Is free shipping right for your business
The promise of free-shipping can seem too good to be true, and often it is suspected that the shipping costs have been absorbed into the price of the goods. This can sometimes be true, but with products that are available online direct from the manufacturer, it makes it harder for retailers to add their own mark-up. Competing on price becomes impossible and retailers have to find other ways to set themselves apart. Free shipping becomes the next logical step.
According to Statista, 16% of online shoppers abandon their order due to unsatisfactory delivery options. This can be due to many factors, such as speed, security, and coverage, as well as expense. Eliminating this last reason as a hurdle to completion by offering free shipping may lessen the effects of the previous three, and perhaps lead to greater conversion.
Types of free shipping and delivery
Free shipping is a misnomer. Someone is always paying and there are several tactics that eCommerce businesses can use to mitigate the costs.
- Minimum purchase – This protects businesses from users who want a single pair of socks, or just one chair. The threshold will depend on the type of products and the cost to post. For big ticket, expensive to ship items, a minimum of $500 might be reasonable, for clothing $99 is a common figure. Amazon uses this model and they continue to grow exponentially, a testament to how effective giving customers a minimum spend to aim for can be.
- Members’ only – Often this is combined with a smaller minimum purchase, or signing up requires an annual fee. This is an attractive incentive to become a regular customer and can help build relationships and fuel growth. This is also a great way to market directly to your customers and build a profile of their spending habits.
- Free to all customers – Book Depository and Apple, among others, have made this the central tenet of their online businesses. Both companies trade on the fact that they will ship your purchase, regardless of size, anywhere. Of course, being two giant, international companies helps with absorbing the cost of packing and shipping. For smaller businesses, this option may not be realistic in the short term.
How to evaluate what form your free shipping should take
There is no one-size-fits-all answer to offering free shipping. It depends on the size of your operating margins, the distances involved from your warehouse to customers, the weight, dimensions and fragility of your products, and more. Outright free shipping is a rarity that could set your business apart from the pack, however if it is not economically viable, a member or minimum purchase system may work better for your business.
There is also the possibility that customers would purchase from you regardless of whether you offer free shipping or not. This is where customer engagement and analytics will help to understand what is driving your abandoned cart and bounce rates. While offering free shipping can give your customers a reason to choose you, if your product is unique or your service and reputation are exemplary, customers may not need the added incentive.