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Discovering how to offer free shipping without losing money is one of the greatest challenges in the eCommerce industry. Free shipping instills in the customer a powerful feeling that they’re saving money and diminishes possible doubts about purchasing a product.
If you haven’t figured out a way to offer free shipping on your online shop without losing money, these 6 infallible strategies will help you balance out the costs so that businesses like yours can offer free shipping without any fear.
Take a look at the reasons why free shipping strategies are a bold move that report benefits, premilinary considerations to take into account and our 6 tips to offer free shipping without losing money.
Why offering free shipping is a bold but correct move for eCommerce
Some of the advantages of offering free shipping for eCommerce are:
- Less friction in checkout and lower cart-abandonment rates.
- Competitive advantage: you most likely have competitors offering free shipping already.
- It can be used to increase average order value (AOV) thanks to strategies such as imposing a minimum order to qualify for free shipping.
- It can be used as a branding feature of your online strategy. Offering free shipping permanently can build customer loyalty and retention.
The following infographic is from a study carried out by Primary Parcel on the importance of free shipping for eCommerce:
In order to offer free shipping without losing money, it's important to implement some control mechanisms.
Make sure free shipping is profitable
The last thing you want is to offer free shipping to your customers but go bankrupt in the process.
To avoid this, you can try out different eCommerce shipping strategies and evaluate which ones bring the most value to your customers while also being sustainable for your business in the long run.
In order to evaluate your options, you’ll need to keep track of your margins, profits and losses, and then adjust the strategy accordingly. If you feel like you could use some help in this department, check out our article on how to calculate shipping costs.
Free shipping can increase the costs related to customer support and packaging. Don’t forget to calculate and include them as part of your expenses to be as accurate as possible.
Choose a consistent strategy
While it’s not unusual to experiment with different eCommerce shipping strategies, constantly changing your shipping policy will confuse your customers.
For this reason, if you don’t plan on offering free shipping long-term, don’t let your customers get too used to having this option. Their reaction should you start charging for shipping that was previously free can do more harm than good.
It’s also possible that customers will detect a pattern in the dates or periods when you offer free shipping. This could affect your sales previsions and stock management, since customers might choose to wait for certain dates or periods to do their shopping.
Free shipping can discredit your shop
Not all products or businesses seem to benefit from free shipping. In fact, in some sectors, like luxury items or furniture, free shipping can be detrimental to your business for various reasons: the online shop may need to absorb very high delivery costs or it may not be seen as sufficiently exclusive, something you definitely want to convey for high-end products. This is why knowing what your customers expect and the cost you can bear it's fundamental before you offer free shipping.
How to offer free shipping without losing money
1. Add the cost of shipping to the price of the product
One way to offer free shipping without too much difficulty is to include the shipping costs in the price of the product. This way, the customer indirectly pays the shipping costs without realizing it.
Remember that, for the consumer, the psychological impact of free shipping is much greater than a price difference of a few euros in the value of the product.
The best approach to implementing this type of strategy is to compare the new prices with the prices offered by your competitors, to ensure that the difference isn’t too significant.
2. Establish a minimum value per order to qualify for free shipping
One of the most common strategies for offering free shipping without losing money is to establish a minimum order value for free shipping to apply.
This practice has two advantages. On the one hand, you’ll make sure that you only pay for those shipments that are profitable for your business, since the threshold will ensure that the balance is positive for every shipment.
On the other hand, customers will feel tempted to add more products to the cart in order to reach the minimum value required for free shipping.
This is a great opportunity to implement cross selling and upselling strategies. Does the buyer have pens in the basket with a total price of €7, but the minimal value to opt for free shipping is €10? Show notebooks with a cost of €5 to reach the threshold and cross-sell.
The key to establishing a higher minimum value per order is to set a value that is only slightly higher than what they were already planning to spend. Otherwise, you might scare customers away. The threshold for minimum price order is thoroughly discussed in this article from Digital Hit Men.
3. Use free shipping as a tool to gain customer loyalty
For example, you can offer free shipping as a reward for repeat customers. In this way, you will only be supporting the shipping costs for loyal customers — those that you should pay special attention to, because of their high repurchase rate.
At the same time, you can offer free shipping during special periods like Valentine’s Day or Christmas. Doing so means that, next year, they’ll remember your free shipping deal and will be more likely to purchase from you again, increasing customer loyalty and retention.
4. Free shipping, yes, but only for some products
Free shipping can be the perfect highlight for some items in your catalog.
You can promote products with a higher profit margin, to maximize the potential benefits, or use this technique to sell out-of-season items before they become obsolete.
The possibilities of this option are endless, but the philosophy should stay the same: Use free shipping to promote those products that can bring the most benefit to your business.
5. Shipping can be the new ‘acquisition cost’
Many companies are starting to see the cost of shipping as the new ‘acquisition cost’ of marketing campaigns. Instead of paying for the clicks you get from a PPC campaign, you pay for a customer. Not for a potential customer. The great advantage of this strategy is that you pay once you have already made a profit out of that customer.
However, if you want to approach free shipping as the new acquisition cost, you’ll still need to put this information out there. How are your customers going to enjoy free shipping if they don’t even know you offer it? Send newsletters, optimize your SEM campaigns, improve the SEO of your website product pages, etc.
Enable this strategy only for first-time buyers to ensure maximum customer acquisition.
6. Reduce shipping rates
If you are willing to bear the shipping costs, partially or completely, then optimizing your logistic system is more than advisable.
Normally, the logistic costs depend on couriers’ rates, so maybe it’s also time to renegotiate your contract and shipping rates and to implement our secrets to reduce shipping costs.
Something that can help you during the negotiation process is to create a forecast or plan that reflects the rise in the number of sales that result from a free shipping strategy. Make sure the courier knows that this rate reduction will accompany more sales, and, therefore, more shipments.
If for whatever reason you can’t optimize your current shipping conditions, you can always work with other couriers or use those provided by a shipping tool like Outvio.
All Outvio users can enjoy affordable shipping rates from domestic and international couriers. No negotiation is needed. Simply register, connect your online shop and start shipping.
Everything doesn’t have to be free, but it’s worth a try
Free shipping works; there's no doubt about it. But it isn’t the only factor that influences a consumer’s decision.
If to offer free shipping, you'll need to neglect other areas of your business, you may want to wait until your eCommerce business has the financial resources to successfully implement one or more of these strategies.