The word "free" doesn't always mean what you think it does.
Online shopping surged in popularity during the pandemic, when consumers were worried that shopping in person would expose them to unwanted germs. And these days, many consumers do the bulk of their shopping online -- not due to health-related concerns, but due to the convenience factor. After all, why force yourself to drive 20 minutes to the nearest mall or big-box store when you can order the things you want from the comfort of your couch and wait for them to show up at your door?
Another reason online shopping holds so much appeal is that many retailers offer free shipping on purchases, so there's little downside to skipping an in-person shopping trip. In fact, you can even argue that online shopping is cheaper than in-store shopping because that way, you're not paying for gas.
But is free shipping actually something that saves you money? Or are you secretly paying the price?
Is "free" a misnomer?
Most major retailers offer free shipping on online purchases. This means that you can complete an order and check out without incurring a separate shipping charge on your credit card. But while you may not be charged a separate fee for shipping, you might be paying for that shipping in other ways.
Retailers aren't in the business of losing money. And so in exchange for free shipping, they might instead raise the prices of the items they're selling to make up the difference. So all told, you may not end up saving money.
It's similar to credit card processing fees. Some retailers pass those onto consumers directly by adding, say, 3% to their bills if they pay by credit card. Other retailers might claim to cover those fees instead. But in reality, what they're probably doing is just baking those fees into the cost of the items they're selling and charging more for them.
You might have to spend more for free shipping
While it's true that most big-name retailers offer free shipping for online orders, you'll usually have to meet a certain threshold to avoid shipping charges. Amazon, for example, offers free shipping for orders of $25 or more.
But what if you only want to buy a $10 item? In that case, you may just decide to spend an extra $15 to get free shipping. But are you saving money in that case? No.
Of course, it's easy enough to snag free shipping on Amazon by getting a Prime membership. But that comes with a price tag of $139 a year. So while it allows you to get free shipping on a $4 item, you're paying for that privilege via the annual cost.
Similarly, Target and Walmart offer free shipping for online orders totaling $35 or more. But if your average purchase on those sites only amounts to $25, and you're constantly forcing yourself to buy extra things to meet that $35 minimum, then you're not coming out ahead financially.
All told, few things in life are free, and it's fair to say that shipping falls into that category. You may not have to pay a shipping fee when you shop online. But rest assured, you're most likely paying in a less obvious way.
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FAQs
Retailers aren't in the business of losing money. And so in exchange for free shipping, they might instead raise the prices of the items they're selling to make up the difference. So all told, you may not end up saving money. It's similar to credit card processing fees.
Is it worth it to do free shipping? ›
It increases sales
Shoppers believe they're getting a better deal when they don't have to pay for shipping costs. Customers will buy more to get it and will take their business elsewhere if they can't. Plus, offering free shipping can help create a sense of trust and loyalty between the customer and the business.
Do companies lose money on free shipping? ›
The reality is that free shipping costs a lot of money. If your company were to offer free shipping for every customer, it adds up fast. An average medium-sized parcel sent through USPS costs around $11.50. That means with every sale, you are losing on average $11.50.
Are people more likely to buy with free shipping? ›
Influence on Purchase Decisions
When faced with the choice between paying for shipping or getting their items delivered for free, most consumers tend to opt for the latter, leading to increased sales for businesses.
Is shipping ever really free? ›
Just as the popular economist adage states, “There's no such thing as a free lunch,” there is also no such thing as free shipping. As online retailers know, it can be very expensive to ship a box from Point A to Point B.
Is free shipping a competitive advantage? ›
Definition: Free shipping is an increasingly-popular option for online shopping, where customers do not have to pay an additional shipping charge. Free shipping is attractive to customers who appreciate simple pricing structures, which in turn makes it a potential competitive advantage for online businesses.
What are the disadvantages of free shipping? ›
Offering free shipping and returns can also have some drawbacks for your ecommerce business, such as increased costs due to shipping and handling expenses, the potential for customers to order more items than they need or want and return them later, a decrease in perceived value of products or services, and the ...
