A Forbes survey projects that by 2026, twenty-four percent of retail sales will happen online. Too few alternatives for free shipping have left many eager customers staring at the checkout page with a depressing expression. Customers will not pay for shipping unless it is for same-day or next-day delivery, regardless of the amount in their cart. Even then, the majority of us anticipate it will be free, and more than 90% of respondents say delivery alternatives have a big impact on their purchasing choices.
It’s a difficult choice, but many e-commerce sites now provide free shipping in response to this ongoing consumer expectation. After all, someone has to cover the cost of shipping. This post is for you if you wish to offer free delivery to your customers but are unsure of how to cover the expense.
We’ll go over how to offer free shipping without sacrificing profitability, if it makes sense for your company, and how to get the most out of this tactic. Now let’s get started!
- What is Free Shipping, and Why Should Your Ecommerce Store Offer It?
- Let’s Do the Math: Factors Affecting Free Shipping Availability
- Four Ways to Make Up Expenses When Giving Free Shipping
- Is It the Correct Decision for My Online Store to Offer Free Shipping?
What is Free Shipping, and Why Should Your Ecommerce Store Offer It?
Retailers that offer free shipping allow their consumers to receive their purchases without having to pay for postage. Since its introduction by Amazon Prime in 2005, this sales tactic has been standard practice for numerous firms.
Free shipping quickly gained popularity, and consumers now want nothing less. and provided data for each store that implemented free delivery. Among the main advantages of free shipping are:
1) Increased Revenue
Consumers are more likely to purchase from an online retailer that offers free shipping. If there is a minimum order value requirement, they are also more inclined to spend a little more money in order to be eligible for free shipping.
2) Reduced Rates of Cart Abandonment
Sometimes, unexpected shipping charges toward the conclusion of the purchasing process discourage buyers from finishing the transaction. Free delivery has been shown to significantly lower the rate of abandoned carts.
3) Recurring Purchasers
Customers that have a positive purchasing experience with your brand are more likely to make repeat purchases. Their shopping experience is simplified with free shipping. Brand loyalty is increased by this.
4) An Advantage Over Rivals
Offering free shipping can offer you a competitive advantage over other companies in the sector.
We’ve seen that providing free delivery has a number of important advantages, but how can you do this without going bankrupt? The next parts contain more information and an answer to this query.
Let’s Do the Math: Factors Affecting Free Shipping Availability
It takes considerable preparation to make free shipping a profitable tactic. It’s not required for online retailers to provide free shipping on every purchase. A few crucial elements, such as the following, should influence your decision-making process:
Product Dimensions and Weight
It’s common for companies to restrict free shipping on orders that are too large or heavy to fit into standard shipping containers. This is due to the fact that most carriers impose additional fees for carrying these kinds of merchandise.
However, if clients order these things in large quantities, companies might think about offering free shipping. Through economies of scale, full truckload or full container load (FTL or FCL) transportation enables sellers to reduce their overall expenses.
Margin of Profit
Each item in your inventory ought to provide you with a distinct profit margin. When providing free shipping, choose products with a larger margin to give yourself some leeway. Naturally, your industry would determine how many categories you could offer free shipping to and for the lowest cart total.
Retailers of electronics and fashion items have the biggest profit margins, therefore they feel more at ease providing free shipping. While grocery and perishables retailers need to set boundaries in that regard.
The destination and duration of shipping
Are the majority of your clients from abroad, or do you have domestic customers? Do you offer shipping that is expedited? If you wish to implement a successful free shipping strategy, you must have a clear response to these queries.
The majority of internet retailers do not provide free international shipping. You might address this issue if part of your audience consists of both domestic and foreign users by limiting free shipping to domestic locations. But if the majority of your customers are foreign nationals, you should really assess the profitability and business plan of your company.
Except for Amazon, most online retailers charge extra for expedited shipment. However, a lot of businesses these days are trying to offer these services free because of the intensifying rivalry. Go ahead and implement this plan if you believe it will increase foot traffic and sales in your store and offset the associated costs.
