Should You Offer Free Shipping?Before deciding, do the math, and weigh the alternatives.
According to a Pitney Bowes Inc. study, 80 percent of Americans say shipping is an important factor in their online shopping experience, and half have abandoned a purchase because of shipping costs.
Changing your shipping options or prices could increase your sales and decrease shopping cart abandonment. Free shipping has been shown to boost overall conversions. When it was added to e-commerce site NuFACE, the number of orders shot up 90 percent, and the website 2 Big Feet reported a 50 percent increase in orders.
But not every e-commerce business can afford to offer free shipping all the time, and depending on what you sell, that may be okay.
“If you don’t offer free shipping, it’s not a deal breaker,” said Craig Smith, founder and CEO of Trinity Insight, an optimization agency for e-commerce brands. “But in mass merchandise retail, electronics and apparel, you’ll lose out more often than not.”
It’s a good idea to offer free shipping no matter how big your company is. However, if you’re in an industry where customers can find the same product at a dozen different stores, they’re going to go with the business that either provides free shipping or a lower price even with shipping.
“Your competition is offering free shipping, so you have to,” said Smith. “Or, you can use intelligent pricing tools and sell something at a lower price. Maybe a blender is $10 less on your website than your competitors’. That’s another tactic to get orders, because [low prices] are what consumers want.”
Do the math on free shipping
Before deciding to offer free shipping, do the math to see how it will affect profits. “You need to ask yourself, ‘If we offer free shipping and conversion rates go up, how much did we spend on that free shipping and was it worth it?’” said Smith. “See how you can do it without losing money.”
Instead of jumping into a free shipping policy for your whole site, run a test during a special time of year or a holiday. See if incremental sales exceeded expenses, Smith advised.
How to provide free shipping during certain times
If offering free shipping all the time is too expensive, consider offering it at certain times.
“Weekend sales work well with free shipping,” said Smith. “You can think of different twists, like calling it a Manic Monday sale, or surprising your email list with a promotion. Do it periodically.”
Some businesses will offer free shipping only when customers reach a certain purchase point, say, $50. But Smith pointed out that $50 or even $75 but not be high enough for you to make your money back. “You have to test different thresholds,” he said. “There’s a lot of measuring that goes into it.”
The need for speed
As a general rule, when you’re supplying free shipping, you shouldn’t make the customers wait a long time for their products to arrive. Smith said orders should be delivered within the two to four day range. “That’s still acceptable for the majority of retailers in the market.”
Thinking long term
Think of free shipping as an investment in your customer relationships.
“The lifetime value of a customer has to be considered,” said Smith. “Businesses may lose money on the front end, but they offer free shipping because they are convinced the person will come back to purchase more goods.