Should Your E-commerce Business Offer Free Shipping As Standard?
Whether you sell on your own e-commerce platform or on another such as Amazon, eBay, Etsy etc. one of the things you need to consider is whether you offer free shipping to your customers and under what circumstances. Free shipping can be a great incentive for customers to proceed with a purchase and even return as a customer but depending on your business goals it can be used in different ways. In this post, Ogden discusses the arguments for and against offering free shipping as standard.
Reasons you might offer free shipping
Getting a Competitive Edge
Firstly, an offer of free delivery provides a competitive edge, especially if none of your competitors in your niche offer the same. Just make sure that your prices are sustainable and that you still make the profits you want. Time to pull out your trusty calculator!
If you can’t beat them, join them!
Unfortunately, you won’t be the first business to think of free shipping. There’s a likelihood of some competitors already offering this great customer incentive. If this is the case, it might place your e-commerce business at a disadvantage if you don’t offer it. Time to give your competition a run for their money!
It gives customers a feeling of saving money
We can all recall a time where we’ve heavily researched a product to find the best price online and begrudgingly accepted the amount of hard-earned cash we’ll be departing with. Then when we get to the online checkout we find that the figure has now gone up—not pleasant!
An additional fee added on for shipping can sometimes be an unwanted surprise and very off-putting. By offering free shipping, you don’t have to worry about having surprised customers increasing your cart abandonment rates.
At the checkout stage you can show your customer how much money has been saved by your free shipping policy. This makes the customer feel like they’ve saved a few pounds rather than feeling like they have to pay extra and can do wonders for customer loyalty.
Reasons you might not
You’ll have to raise prices or lose profit
Free shipping is an illusion. For most products that have free shipping, the shipping costs are part of the price. This means that if you don’t currently offer it and want to start, you’ll have to factor the cost of shipping into your base price which means a price hike or a profit loss. Profit loss is bad for you and a sudden price raise might not bode well with customers. It also means that calculating your profit margins will be a little more difficult.
You like a trick up your sleeve
Shipping for free can be a great promotional tool to increase sales at key points throughout the year. You can also use it as a reward or motivation to drive action. For example, offering free shipping codes for signing up to your newsletters or as a first purchase ‘thank you’ to retain customers. If you always offer free shipping, you no longer have this trick up your sleeve to deploy. That means you’ll have to think of something else!
Costs might be too high
Sometimes, an e-commerce business sells a variety of different sized items and it can be difficult to provide customers with a single universal shipping fee. For example, an online appliances store will have wildly different shipping costs for a kettle compared to a dishwasher!
In addition, if your business sells internationally, costs will vary depending on your location in the world and which country you’re shipping to. This is evidently going to make things more complicated and thereby more difficult to offer free delivery to every customer in the world, regardless of the product sold.
You offer free returns
If you want to offer something for free but cannot afford to ship every item for free, offering free returns is a nice service you can provide instead. This is because:
1. Returns shouldn’t happen anywhere near as often as shipping.
2. No one likes having to pay for something that didn’t meet their expectations.
Trying to increase average order value
If you’re trying to increase the average value of your customer orders, a good way to do this is to offer free shipping above a certain threshold. This threshold would be the average order value you’re hoping for. If you offer free shipping on orders above £50 and your customer’s basket is currently at £40, they’re likely to buy another item for £10 rather than spend £5 on shipping costs.
Testing testing 1, 2, 3…
If you’re still wondering about the effects of free shipping on your business, why not try it out temporarily to start with? Use it as a temporary promotional tool to see if it improves sales and the customer experience and then go from there. Just ensure you have a system in place to accurately measure how it affects your business so you can come to a final decision based on the figures.