Should I Offer Free Shipping?

In this era of ecommerce, customers want exactly what they want, they want it now, and they want it shipped for free. But depending on your product, offering free shipping to your customers may or may not make sense. Here’s some information to help you decide whether free shipping is for you:

There Ain’t No Such Thing as Free Shipping

Free shipping is a marketing tactic used by online vendors and mail-order companies to attract customers. After all, if two vendors offer the exact same item at the exact same price and one of them ships for free, the customer’s decision of where to guy it will be clear.

“Free shipping” is a bit of a misnomer, however. Somebody must pay for the item to be shipped. If it’s advertised to the customer as free, that means you, the vendor, must pay.

Benefits of offering free shipping

Free shipping can give your business a leg up for several reasons. For one, your customers are more likely to close the deal. According to the Baymard Institute, nearly 70 percent of online customers abandon their online shopping carts before they proceed to checkout. And 55 percent of the abandoners report doing so because of extra costs, including shipping.

So, depending on the cost of shipping your items, the number of additional sales free shipping yields may quickly make up for it.

A survey done by Alixpartners also looked into the top reasons customers decide not to make a purchase online. They found that 36 percent of respondents said because shipping costs are too high. (Other reasons cited included a desire to see the item in person before purchasing it, concerns about freshness, and a lower price on the item in a physical store). By offering free shipping, you could potentially win back more than one-third of those who originally decided not to buy.

Secondly, customers often spend more when the items are shipped for free. One study found with free shipping, the average shopper put 3.7 items in his or her cart for a total purchase of $142.93. Without free shipping, the average cart contained 3.4 items and totaled $118.29.

Clearly, free shipping has an impact on online retail sales. However, whether free shipping is right for your particular business is something only you as an owner can decide.

Is Free Shipping for You?

Free shipping comes with additional costs to you, the vendor, so you should do your homework before making the decision of whether to offer it. One factor to consider is the speed at which you can ship your items. The Alixpartners survey also asked customers how long they were willing to wait for their items in order to get free shipping on their orders. Fifty percent of people said they would wait up to one week for free shipping; 24 percent said five days; and the remaining 25 percent wanted their items within four days or less. Think about it: can you ship to your customers within a week or less?

Other factors to think about include the following:

Your competition. Do you have a lot of competitors? And do they offer free shipping? If they do, more of a reason for you to offer it, too. Also consider whether you are competing for price. If so, lowering the price of your product may be more important for increasing sales than offering free shipping.

The size of your items. Shipping costs are different for jewelry than for paddleboards. They are different for printer cartridges than for custom-made furniture. Think about the size of your goods and how much they will cost you to ship if you decide to take care of the shipping costs for your customers.

Where you are shipping your products to. Are most of your customers domestic or international? If they’re domestic, are they within the same basic region? The shorter the distance you will ship your goods, the lower the cost.

To discover whether offering free shipping is the best option for your business, you can try a few things. First, you can experiment and test to see whether free shipping will pay off for you. Offer it to customers for a few weeks or months and see how the numbers shake out in terms of your blended gross profit margin.

If you do the math and free shipping doesn’t quite make sense for you, depending on your industry, you may be able to meet your customers in the middle. Options include:

• Free shipping on certain items
• Free shipping with minimum purchase
• Free shipping to certain regions
• Free shipping for your best customers (ie Amazon Prime)

Before you decide to offer free shipping, you need to understand the impact on your bottom line. You may make more sales but end up losing too much money on each one. Or, free shipping may bump up your sales so much that you can easily absorb the additional shipping costs. Consider all factors to make the best possible decision for your online business.