With internet business booming, many stores are offering free shipping to get a leg up on the competition. While this may work for some stores, others may suffer greatly if they cover the full cost of shipping on their own. With so much pressure to offer free shipping, how can small businesses make the best decision for their company?
If you can offer free shipping, is it a smart choice for your business? There is no denying that offering free shipping from your web store can significantly impact your e-commerce. A couple of years ago, Lab42 released data stating that 96% of consumers are more likely to shop on a site if it offers free shipping. Not only this, but ComScore released data stating that 58% of shoppers will add items to their shopping cart to qualify for free shipping.
For a consumer, the benefit of free shipping is obvious. As a business owner, it may not be. Here are some of the benefits to offering free shipping through your site:
- Short-Term Sales Boost. The results of offering free shipping are usually immediate, boosting sales and revenue. For those with minimum thresholds, it can also lead to larger orders.
- Increased Profitability. There is a chance that free shipping can lead to an increase in profits long-term. However, this doesn’t happen for everyone, so it should be watched.
- Long-Term Customer Gain. Many customers will only shop from stores that offer free shipping. By offering it, you gain these customers who may become repeat buyers.
- Competition. Offering free shipping helps your store to remain competitive with what similar businesses to yours are offering. While it doesn’t necessarily put you ahead of your competitors, it does level the playing field.
The downfalls of free shipping obviously start with the loss of profit margin that is used to absorb the shipping costs. Some additional downfalls include:
- Slower Delivery. Your business can choose economy shipping instead of regular shipping, but the cost of shipping has still been increasing in the past few years. Economy shipping, however, takes much longer to get the product to your customer.
- Programming and Marketing Expense. Some programming may be required by your IT team to offer the free shipping on your site, depending on how complex your system is. Marketing free shipping can increase sales, but care should be taken in order to take design and advertising expenses into consideration.
- Is the Incentive Needed? You may find that the customer that buy from you after offering free shipping would have bought from you in the first place. It is hard to know if the incentive is what makes the sale, it may just be an unnecessary cost to your business.
When looking at whether you should offer free shipping, Web Marketing Today offers some insight on how to decide if it’s right for you. Consider your profit margins and how they will be effected if you offer free shipping from your site. Additionally, consider the type, size, and weight of the products you would be shipping, and to where. If you do a lot of international shipping, it’s going to be less cost-effective to offer free shipping, which is why many retailers only offer it within the US. Finally, consider your order size. If the typical order is $35, consider a threshold of $50 to qualify for free shipping. If the typical order is higher, take that into consideration when deciding on your threshold.
If you have decided that offering free shipping on your web store is something you want to try out, here are some ideas for ways to test it.
- Free Shipping on Everything…with stipulations- economy shipping only, within the continental US, for example.
- Free Shipping with Minimum Thresholds.
- Free Shipping on Certain Items.
- Free Shipping Periodically. Not all the time.
- With a Fee-Based Membership Program. One year free shipping with membership.
- Loyalty Programs. Offer free shipping to repeat customers.
- Free Return Shipping.
- Flat Rate Shipping. This can encourage larger orders.
Above all else, research your competition and look at what they are offering and what is bringing them customers. Free shipping can significantly level the playing field if the majority of your compatitors are already offering it. To learn more about how to handle the fulfillment of your orders in the most cost-effective manner, contact us.