Free. Everybody's favorite “f” word. Free trial, free sample, and most importantly free shipping are the words that consumers love to hear. However, free shipping is not always financially friendly to companies. Offering free shipping usually means that the shipping costs are being taken from the profit margin on an item; and unless free shipping is increasing a company’s volume of sales, it will likely be taking away from the bottom line.
On the flip side, we do know that free shipping is an incentive for customers to complete a purchase:
- 9 out of 10 customers say that free shipping incentivizes them to shop online more.
- 61% of customers are likely to abandon their cart if free shipping is not offered.
- 58% of consumers will add more items to their cart to qualify for free shipping.
- 47% of consumers will search for a coupon code for free shipping.
- 30% of customers will abandon their cart and wait for free shipping to be offered.
Moral of the story, customers love free shipping, and they will look elsewhere if it is not offered. Here are some tips to help your business make free shipping possible:
- Offer free shipping to loyalty program members. Incentivizing customers to sign up for loyalty programs in trade for free shipping is a no-brainer and a great opportunity to increase the customer lifetime value of a shopper. By capturing a shoppers’ email you then have the ability to send them additional offers and alert them about new products or opportunities. One offer of free shipping can be a small price to pay in order to be in a shoppers’ inbox for months to come, which will hopefully lead to many more purchases in the future.
- Set a minimum threshold for free shipping that is just above the average purchase amount. Say your most popular item is a face lotion that costs $18. Make the minimum threshold for free shipping $25, then offer the shopper add-ons in the cart that will bring their subtotal above the minimum amount. Your shopper decides to add a face wash that costs $10. You have increased your average order value by $10 and allowed your company room to safely absorb the free shipping cost. When deciding your minimum threshold, find the sweet spot that converts more customers and also justifies your costs.
- Roll the cost of shipping into the cost of the product. Say you sell COVID-19 facemasks for $12 and shipping costs $3. What looks better to consumers? A $12 item and $3 dollar shipping or a $15 item and free shipping? The offering with free shipping will win 9 times out of 10. This principle goes back to the consumer behavior saying to “integrate losses.” Integrating losses is important because it is easier on consumers' minds. When customers see one price that includes the item and shipping, they are more likely to have a positive feeling. If instead customers see the price of the item AND then shipping for the item AND then sales tax and the final price is several dollars higher than they originally anticipated, they are likely to jump ship.
- Work with a 3PL. We are here to say that you don’t know what you don’t know, and that is nothing to be ashamed of. Being a shipping and logistics expert is not your job, your job is to create amazing products and build a loyal and happy customer base. Our job, however, is to be shipping experts. Working with a 3PL like iDrive will show you where and how to make adjustments to your carrier contracts so they are tailored exactly to your needs. Carriers have plans that are blanket contracts and they are not perfectly suited to you, that is where we work with you to make the adjustments that fit your needs exactly. Another tip when finding a 3PL to work with is to identify a 3PL that has multiple warehouses. This will help you drive down shipping costs by reducing your zones and strategically placing your inventory where it is needed most.
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