They say nothing is free in life – even “free shipping.” That’s no surprise to ecommerce entrepreneurs competing against business giants, like Amazon, that offer free shipping on almost everything. Customers often expect free shipping. For online retailers, knowing how to offer free shipping – without going broke – is crucial to ensuring long-term success. “Striking a balance between profitability and your customers expectations for shipping fees cannot be taken lightly. Too often businesses lose out on valuable customers simply because shipping fees are beyond what they’re willing to pay." Rick Nelson, Founder and CEO, The Fulfillment Lab Recent statistics support Rick’s sentiments. But, how can companies offer free shipping? It’s no secret that offering free shipping is easier said than done. Of course, retailers like Amazon and Walmart can afford to take the hit on free shipping, but it’s a different story for startups and small ecommerce businesses. However, free shipping is not impossible for small- and mid-size businesses to offer, and the benefits of free shipping outweigh the costs. Here are some ways to offer free shipping and how to calculate your free shipping threshold. In short, the answer is yes. With free shipping, retailers are better able to convert shoppers into customers, improve customer relationships, outshine the competition, and generate higher sales numbers. While there are risks associated with free shipping, when a free shipping offer is done correctly, there are a number of benefits. Examples of these include: As mentioned earlier, free shipping is never “free” and someone, be it the retailer or customer, has to pay for shipping. A big mistake many online retailers make is not knowing if they can afford to offer free shipping or not having a free shipping strategy. Without careful planning, offering this type of incentive can cut too deep into profit margins and harm the business. So, the first thing you can do is know what you can afford to offer in free shipping and how to calculate your free shipping threshold. Once you have a better understanding of the numbers you’re working with, you can establish a free shipping strategy that both your bottom line and customers will be happy with. Let The Fulfillment Lab show you how. Access Better Pricing Let’s explore how to determine what an online seller can offer in terms of free shipping. This threshold is crucial so you don’t create a free shipping program that doesn’t protect your business. Afterall, setting an arbitrary threshold could be useless to customers, or could eat up your margins. For example, if your average order value is $50 and you set your free shipping minimum at $500, no one is going to bite. By the same token, if your average order value is $50 and you set your minimum at $40, most customers will qualify – and you’ll be taking a huge hit. The key is to find the right balance that both you and your customers can live with. Here’s how to calculate your free shipping threshold. Now, it’s time to put thatProposed Minimum Cart Valueto the test. As you can see, you’re going to wind up paying $6 for shipping on qualifying orders, which is too much of a hit for your bottom line. So, let’s try adjusting theProposed Minimum Cart Value. This time, use $55 as the minimum. By upping your threshold by $10, you still provide value for customers while dropping your shipping cost to just $2.00 per order. That’s much more do-able, right? You may have to play around with the numbers a bit to find your sweet spot, but it’ll be worth it to your bottom line! Other ecommerce articles we think you’ll enjoy: If you offer free shipping, it’s going to come out of your bottom line, and most startups and small eCommerce retailers are already working on small profit margins. How can you offer free shipping without losing money—or at least without losing much money? Here are four ways you can offer free shipping. This may seem counterproductive, but remember, customers like the simple pricing structure of a free shipping model. They may not notice that the product costs more. Instead, they’ll be attracted to the free shipping angle. TheWharton School of Businesseven shows that free shipping that saves a customer $6.99 is more appealing than a discount that cuts the purchase price by $10. Again, it comes to simplicity and not asking your customers to do calculations themselves. Many online shoppers will add additional items to their shopping cart to receive free shipping. You wind up selling more and, by shipping the items together, can save on the cost of individual shipments. Wharton also reveals that the average consumer will increase their spend on an order up to 30% just to get free shipping. If providing free shipping on a regular basis is not sustainable, don’t worry. There are other ways to incorporate this customer-preferred feature. Consider offering free shipping exclusively to first-time buyers as a welcome gift that also encourages them to buy. Experiment with this strategy by generating a single-use promo code for new accounts that are making a purchase. Attracting new customers is significantly harder than persuading current customers to return, even if it means they must cover shipping costs. Therefore, this approach could be an effective method to boost new customer sales. You might also consider offering free shipping for a brief period to spark a surge in sales. Why not run a special promotion for one weekend each month, or align it with major celebrations like Christmas, Mother's Day, or Father's Day? This approach leverages the power of urgency, a proven sales booster that can skyrocket salesby as much as 332%. Set up a short-lived promo code and spread the word across your website and social media platforms. Introducing free shipping for just a few days can be the nudge your customers need to go from thinking about a purchase to making it, potentially driving up your sales and boosting your revenue in the process. Depending on the types of products you sell, it may be easier to offer free shipping on some items and not others. For example, if you ship heavy items, such as organic laundry soap in glass bottles, free shipping may not be feasible for that product. However, if you have other items that cost less to ship, you may want to consider offering free shipping only on those items. One other way to make free shipping more comfortable for your business is to partner with The Fulfillment Lab. Using one or more of our national and global fulfillment centers, especially as your ecommerce business begins growing, offers significant savings to offset the cost of shipping. For example, we ship your product from the location closest to your customer (the fewer zones it crosses, the less money it costs). Because we do bulk business with all major carriers, we’re also able to negotiate better shipping rates in general. Of course, that’s not all we do. Check out our blog,10 Reasons to Use a Fulfillment Center for Your Ecommerce Shipping, and thencontact usto learn more about what we can do for you!First, Is Free Shipping Worth It?
