According to the Baymard Institute, extra costs from shipping, taxes, and other fees are major reasons why shoppers abandon their cart.
This statistic shows that if you are serious about reducing your cart abandonment rate, improving your shipping and delivery experience should be a priority, rather than an afterthought.
One of the easiest ways to address high shipping costs and fees is to offer every customer free shipping and move on.
But like most things in life, that is easier said than done.
The Limitations of Free Shipping
While free shipping can greatly influence a shopper to complete their purchase, it isn’t a foolproof option.
Research suggests free shipping only works when a buyer is in purchase mode – as the idea of getting something “free” further validates their purchase.
Free shipping also means you will be using the cheapest solution available, potentially making you sacrifice speedy service and frequent tracking updates that more demanding customers may be looking for.
If free shipping is the only solution you offer at checkout, and it turns out to provide a poor delivery experience, you run the risk of disappointing customers.
Unfortunately, 52% of customers blame eCommerce retailers rather than the courier company for a bad delivery experience, making it crucial for SMBs to work with a variety of reliable delivery providers.
You’ll also need to determine who’s going to be covering these costs.
If your business is covering the cost of free shipping, it can not only cut into your profit margins, but it can also complicate how your margins are calculated.
Your profit would no longer be an applied markup percentage; as shipping costs can be variable depending on the type of solution you choose, this will affect your net margin calculations.
If your business is unable to cover the cost of free shipping, you can decide to pass the fees on to your customers by increasing the price of your products.
Not only can this eat into your profit margins, but you could potentially lose sales if your clientele is price-sensitive, or your vertical thrives on competitive pricing.
Is Free Shipping the Best Solution for Your Business?
Keep in mind that eCommerce shipping costs are based on a variety of factors, mainly:
- The weight of your shipment
- Your packaging dimensions
- The distance it will need to travel
There are also a variety of delivery services SMBs can partner with. Common types include:
- Express couriers: Provides fast and reliable services at a cost
- Postal couriers: Offers affordable pricing, though delivery speed may be sacrificed
When eCommerce businesses offer free shipping, it’s not uncommon for them to rely on a postal courier, as they usually offer the simplest, most straightforward solutions at competitive prices.
Businesses that meet the following criteria may benefit from offering free shipping year-round:
- Shipments are lightweight. If your shipment weight is under 1 pound, it’s easy to find affordable shipping costs. For example, shipments that weigh under 13 oz can be shipped for as low as $2.80USD if you use a postal courier such as the United States Postal Service.
- Items are low value. In the event that your shipment gets lost, it’s not as painful to re-send the item; additionally, it’s easier to write it off if your customer wants a refund and you decide to do so without requiring them to return the merchandise.
- Your clientele aren’t interested in rush delivery. There are definitely customers out there who are willing to wait, or who are cost-conscious about shipping. In that case, free shipping can definitely help convert this particular customer persona.
Conversely, offering free shipping year-round may not make sense if one or all of the following applies to your business:
- You ship large, or heavy items. Weight is a major factor in shipping costs, and the heavier and farther a shipment needs to go, the more expensive it is to ship.
- Items are valued over $100USD. Some couriers offer automatic insurance for shipments that are valued under $100USD. If your item value is over this threshold, buying additional insurance is recommended. If you’re not interested in buying insurance, you’re better off using a reliable service that offers more frequent tracking. However, this will come at a higher cost.
- Your items require fast delivery. Let’s face it – you get what you pay for when using a cheap solution. If you ship perishable items, or have clientele with higher delivery expectations, partnering with a reliable courier that can deliver within the speed and time frame you require will be pricier – but worth it.
Being Responsible with Free Shipping
It’s definitely possible to offer free shipping in moderation. Consider doing so in specific situations, such as:
- When your products are in season
- Major sales holidays such as Black Friday / Cyber Monday
- For returns only (this can help build trust with new customers).
You can also cover the costs of shipping by doing the following:
- Include shipping costs into the price of your products. To do this, calculate your average shipping costs and add accordingly. This may work best for those who employ a premium pricing strategy.
- Enforce a minimum spend. To calculate this figure, it’s recommended to take your current average order value (AOV) and increase this by 10-15%. This is a great way to increase revenues, as well – according to Invesp, carts that took advantage of free shipping with a minimum spend had order values that were 30% higher on average.
Bareaya offers free shipping for orders over €75
Alternative Shipping Strategies to Increase Profitability
Rather than simply following the crowd and offering free shipping across your store, there are a few other options to consider.
Options which, when well executed, can still increase conversions without eating into your profit margins.
The below are a couple of options you could implement to diversify your shipping strategy.
Flat Rate Shipping
Flat rate shipping is when you can ship items, regardless of their weight or distance that it needs to travel, for one price. Of course, the caveat is that these items must fit snugly inside the courier’s designated flat rate box.
Still, this is a very alluring option for eCommerce sellers because it simplifies costs – when each shipment is the same price, it’s very easy to calculate your shipping budget each month.
Additionally, flat rates is a great marketing tool that can encourage customers to purchase more, with the guarantee that shipping prices won’t go up.
Heatonist offers flat rate shipping to entice customers to buy more bottles.
However, it’s best to make sure that flat rate shipping makes sense for your business, as it can cause you to overspend on shipping. To understand when flat rates are the most economical solution, you’ll need to look at your courier’s rate tables to see at what weight and distance you would break even.
But, doing this type of analysis for each shipment is not a scalable solution, assuming you are constantly sending multiple shipments with different sizes to different locations.
It’s best to automate this task by using shipping software. A platform like Easyship can provide complete visibility when you’re doing price comparisons across multiple solutions – allowing you to quickly determine whether a flat rate solution will save you money.
This may sound obvious, but you can completely avoid the possibility of overspending on shipping by charging customers their exact shipping costs.
To make your paid options even more enticing, it’s recommended to work with multiple couriers to give customers flexibility in their delivery options. Partnering with a shipping rates re-seller can give you immediate access to discounted rates, avoiding the need to reach out to couriers and negotiate with each one.
Additionally, using a plugin such as Easyship’s Rates at Checkout allows you to immediately show the fastest, cheapest, and best value solutions based on the recipient’s location.
Author: Michelle Mondonedo
Michelle Mondonedo is a Senior Content Specialist at Easyship, an end-to-end shipping platform. By giving SMBs access to the technology needed to scale globally, Easyship aims to break down eCommerce logistics barriers for all businesses.
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