Free shipping is a competitive necessity for some online retailers. While there are certainly costs associated with free shipping, there are also some reasons to feel good about offering it.
When companies like Amazon first introduced free shipping several years ago, it might not have made sense for every ecommerce merchant, particularly small ones, to follow suit. But with scale and growing customer expectations, free shipping has become both common and beneficial to some sellers.
1. Free Shipping May Increase Sales, Revenue
Free shipping is popular with your shoppers. This is so obvious, in fact, that you are unlikely to find any statistical data or survey results to support the claim directly. Researchers simply don’t bother asking shoppers if they would rather pay for something or get that same thing for free.
There is an important note here: Some shoppers will, in fact, pay for faster shipping when the situation demands it — perhaps a last minute gift. But otherwise, delivery times being equal, your customers would rather not pay to have an order shipped.
In 2014, Business Insider reported that for the first quarter of last year, 58 percent of U.S. ecommerce orders included free shipping. Thus the service seems popular.
What is popular with your customers may also be good for your business. There have been several, albeit anecdotal, reports of free shipping offers increasing sales conversions and revenue.
Last year, Stitch Labs found “that retailers who always offer free shipping can directly increase revenue by 10 percent.”
Brandon Eley, owner of 2 Big Feet, reported in 2012 that free shipping had boosted his site’s conversion rate 50 percent.
In a 2014 case study, Red Door Interactive said that a free shipping offer had increased ecommerce orders by some 90 percent.
In a survey from 2010, 93 percent of respondents said that free shipping encouraged them to buy more online.
Monetate released a case study in 2011, reporting a 48 percent increase in new customer acquisition with a select free shipping offer.
2. Free Shipping Boosts Average Order Value
A portion of the promised, free-shipping-induced boost in ecommerce revenue will come in the form of increased average order value.
When free shipping offers include a minimum purchase threshold — like £25, £50, or £75 — some shoppers will add items to their carts. In fact, a June 2015 study from comScore and UPS said that 52 percent of American shoppers have added items to their ecommerce shopping cart to qualify for free shipping.
Similarly, the aforementioned Red Door Interactive case study from 2014 reported a 7.32 percent increase in average order value when Red Door client, NuFACE, offered free shipping.
3. You Can Control Free Shipping Costs
Online retailers that sell commonly available products or even commodity products often compete on price, squeezing margins and “racing to the bottom.” Merchants in these sorts of price competitive situations can feel helpless, as some hapless competitor irrationally lowers prices. There is simply no way to control the price your competitor sets.
Free shipping costs, however, can to some extent be controlled. In fact, savvy online retailers can take actions that will significantly reduce shipping costs. Given this level of control, managing shipping expenses may even be a way to regain margin.
Here are a few examples.
Use fulfillment services. Merchants can warehouse popular items with fulfillment providers, potentially reducing the distance packages must be sent and thereby reducing the cost of those shipments, even when the fulfillment service fees are included.
Limit free shipping offers. While you certainly want to make a free shipping offer to all of your shoppers, that offer need not be the same. Shipments to neighboring towns could have a relatively low minimum purchase requirement, while far away towns could enjoy free shipping with a relatively higher minimum purchase.
Choose carriers and service levels. Try to discover the best combination of carrier and service level for each shipment. Postal Service for nearby destinations, while ground shipping from FedEx or UPS may cost less for cross-country deliveries.
Minimize packaging. In the era of ubiquitous dimensional weight shipping fees, reducing package size can reduce shipping costs.
4. Loyal Customers Love Free Shipping
Although it is not clear that free shipping offers help retain customers, many marketers believe that there is a relationship between customer retention (or customer loyalty) and offering free shipping.
For example, the comScore and UPS study mentioned earlier found that 54 percent of shoppers are likely to take action when they receive a free shipping offer by email. This implies a couple of things.
First, it would seem that free shipping is a more compelling offer than a sale price since emails offering product discounts rarely have a 54 percent conversion rate.
Second, since consumers receiving emails presumably have a relationship with the online seller, one can assume a level of loyalty or at least familiarity.
5. Free Shipping Problems May Be in Your Mind
Many online sellers will argue that they do not need to offer free shipping or that free shipping is simply too expensive. They just cannot get over the idea of “wasting” money on shipping. But some of these perceived problems with free shipping offers may really be a result of the way we think about free shipping.
