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1
Why offer free shipping?
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2
What are the challenges of free shipping?
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3
How to calculate your free shipping threshold?
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4
How to display your free shipping offer?
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5
How to optimize your order processing system for free shipping?
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6
How to measure the impact of free shipping?
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Order processing is the sequence of steps that a business follows to fulfill a customer's order. It involves receiving, verifying, packing, shipping, and delivering the order. How to optimize pricing and discounts in order processing is a crucial question for any online seller who wants to increase sales, loyalty, and profitability. In this article, we will explore one of the most common and effective strategies: offering free shipping. We will also discuss the benefits and challenges of this approach, and how to implement it in your order processing system.
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1 Why offer free shipping?
Free shipping is a powerful incentive for online shoppers, who often abandon their carts due to high or unexpected shipping costs. According to a survey by Statista, 72% of U.S. consumers said that free shipping was the most important option when checking out online. Offering free shipping can help you attract more customers, increase your average order value, reduce cart abandonment, and improve customer satisfaction. It can also give you a competitive edge over other sellers who charge for shipping.
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2 What are the challenges of free shipping?
Offering free shipping is not without its challenges, however. The main challenge is that it can eat into your profit margin, especially if you sell low-priced or bulky items. You also need to consider the shipping costs and delivery times of different carriers, regions, and countries. Additionally, you need to manage customer expectations and communicate clearly about your free shipping policy, such as the minimum order amount, the eligible products, and the delivery time frame.
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3 How to calculate your free shipping threshold?
One way to offer free shipping without hurting your bottom line is to set a minimum order amount that qualifies for free shipping. This way, you can encourage customers to buy more and cover some of the shipping costs with the extra revenue. To calculate your free shipping threshold, you need to know your average order value (AOV) and your average shipping cost (ASC). A simple formula is to multiply your AOV by 1.5 and add your ASC. For example, if your AOV is $50 and your ASC is $10, your free shipping threshold could be $85.
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4 How to display your free shipping offer?
Once you have decided on your free shipping threshold, you need to make sure that your customers are aware of it and motivated to take advantage of it. You can display your free shipping offer on various places on your website, such as the homepage, the product pages, the cart page, and the checkout page. You can also use banners, pop-ups, or countdown timers to create a sense of urgency and scarcity. Moreover, you can use email marketing, social media, or ads to promote your free shipping offer and drive more traffic to your website.
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5 How to optimize your order processing system for free shipping?
Offering free shipping can also affect your order processing system, which needs to be efficient and reliable to handle the increased volume and complexity of orders. You need to have a clear and consistent workflow for receiving, verifying, packing, and shipping orders. You also need to have a robust inventory management system that tracks your stock levels and avoids overselling or underselling. Furthermore, you need to have a reliable shipping partner that offers competitive rates, fast delivery, and tracking services.
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6 How to measure the impact of free shipping?
Finally, you need to measure the impact of offering free shipping on your order processing performance and your business outcomes. You can use various metrics and tools to monitor and analyze your data, such as your conversion rate, your cart abandonment rate, your average order value, your customer retention rate, your profit margin, and your customer feedback. You can also conduct A/B tests or surveys to compare different free shipping scenarios and optimize your strategy accordingly.
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