It can be expensive to get things to your customers. You have to factor in the shipping fees and the costs of shipping materials. At the same time, consumers have come to expect free and discounted shipping from online retailers. They want a good deal. Can you deliver it while still turning a profit?
Do the Math: Does It Make Sense for Your Business?
Free shipping results in a lower profit margin for individual sales. However, it can boost overall sales to compensate for the loss, especially if you require a minimum order threshold for free delivery. Free shipping can also lead to certain priceless benefits to your bottom line. For example, a free shipping event on your website might double your traffic within a given time frame.
Ultimately, you’ll want to consider the impact of free shipping on your total budget. Typical delivery expenses will include postal fees, packing and shipping materials. The delivery costs may be higher if you are shipping hazardous materials that must comply with the IATA dangerous goods regulation. It’s important to remember all of these when crunching the numbers for free shipping.
4 Types of Free Shipping
You can explore many different avenues for enticing customers with free shipping. No right or wrong answer applies to every situation. Your decision will depend on your budget, brand sensibilities and business strategies. Here are just a few options to consider.
1. Shipping Costs Built Into Pricing
This is one of the most straightforward ways to deal with shipping costs. Rather than selling a product for $20 with a $5 delivery fee, you sell it for $25.
The main advantage of this pricing method is that you can declare free shipping across your website. This can attract customers and help you establish your brand as cost-effective. You’ll also lower the possibility of cart abandonment. Without free shipping, customers may get to the checkout stage and balk at the added shipping charges.
The downside of this method is that it requires you to individually price all items or item categories. This can be labor-intensive even if you buy software to automate the job. Another danger is that customers won’t realize what you’ve done for them. They’ll think you’re inflating the value of the product. They might be tempted to shop elsewhere when they see the same item for less from your competitors.
2. Free Shipping at a Required Spending Threshold
This is a common way for businesses to offer free shipping: Customers are required to spend X amount of dollars to qualify for it.
This method of free shipping incentives offers quite a few advantages. The most obvious is that customers are encouraged to spend more than they normally would. You can include free shipping with sales events, loyalty programs and other shopping incentives.
The disadvantage of this method is that you might miss out on smaller quantity sales. If customers can’t fill up their cart enough to reach the free shipping threshold, they’re at greater risk of abandoning it.
3. Free Shipping for First-Time Customers
If one of your ongoing business goals is sustained new customer growth, this might be the free shipping method for you. It offers free shipping for first-timers but not others. With this method, you can incentivize new customers to take a chance and order from your company. You can also leverage it as an opportunity to get them signed up for newsletters or other offers.
The flaw with this shipping method is that it doesn’t offer any benefit to returning customers. This practice might lead to problems with customer retention.
4. Limited-Time Only Free Shipping Promos
Sales events are a great time to offer free shipping. You can run them regularly or as part of advertising promotions for holidays, major shopping weekends and more.
The trick is to use free shipping as an extra on top of the main event. This way, it’s seen as something special and valuable. It’s a deal that customers can only receive because of extraordinary circumstances. Offering free shipping for a limited time can also promote a sense of urgency that inspires or encourages customers to buy now, not later.
The drawback to this shipping method is that it doesn’t do anything for extended customer retention. Like some of the other tactics above, it focuses more on driving short-term sales than long-term customer loyalty. If you’re struggling as a business to keep your customers coming back, this might not be the best strategy for you.
What Consumers Expect From Shipping
When considering the possibility of free shipping within your business, it’s crucial to consider consumer expectations. Their standards and assumptions can drive everything from your sales to your brand reputation within the industry.
For example, 66% of all online shoppers expect free shipping for every purchase. Additionally, 80% expect free shipping when they spend over a certain dollar amount.
If you don’t offer free shipping in any capacity, it might hurt more than just your sales. It could also impact your web traffic, brand reputation, cart abandonment rates and overall profit margins. On the flip side, offering free shipping that meets customer expectations can establish you as a brand that understands its demographic. It can also, of course, increase your sales.
The Bottom Line on Free Shipping
Today’s consumers tend to expect free shipping from online retailers. Here we presented a few options for incorporating it into your pricing model. In most cases, you will reap benefits in multiple areas. It’s definitely something to consider for long-term brand success.