A few years ago, a Quora contributor named James Edwards wrote, “‘Free shipping’ in an online business is no different to ‘free entrance’ into a brick-and-mortar store. Just as a brick-and-mortar store incorporates the cost of sales assistants and store lease into their item price, so too can an online business incorporate the shipping cost into their product prices.”
Edwards’ argument is that free shipping is simply a cost of doing business. For example, few online retailers pass the cost of packing materials to customers. Nor do many businesses charge shoppers on a prorated basis for website hosting, payment card processing, or myriad other overhead expenses.
Similarly, many online sellers are very happy to offer shoppers 10-, 20-, or even 40-percent discounts on products in the form of sale prices and coupon code offers, only to be reluctant to offer free shipping. Ecommerce marketers will spend £5 per click on AdWords to get a shopper to the site, but won’t spend £5 on free shipping to double conversions.
The problem may be that one needs to think about free shipping offers like overhead or advertising, rather than a extra cost.
“How do I boost conversions?” It’s often the number one question from smaller online retailers.
The question has potentially thousands of answers, and there is no cookie-cutter plan that suits every store. Also, let’s not confuse conversions with sales amounts. Chances are you’d rather make more money, even if that means a slightly lower conversion rate.
Years of experience and data tell us, however, that there are some common themes when it comes to inspiring visitors to click that call to action. You may be surprised how well some quick-and-easy changes can perform. The exact messaging and design is dependent on your target audience, so be sure you understand exactly who your ideal shoppers are.
7 Changes to Boost Conversions
1. Swap main and alternate images. Make sure that the first product image the shopper sees is the best one. It should typically present the product in a setting (or on a model). Alternate views are used to present manufacturer images and for clarification of product features.
For example, a product as simple as Pyrex bowls begs for the proper main image.
Standard manufacturer’s image. We can see it’s just a set of glass bowls with lids. Source: Kohl’s.
The in-setting image gives us a more clear understanding of size, and also shows the lids are sturdy enough for stacking. Source: Kohl’s.
2. Display “Ships Free” next to products and calls to action. If you offer free shipping based on an order subtotal, any product that exceeds that threshold should say so.
Frys.com offers free shipping on orders of $34 and up. A “Ships Free” truck appears next to every product that qualifies on its own.
Take it a step further by reinforcing the free shipping offer on the product itself.
Amazon reminds us that Fulfillment by Amazon orders over $35 ship free, regardless of the current product’s price.
3. Change the color of the add-to-cart, checkout, and submit buttons.Colors play a big role in the conversion process. Even if you don’t have time to change things up throughout the entire site, this simple step can make a big difference, especially on mobile. Talia Wolf, a conversion optimization expert,goes into great dealabout the emotional triggers of color, and many studies show that the majority of online shoppers say color is the reason they buy a particular product.
This easy-to-understand chart shows how colors and their shades convey emotion. Source: Conversioner.com.
4. Display accepted payment icons on every page. People who pay with something other than Visa and MasterCard want to know if you accept their method of choice. Letting them know up front not only keeps some people in the store, but it can also increase order totals.
You don’t have to distract shoppers. Place the payment icons in the footer. Source: RetroPlanet.com.
5. Display stock status.If only a handful are left, display the number in stock to create a sense of urgency.
People want to know the item is actually available. The stock status reinforces that. Source: RetroPlanet.com.
6. Place “add to cart” on category pages and search results. This may not work for all product lines, but if shoppers know what they want, don’t make them tap or click to the product page. Speed up the process, especially on mobile.
Repeat shoppers should be able to buy right from a product listing page. Source: King Arthur Flour.
7. Increase the font size. Even a slight boost can help keep your shoppers from squinting or zooming. On a responsive site, this change should have minimal effect on the page’s overall layout. In fact, it might make everything look a million bucks better.
Even the smallest of changes can make a difference — hopefully a positive one — so be sure to annotate in Google Analytics or related software. By notating exactly when you made any sort of change you can better determine if the alteration was for the good or the bad.
If you make any of these updates to your store, I’d love to hear the outcome. I’ll read all your comments below.