Does free shipping affect sales? ›
Encourages higher conversion and sales rates.
Free shipping can act as a powerful incentive, motivating customers to make a purchase they might have otherwise hesitated on. This boost in conversions leads to increased sales and revenue.
How to not lose money on free shipping? ›
How to Offer Free Shipping Without Losing Money 🤔
- Strategy 1: Increase the price of your items online to support the shipping cost. ...
- Strategy 2: Establish a minimum value per order to qualify for free shipping. ...
- Strategy 3: Use free shipping as a tool to gain customer loyalty.
While free shipping is a fantastic deal for shoppers, it's also an effective marketing tool for small business owners. By placing a digital “Free Shipping” banner on your homepage, you're bound to catch potential consumer's attention. Free shipping can also be a great incentive to complete an online purchase.
How does Amazon not lose money for offering free shipping and returns? They do, they just make so much money it's a cost they can afford. Bear in mind they only lose money on the products they sell. The products sold by third parties like me, WE lose money when there is a return.
How many customers want free shipping? ›
While 80% of American shoppers expect free shipping above a certain order threshold, 66% expect free shipping on all orders. 50% of consumers have abandoned their online shopping cart due to shipping and/or delivery options. 82% of shoppers are more likely to complete a purchase if delivery is free.
What is the difference between free delivery and free shipping? ›
But while most people may use them interchangeably, the terms don't actually mean the same thing. Shipping describes a package leaving your warehouse and making its way to the customer. Delivery, on the other hand, describes the actual date a package is dropped off at the customer's address.
How do I avoid paying for shipping? ›
Opt for in-store or pickup - Some stores will even offer same-day pickup at a local store, or free shipping to the store itself so you can swing by and pick up your order. It can help you avoid the lines and the shipping fees.
What is the psychology of free shipping? ›
79% of consumers say free shipping makes them more likely to shop. It's because the incentive improves the online experience and removes the barrier that shipping costs create. Most importantly, shoppers believe free shipping to be convenient, and convenience shapes shoppers' behavior.
Do businesses lose money on shipping? ›
Orders need to be shipped safely and efficiently or the company will lose money. Here are some starting considerations: Shipping costs – Shipping costs money. A business needs to know this fee and build it into the cost of the product, or charge for shipping separately.
Why is shipping so much money? ›
The main reason for such high prices is supply chain disruptions. As merchandise inventory was rapidly depleted throughout 2020 and early 2021, demand climbed higher as supply dropped to historic lows.
What is the power of free shipping? ›
Free shipping has a significant impact on sales and customer satisfaction. According to research, 78% of consumers are willing to buy more to qualify for free shipping. This means that by offering free shipping, businesses can increase their average order value and drive more sales.
How do businesses make money with free shipping? ›
How to offer free shipping and still make money: best strategies
- Add the shipping cost to the product price. ...
- Set a minimum order value. ...
- Free shipping as a loyalty reward. ...
- Free shipping, yes, but only for some products. ...
- Reduce shipping rates as much as possible. ...
- Integrate free shipping into your marketing campaigns.
shipping by sea can be slower than other transport modes and bad weather can add further delays. routes and timetables are usually inflexible. tracking your goods' progress is difficult. you have to pay port duties and taxes.
Ebay strongly encourages Sellers to offer free shipping. I understand why. Free shipping is important to buyers and generally results in increased sales.
Is shipping easy worth it? ›
Many users highly recommend ShippingEasy as an all-in-one solution for shipping needs. With its comprehensive features and integrations, it simplifies the shipping process and eliminates the need for multiple tools or platforms.
Should I have free shipping on Shopify? ›
As a Shopify seller, you're in business to make a profit. But that doesn't mean you should nickel and dime your shoppers, either. Shoppers hate paying for shipping, so if you have a Shopify store, it's not a bad idea to give shoppers what they want.