Before You Begin Free Shipping - Know Your Free Shipping Threshold!
Lower Shipping Costs and Ensure 99.95% Order Accuracy
How to Calculate Your Free Shipping Threshold
How to Offer Free Shipping: 5 Strategies to Consider1. Increase the price of your product.
2. Offer free shipping on orders over a certain dollar amount.
3. Offer free shipping for first-time customers.
4. Offer a limited-time free shipping offer.
5. Offer free shipping on select items.
Streamline Shipping Costs (So You Can Offer Free Shipping!) with The Fulfillment Lab
FAQs
How to Offer Free Shipping – Without Losing Money? ›
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.
How to not lose money on free shipping? ›- 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.
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.
How can I give my customers free shipping? ›For example, if a customer's order is $65, then offer free shipping for all orders over $75. From the shopping cart, let customers know how much more they need to spend to qualify for free shipping. Use economical shipping methods. It's important to let your customers know what kind of free shipping to expect.
How do companies make money on free shipping? ›By providing numerous shipping options, an online retailer can capitalize on the booming ecommerce experience to generate revenue streams through increased sales. Free shipping entices customers to purchase by wrapping all costs into the price of each item.
Is free shipping a good strategy? ›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.
- Free shipping threshold = (Average shipping cost per order / gross profit margin percentage as a decimal) + average value of an order.
- Free shipping threshold = ($10 / .30) + $50.
- Free shipping threshold = $83.33.
Free Shipping and Customer Loyalty
Multiple studies suggest that consumers tend to be more loyal to businesses that offer free shipping over those that don't. According to a survey by Deloitte, 60% of customers say that they are willing to increase their purchases from a retailer that offers free shipping.
- The simplest way to make free shipping work for your shop is to include the cost of shipping in the item price. ...
- By including shipping costs in your item prices, buyers know what they need to pay for your items up-front, and you don't lose money on orders with free shipping. ...
- Learn more about offering free shipping.
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.
How do you charge customers for shipping? ›
Ecommerce businesses usually charge standard shipping fees in one of two ways: at cost or as a flat rate. Keep pricing as low as possible to avoid negatively surprising customers. Charging a flat rate is best if all of your products fit into flat rate boxes that ship for the same price.
How do you say free shipping? ›- Did Someone Say FREE Delivery? – ...
- Holy ship! ...
- Just for you: FREE Shipping on your order! – ...
- everything ships FREE – Jayson Home.
- Psst… your order ships FREE! – ...
- This weekend, gifts ship free! – ...
- Get FREE delivery on all orders! – ...
- LIMITED TIME: 50% Off + Complimentary Shipping – Mugler.
The practice of shipping products for free has become standard in e-commerce. The Digital Commerce 360 Top 1000 Database shows that 74.4% of retailers offer some sort of free shipping: 20.4% unconditional for all orders, 45.1% with a value threshold, and 14.5% requiring membership in a loyalty program.
How can sellers offer free shipping? ›- 1) Unlock free shipping at a minimum spend. ...
- 2) Boost average order value with upsells. ...
- 3) Provide free shipping for product bundles. ...
- 4) Build the cost of shipping into your product margins. ...
- 5) Create a loyalty program. ...
- 6) Give away free shipping as a referral perk.
Does the Customer Pay? Let's say an item's retail price is $20, and it costs $5 to ship. If the retailer charges $25 and announces, “free shipping”, then the customer is paying. This approach is still common among many third-party sellers on sites like Amazon and eBay.
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 I offer free shipping on eBay without losing money? ›- Adjust Your Product Prices. Here's the most obvious and well-known method to ship free at a profit. ...
- Set Minimum Purchase Amounts for Free Shipping. ...
- Only Ship Big-Ticket Items for Free. ...
- Offer Smaller Products as “Add-On Only” Items. ...
- Save Money Elsewhere.
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.