Free Shipping Helps Your Business, So Offer It!
Free Shipping Works
“Delivery” is highly significant part to any business & when making eCcommerce sales there are many studies that indicate that handling fees are one of the main reasons why shoppers abandon their shopping cart.
ComScore released results in December 2011 of a holiday survey, which reported that “36% of online shoppers would not make a purchase online unless they are offered free shipping”. “42% said that shipping was of great importance” and that they sought out free/good shipping deals.
Online retailers have always been aware of the concerns of which customers have concerning shipping costs. According to the same ComScore study over half of all online transactions in 2010 included free shipping over the holiday period. Discounts on shipping are not just being met during holiday seasons but are being offered by retailers all year round.
If considering offering free shipping, be aware it doesn’t always work for all eTailers. If inclusive free shipping isn’t an option for your company there are always other options it is important to find the correct one to suit your business.
Benefits of free shipping
As a retailer, free shipping can automatically increase online sales. Offering free shipping can also increase the size of the order especially if retailers set a minimum order value.
According to the survey done by ComScore it can increase the company’s profitability. “46% of online sellers say that offering a free shipping service did increase their sales” and nearly one third said it didn’t make a difference. If you consider offering free shipping it must be remembered that profit increase yet instant come at a cost.
There are a few long term gains when offering free shipping these are that you will often receive new customers as the free shipping is a great way to influence them to buy form your site. Often customers will recommend your site for the free shipping deals to people they know leading to new business and sales.
Whilst free shipping is a great way to gain new customers and keep old ones it isn’t a way to compete in the business market. Many retailers are now offering free shipping, this makes it unlikely to see a dramatic rise in sales however will level the playing field with other competitors and allow you to keep your existing sale levels.
The cost of free Shipping
Obviously when offering free parcel delivery to the USA the merchants lose operating margin due to the absorption of shipping expenses. Over the last decade there has been an increase in the price of shipping. Retailers can still offer different ways in which to send parcels allowing them not to make such a loss when paying out for delivery. Retailers can offer an economy service that will significantly reduce the delivery costs however could mean slower delivery times and in some cases a loss of order tracking.
When offering free shipping there are also other costs involved that need to be taken into consideration such as extra programming and marketing.
It does depends on what type of shipping you decide to offer but any change may require substantial amount of programming in order to make the system functional. If you decide to add free shipping as a way to increase sales this will work however the cost involved in generating awareness of your offer must be considered.
You may also have to consider the loss in which you may make when offering free shipping to customers who would have ordered from you anyway and paid the shipping cost.
How to evaluate your shipping
The approach of free shipping is a very attractive offer to customers but isn’t always an option for e-retailers. Retailers that generally ship small to medium sized goods wont always have the negotiation power that bigger company’s who sale vast and big items will have with negotiating delivery deals.
Retailers don’t need to offer free shipping on all of their products to make more sales or become more competitive. Below are a few key points to consider:
• Margins can play a huge role in which shipping option you decide to offer your customers, many items in which you sale will offer varied margins allowing you to offer different shipping deals.
• If choosing free shipping restrictions are important to consider as the larger/bigger items will cost more to ship.
• To cover the cost of free shipping retailers normally offer free shipping on certain orders on or above a certain value.
• Retailers must make it clear when offering free shipping if there are any restrictions. Certain areas may cost more to deliver to this must be taken into consideration.
A few ways you can offer free shipping
(I) Free shipping on everything – For retailers who ship smaller and lighter weighted products it is generally easier for them to offer free shipping on all of their goods.
(II) Free shipping with minimum thresholds – This is more of a common choice for retailers this allows them to put free shipping only on certain order values hopefully creating more sales and creating less risk.
(III) Free shipping on certain items-many retailers that’s decide to offer free shipping will only do so on certain items. The items in which the retailers choose to ship for free are generally the ones that have the largest margins.
(IV) Free shipping at certain times of the year – Free shipping periodically is very popular with retailers as this is when more sales are made and the market becomes more competitive.
(V) Free shipping to certain locations – Retailers will often offer free shipping to a wide range of areas. There may be some restrictions depending on the location and viability of delivering a parcel to it.
(VI) Member Programs – Many bigger companies re offering an exchange of an annual fee to low the customer to receive free shipping all year round.
(VII) Loyalty programs – To try and increase the lifetime value of customers retailers often offer exciting customers special deals it terms of shipping.
(VIII) Add free shipping into product price – Some retailers choose to include the delivery costs in the product price whilst still advertising free shipping.
(IX) Free shipping on returns- This is an appealing choice for buyers.
(X) Flat-rate shipping – This is not free shipping but offers customers a one of rate on all orders this in tern will encourage customers to place bigger orders. The downside to this option is that it may put off customers who only want to order small amounts
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