Free Shipping- The impact on Ecommerce

Free shipping is becoming a must strategy for those who want to thrive on online shopping. Many customers now expect to have those fees waived so they can purchase something from a particular website. In fact survey suggests that a merchant increase sales chance by 65% when customers do not have to pay for shipping charges.

But as most us are aware, “there is no free lunch”.

As retailers know, it is expensive to ship a parcel from One Point to the other. And for many different reasons, shipping carrier rates are increasing over time. What this means is: Someone must pay for those shipping costs.

It’s well documented that if we provide a free service, this influences heavily on consumer behavior because clients have a perception that they are getting an amazing deal. There are many examples about this: Free Checked Bags when flying, Free coffee refills in Restaurants, Free samples in grocery stores…

So nowadays we see many merchants selling their goods with shipping fees included at the transaction. 90% of online shoppers view free shipping as a major incentive to opt-in purchasing online, while 86% of abandoned carts happen because of shipping costs related to the order.

But remember, there is no free lunch…so the truth is: these savings are typically hidden somewhere else.
In order to apply the free shipping strategy, a business has to find the right balance of driving more conversions and keeping operations profitable.

Playing the free shipping game means finding the right balance of driving more conversions and not breaking the bank. So, what options do small to mid-sized online retailers have?

Those are the few options we often suggest our partners:

a) Insert the shipping cost into your price

This is Free Shipping 101. Raise your price to accommodate the shipping cost so you can provide the shipping for free.

The key is to find the perfect balance of rising the prices of your products to the point that you can provide Free Shipping and not lose sales due to cost of the product.

b) MOQ- Minimum Order Requirement

You can make the client spend a certain minimum amount of dollars to activate free Shipping. This works wonders because shipping more products in one box will save you tons of logistics costs that you can pass it on to the customer as free shipping.

Remember that the idea is to make the customer know he is getting a great deal, so making him put one extra thing or two in the cart works really well. By the way, 93% of customers will take action to qualify for free shipping!

c) Keep an eye on your margins

There is no point on getting into a transaction if you lose money after it is done right? So even though you want to increase the amount of sales by offering free shipping, you should only do it if you can actually afford it.

Normally there is a small unwritten rule on ecommerce shipping: Things that are cheap, are hard to be shipped for free. Imagine a key that you sell for $8 and the shipping cost is $8. When the transaction is done, you won’t make any money.

Your margins are different for each of your products, but make sure they do have a comfortable sales price that can offset the product cost itself so you can keep some of the margin.

Conclusion

To be a successful ecommerce store you should try to go with the Free Shipping Strategy ASAP. Numbers are favoring those who make it successfully. There is not a simple solution that is suitable for all the online players, but they must be able to find the balance between sales volume, profitability and expenses.

Ingols Digital helped a company in Vancouver to do this well. Vancouver Best Cookies was transformed from a simple bakery to a master in delivering yummy cookies for free while being profitable!

Worth checking it out!