Have you ever wondered how offering free shipping to your customers can boost your eCommerce sales?
You may have thought about it but wanted to look the other way because free shipping can shoot up your costs.
Conversely, the word “free” leaves a lasting effect on customers’ buying behavior.
The following statistics on consumer psychology show how offering free shipping can be a game-changer:
- Free shipping without any condition is a top factor that attracts consumers to shop online.
- Almost 90 percent of consumers think of free shipping as the best incentive that encourages them to buy online more often.
- 47 percent of customers say they would abandon a shopping cart if they find out the product doesn’t have free shipping.
For eCommerce businesses, offering free shipping is an effective strategy to prevent customers from encountering any unwanted surprises during checkout.
You like the idea, but there is a problem. You can’t offer free shipping because you got a tight budget.
How you can overcome this, we will come to that part later. Let’s first clarify the concept of “free shipping.”
Is “Free Shipping” Really Free?
First things first, “free shipping” is not free.
If your customers don’t pay for shipping, you need to bear the cost. However, don’t stress yourself out over it just yet.
Even if you absorb the shipping cost instead of passing it on to customers, it can pay off greatly by generating a higher average order value (AOV) and total profit margin.
You can set a minimum threshold for orders that customers need to hit to qualify for free shipping.
A study by Harvard Business School has found that when customers need to hit a threshold to get free shipping, their AOV increases 9.4 percent more.
If your customers are on a buying spree, offering free shipping makes it easier to rationalize their buying decision or add more items to their cart.
Interestingly, 48 percent of shoppers are ready to buy more items to be eligible for free shipping.
As told earlier, even if you have a tight budget, you can consider the following ways to offer free shipping without hurting the bottom line of your business. Here are those ways.
5 Ways to Offer Free Shipping for Your Online Store
- Increase AOV Setting a Minimum Order Amount or Bundle Offers
If you decide to offer free shipping, you can cover this extra cost by setting a minimum order amount and increasing your average order value (AOV).
A few easy ways to do that are to offer bundles, upsells, and membership subscriptions.
If you consider using the minimum order amount as part of your free shipping offer but are unsure how to set the minimum order threshold, you can begin with your average order value.
On average, if your customers spend $70 per order, you could set the minimum order value to $85 for free shipping.
To make it happen, you can use upsell technique to push your $15 to $20 items, which can easily fit in the same shipping box.
Here is how the leading eyeglass brand Peepers boosts its conversions and AOV.
The company offers free shipping for a minimum order amount of over $42 and pushes customers to buy more than one frame.
Minimum Order Value Example (Source: shopify.in)
In most cases, customers are willing to buy an additional item and spend more to qualify for free shipping.
Offering bundles is another effective strategy for a specific group of products that you can sell as a single unit at a discounted rate.
The travel kit of Skinny & Co comprising 100 percent organic cosmetic products is an example of a bundle that offers a great value to customers.
Bundle Offer Example (Source: convertcart.com)
Keep in mind that setting a minimum order amount is crucial. The amount should not be too high, as it can make customers drop their shopping idea.
There has to be a right balance to help increase the margin on your average order.
You can think of using A/B testing for different price thresholds (for example, $70 vs. $75 vs. $80) to set the best pricing.
- Increase the Product Price
It makes no sense to offer free shipping when a customer purchases a single and inexpensive item. It’s because the shipping cost could be higher than the item itself.
You can add the shipping cost to your product price and then offer “free shipping.”
This strategy will give your customers the impression that they are getting free shipping when in reality you have increased the product price to make up for that additional cost.
Although you may not cover the entire shipping cost, your free shipping offer will likely attract more orders and help you quickly offset that difference.
Also, it is not a good idea to try to earn a profit on shipping. If the sales of individual products at a markup price are sloppy, you can think of persuading customers to buy more items in a single order.
- Offer Add-on Items
One of the best ways to offer free shipping is by introducing add-on items. For example, Amazon offers free shipping to its shoppers with its add-on products.
Add-on items don’t justify the cost of free shipping for their low pricing. In the example below, Amazon customers need to buy products worth more than $25 to get the add-on items.
Add-On Offer Example (Source: getsitecontrol.com)
You can take a cue from this Amazon strategy and identify some of the lower-priced products in your inventory as add-on items.
This strategy will increase both your AOV and ensure that lower-priced products don’t eat away your profit margins when you ship them for free.
- Run Periodical Campaigns Offering Free Shipping
If you have a tight budget and low profit margin, offering free shipping may not always be possible for you.
Alternatively, you can run campaigns from time to time offering time-sensitive/limited-time free shipping.
Time Sensitive Free Shipping by Zappos (Source: convertcart.com)
Running free shipping campaigns can increase your AOV and maintain your profit margin since your repeat customers will be aware of the campaign date and wait for it.
Limited-time campaigns for free shipping work great since customers still get the perk of free shipping, especially the ones on your email list.
This way, you can have more control over your costs.
- Offer Free Shipping based on Locations
Most eCommerce businesses find it difficult to offer flat-rate shipping.
Shipping costs vary widely depending on the destinations or locations. Other factors are the package size, weight, and the speed of a shipment (regular or express) to arrive at a destination.
The following example shows how Kindred Bravely offers free shipping for orders over a certain value that varies based on customers’ location.
Some locations, such as Alaska and Hawaii, do not have free shipping due to their distance.
Location-Based Free Shipping Example (Source: getsitecontrol.com)
Similar to Kindred Bravely, you can also offer options to your customers to pay an additional cost for faster shipping.
This way, customers can get the option of saving their shipping cost by choosing either standard shipping or the option for a faster shipping by paying a little extra.
Regardless of whether free shipping is really free or it’s just creating a perception in the mind of customers who meet the minimum order threshold, it can work well for your business.
ShippingChimp enables eCommerce businesses to offer free shipping. By offering access to 30+ local carrier shipping rates, ShippingChimp facilitates eCommerce businesses to slash their shipping rates by half. Consequently, eCommerce businesses gain a competitive edge by providing free shipping to shoppers without giving away their profits.