Four Ways to Make Up Expenses When Giving Free Shipping
Let’s examine a few strategies that companies can use to maintain a profit margin even when they give away free goods shipment to clients.
Raising the Cost of the Product
Since most merchants that promise free shipping actually include the cost of shipping in the price of the item, the term “free shipping” is actually misleading. Businesses can afford to pay for free shipping without experiencing a loss by increasing the worth of the item.
Consistency in the shopping experience is preferred by customers. For this reason, they get agitated when the total amount of their basket is altered during checkout and shipping costs are added. If an item’s price is raised from $20 to $30 right away to include shipping, those same people won’t hesitate to purchase it.
Provide Packages Or Increase AOV
By encouraging customers to purchase more items, you can increase the average order value (AOV) and offset the cost of delivery. To do this, a lot of business owners set a minimum purchase value—for instance, free delivery on orders over $50—for free shipment.
Another way to go about it would be to offer simple bundle alternatives at the register. You can make clients’ buying experience more enjoyable and worthwhile by displaying more products that complement the one they have chosen. Customers have demonstrated that they are more than prepared to spend a little bit more to have free shipping. For quicker checkouts, you might also provide a kitting—a package of various items—such as a body butter, shower gel, and body oil combination.
To Increase Customer Lifetime Value, Use a Member-Only Model
Investing more in a consumer who intends to make recurring purchases makes sense for a brand since it increases the customer’s lifetime value (LTV). It can be rather successful to test out the free shipping concept for members or subscribers in the beginning.
The similar tactic is employed by well-known fast-fashion retailer H&M to entice more consumers to sign up as members. If membership is free and offers additional advantages like special pricing, first access to sales merchandise, etc., the process becomes twice as beneficial.
Establish Temporary Free-Shipping Offers
In conclusion, if you are still undecided about providing free shipping, we suggest testing it out for one-time occasions like Cyber Monday (BFCM), Black Friday, or End of Season sales. Offering free shipping without sacrificing profit margins is not too difficult to do as sale events usually see an AOV that is greater than usual.
Furthermore, firms are able to get rid of dead stock—stock that would otherwise remain unsaleable—by offering the alluring prospect of free shipment. Since the sales season is brief and provides ample opportunity to get insight into the company and its clientele, we believe it’s the ideal time to test out free delivery.
Is It the Correct Decision for My Online Store to Offer Free Shipping?
Shipping goods for free is a choice that needs careful consideration and thought. The type of business one operates also influences the kind of free delivery one provides.
It will be difficult for small cottage enterprises with extremely narrow profit margins to offer free shipping. It might be simpler for medium-sized companies to offer free shipping on certain products rather than all of them.
You must determine the minimal purchase value at which you can offer free delivery without losing money in order to determine whether free shipping is practical for your online company. This is the free shipping barrier, as well.
(Average Shipping Cost per Order / Gross Profit Margin Percentage) + Average Order Value = Free Shipping Minimum Threshold
Every firm will have a different threshold value for free shipment. If the cost is excessively high, like $250, free shipping might not be worth it if the average order value is much lower.
Instead of using dimensional weight to determine shipping costs, businesses in this situation might choose flat-rate delivery. Online retailers may be able to offer extremely low shipping costs to their clients if they partner with the appropriate shipping companies.
Finally, you may differentiate yourself from your rivals by fostering meaningful customer-brand connections, offering free shipping on returns, and providing superior customer care after a sale. These services offer every customer an equal chance to win them over.
For an online store to be successful, shipping tactics must be implemented. In the fast-paced world of online retail, you may streamline logistics and obtain a competitive edge by placing a high priority on speed, cost effectiveness, and customer pleasure.
If you’re looking for an e-commerce development company to help you with the creation of a mobile app, Appic Softwares is a great choice. We have a talented development team available to help you with any and all of your requirements.
Why then are you acting so cautiously?