Over 200 million people pay Amazon to get free two-day shipping. Yes, the irony that people pay for free shipping is not lost.
The point remains that offering free shipping is a great way to entice people to buy from your e-commerce store. People love to get deals, and when they see “Free Shipping!” their eyes light up. The question is how to offer free shipping without it becoming a financial burden on you, the seller.
In this guide, we’re going over everything to know about free shipping as well as how to offer free shipping for your e-commerce store.
Should I Offer Free Shipping?
It depends. If your business is already doing well and you’re not looking to acquire more sales, then offering free shipping may not be the best option for you. But if you’re looking for ways to increase your sales, free shipping can be a great way to do that.
That said, it’s important to remember that free shipping comes with a cost. You need to carefully consider the financial implications of offering free shipping. Will the number of sales you’ll get by offering free shipping be enough to offset the dent in your shipping budget? If not, it’s not worth it.
But if you crunch the numbers and realize that free shipping will net you greater profits, the answer changes to a resounding “Yes!” Offering free shipping can be a great way to increase sales and make more money. The answer to whether to offer free shipping depends on factors specific to your brand.
Advantages of Offering Free Shipping
Offering free shipping can be a great way to boost sales and customer loyalty, while also increasing your average order value and enhancing the customer experience. Take a look at the most noticeable benefits.
Potentially Increase Sales
Offering free shipping can help to increase sales by making your products more attractive to potential customers. In today’s competitive marketplace, shoppers are looking for the best value and are more likely to choose a product with free shipping over one without. By offering free shipping, you can make your products more appealing and entice shoppers to make a purchase. Plus, studies show that by offering free shipping, you can greatly reduce cart abandonment rates.
Boost Customer Loyalty
Offering free shipping can help to increase customer loyalty. Customers appreciate being able to save money on shipping, and when they know that they can get free shipping on their orders, they are more likely to become repeat customers. By offering free shipping, you can show customers that you value their business and are willing to go the extra mile to make sure they have a great shopping experience.
Enhance the Customer Experience
Introducing free shipping can also help to improve the customer experience. When customers know they don’t have to pay for shipping, they are more likely to be satisfied with their experience and more likely to recommend your business to others. By providing a great shopping experience, you can encourage customers to come back again and again.
Increase Average Order Value
Free shipping is one way to help = increase your average order value. When customers know they don’t have to pay for shipping, they are more likely to add more items to their cart. This can help to increase your average order value, as customers are more likely to purchase more items to make the most of their free shipping.
Make You More Competitive
You may have an e-commerce store that’s similar to another one, with similar products and services. One way to stand apart from the competition is by offering free standard shipping. Customers are sure to take notice when you introduce this feature. More importantly, it can play a critical role in their decision process in choosing your business over others.
How to Cover Costs of Offering Free Shipping
If you’re worried about free shipping eating your profits in the short term, there are strategies you can implement to mitigate the costs.
Increase the Price of Products
This approach is an especially useful tactic if you have a great diversity of products and don’t need to raise the prices of all of them. For example, say you sell a popular $10 item that requires $2 to ship and a slow-selling $30 item that costs $3 to ship. If you raised the price of the $10 item to $15, you’d cover your shipping costs.
You can also just add in the shipping cost to the item. A $100 item with $10 shipping would become a $110 item with free shipping. Don’t try to profit on shipping — it rarely works. Be fair with your pricing and just cover the costs as much as possible.
Increase Customer Lifetime Value
Do you know what people love? Feeling like they’re part of a group — an insider. Customers who get perks and loyalty rewards will stick around and buy more of your products.
With a smart email marketing campaign, you can offer subscriptions, discounts and rewards for making future purchases. For example, if you sell nutritional supplements, you know that people will constantly need to replenish their products. Turn it into a subscription. You could offer free shipping on the first purchase to get them on board.
Increase Average Order Value
Bulk order free shipping makes sense from a seller standpoint because it will be cheaper to send everything to a customer in one big box.
You’ve seen “Spend another $7.65 to get free shipping!” on website order pages, right? Well, that’s bulk order free shipping in a nutshell. By bundling items, perhaps suggesting commonly paired items, you can encourage customers to exceed a minimum spend threshold and get free shipping.
Create a Promotional Event
How about a free shipping sale? This approach is helpful if you have items you need to move and don’t want to (or can’t) offer a discount on the item itself. Advertise your free shipping sale for a limited time and see whether it increases orders. It might convince you to add free standard shipping if it goes well.
Offer Free Economy Shipping
If shipping speed isn’t a priority, you can offer lower-cost shipping. Most carriers have a low-cost option, like the U.S. Postal Service’s Parcel Post. It might take a week or more to arrive to the customer, but it costs less to ship the item.
Partner with a Fulfillment Company
Third-party logistics (3PL) companies have a lot to offer businesses of all sizes, from small e-commerce businesses to large-scale firms. Not only do they provide cost-effective and efficient services such as warehousing, storage and order fulfillment, but they also have connections to discounted rates and shipping offers with major carriers. This can be a great boon for businesses, and you may be able to offer free shipping to customers.
Even better, 3PL companies often have connections to discounted rates and shipping offers with major carriers. Sometimes, if you use a fulfillment company for your orders, it can usually allow you to offer free shipping.
The cost savings and increased efficiency that come from working with a 3PL can easily outweigh the costs incurred on the front end. The increased order volume that you get from a 3PL can be well worth the investment and work to boost your business and increase your bottom line.
Offer Free Shipping to Limited Locations
If there are locations that would carry low shipping costs, it’s a good idea to offer free shipping if it means getting a sale where there wouldn’t have been one otherwise. When you have a $10 item you can ship for $1 to specific locations, why not offer free shipping and make the $9?
Don’t forget that local pickup is an option. If your customers don’t mind coming to you and you don’t mind having them come to your location, let them know that they can swing by and pick up their items. It would also give you some extra facetime with customers and perhaps secure future sales by building a relationship.
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You can do so by using the following formula: (Average Shipping Cost/Gross Profit Margin)+Average Order Value.
When offering free shipping, consider setting a minimum purchase amount for customers to qualify for free shipping. You can also offer discounts for customers who select a slower, less costly shipping method or who upgrade to a faster shipping method. You also can offer free shipping for certain items or to certain customers.
If you offer free shipping, it could potentially increase sales. But if the cost of providing this service does not outweigh the increased revenue from more customers buying products, then overall revenue may decrease.