Although free shipping is very important to ecommerce shoppers, not every online business can afford it. Some companies sell products that are too big to offer free shipping on, like furniture and others simply do not have the profit margin to do it, but if you see yourself losing sales there is a good chance that your customers think that they are overpaying for shipping. The basic rule of thumb is, if your company can offer it, you should! Short term-wise, you will gain a huge increase in online sales, and potentially increase the order amounts of those sales, especially if you require a minimum order amount to qualify for free shipping. In the long run, you will gain more customers as more online shoppers know that you are offering free shipping. This is particularly beneficial if you sell products that customers will need to buy repeatedly.
According to a comScore survey, 46% of online sellers said that free shipping helped increase profits, but one-third said that it did not. While there are many gains, there are also many factors to consider when deciding if or how you are going offer free shipping. With that being said, you must be able to analyze your orders for the long-term.
- Your products: Analyze the types of products that you sell. If you are selling large and heavy items, shipping will be very expensive, so free shipping might be something you do not want to pursue.
- Your profit margin: You could have a profit margin where you can offer 100% free shipping 100% present of the time. Analyze your profit margin to see what type of shipping discounts you can offer and what time of the year you can offer the discounts or free shipping. If you have a product will a high profit margin, you should definitely offer free shipping. You will gain even more sales on it than you did before!
- Your orders: Analyze your orders to help you decide if free shipping is something you should offer. Do you need to increase the average order value? You might test a free shipping offer based on a meeting a minimum amount in the cart.
- Your customers: Where are your customers located? Are you on one coast while the majority of your orders ship to the coast? Do many of your orders ship internationally or to Alaska and Hawaii? Many online retailers will not offer free shipping anywhere outside of the contiguous U.S.
- Your competition: Are you losing sales? It may be because your competitors are offering free shipping when you are not. Review your competitors’ shipping policies and try to match them—or beat them!
If you think that offering free shipping is right for your ecommerce store, consider testing out the offer for a limited time or to select customers to allow you to track customer response and analyze your profits. While free shipping offers may not always directly increase your profits or competitive advantage, they may increase customer loyalty by offering it.
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