This guide is for retailers who are wondering if they should offer free shipping. Below, we explain when and how to offer free shipping, including minimum order thresholds and promotional deals. We also explain the best way to set delivery charges if you can’t ship free.
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When To Offer Free Shipping
More and more web stores today are offering free shipping. Whether it’s to stay competitive, increase orders or attract new customers, you’ve probably felt pressure to hop on board. Many e-retailers, however, are mistaken in believing that free shipping is an end-all solution. Sure, used strategically it can be a great marketing tool. But to boost orders and please customers, it’s actually more important to be transparent with your delivery charges.
If you charge, tell your customers the cost early on and they won’t be surprised during checkout. Studies have repeatedly shown that unexpected shipping costs is a key reason why shoppers get cold feet. As many as 74% of shoppers abandon shopping carts because of high delivery charges.
The easiest way around sticker shock, of course, is to offer free shipping. While it’s almost always good to offer free shipping in some way – be it for orders above a certain amount, on qualifying items, or as a temporary promotional deal – you have to take a look at your products, your customers and your competition to figure out the best way to do it.
The Free Shipping Rule Of Thumb
I had a conversation with e-commerce expert John Lawson who explained this tip:
Granted, a $5 shipping fee is unlikely to deter a customer spending $1,500 on jewelry. But offering free delivery could draw more customers to your website. Many shopping aggregators, like Google Shopping and Bizrate, favor stores with free shipping. Users can check a box at the top to filter out stores who charge for shipping. It can also be a way to separate your store from the competition. If everybody else charges a fee, then displaying “free shipping” on your header can be a powerful statement to shoppers.
Conditional Free Shipping
Despite these benefits, it’s usually not a good idea to ship all items for free. For one, not everyone sells expensive items like jewelry that also ship cheap. Many retailers have bulkier and / or less-expensive items. Even a high-end eyewear shop, for example, sells cart stuffers like lens cleaner and microfiber cloths. Shipping a single one of those for free would likely put you in the red.
Instead, it’s usually good to set some limits. Here’s 4 common ways retailers stagger free shipping offers:
1. Set a minimum order amount.
Offering free shipping on orders above, say $50, is a simple way to avoid losing money on smaller transactions. It can also encourage customers to buy more. One survey revealed 58% of shoppers have added items to their shopping carts to qualify for free shipping.
2. Free shipping on select items only.
A different approach is to offer free shipping on some items, but not others. In an ecommerce forum, one retailer said, “I can sell a $50 locket with free shipping, but I can’t sell a $7, 1 pound bar of soap with free shipping. I would lose on every customer.”
In this situation, it would make sense to offer free delivery on the locket (a light-weight and expensive item), but charge for the bar of soap (a heavy and low-cost item).
3. Use free shipping as a promotional event.
Offer free shipping for a 2 or 3 day period as a promotional event. If you already have free shipping on orders above a certain amount, lower the threshold or get rid of it temporarily. The idea here is to excite prospective buyers – turn the window shoppers into actual customers. In order for this to be effective you have to get the word out there. Send it out on your mailing list or spread it around social media – whatever it takes to reach your audience.
4. Offer Free Economy Shipping.
Most carriers have a slower, lower-cost shipping option, like USPS Parcel Post or UPS Ground. If you’re worried about losing too much money by shipping free, offer one of these delivery methods for free. You’ll spend a little less on each delivery, plus, some customers will opt to pay for a faster delivery method anyway.
Unconditional Free Shipping
If you go with one of the above routes, you get a number of benefits: In particular, you save money by not shipping all orders free all the time and you get a promotional tool you can use strategically. If you offer free site-wide shipping all the time, you can’t use it to encourage larger orders (by setting a threshold) or as a promotional event to attract would-be buyers. However, there’s still a few reasons why you may want to offer unconditional free shipping:
- If all your competitors are doing it, then you don’t have much of a choice. If you want to claim some of the market share, you’ll probably need to offer site-wide free shipping.
- If none of your competitors are doing it. This may seem counter-intuitive, but if nobody is offering site-wide, no-minimum free shipping, then it might be your way to stand out. Zappos and L.L. Bean are two companies that found success with this strategy. It’s easier to make this work, however, when you’re backed by an ecommerce giant (as Zappos is by Amazon), or when you sell your own unique products (like L.L. Bean) and can work shipping costs into the retail price.
Flat Rate Shipping
Perhaps you’re deciding against free shipping, or thinking of offering it only on certain occasions or for select orders. In this case, what should you charge for shipping? If you can’t ship free, charging a flat rate is often the next best option. Here’s why:
- It’s transparent and easy to understand. Displaying “$4.99 shipping on all orders site-wide” on your site banner ensures buyers know what they’re getting into. It’s easy for them to do the math, and ideally should reduce sticker shock when they get to checkout. As long as you display the shipping cost prominently throughout your site, it should reduce the number the abandoned carts at checkout.
- It can encourage larger orders. If shipping costs the same for a $5 order as it does a $50 order, shoppers will perceive the larger order as a discount. Vitamin retailer GNC recently changed to flat rate shipping after research showed consumers would spend more to make the shipping costs ‘worth it,’ Wall Street Journal reported.
There are some potential downsides to flat rate shipping. For one, it can discourage smaller orders. As a customer, you probably wouldn’t pay a $5 shipping fee on an order below $5 (granted, some retailers probably wouldn’t mind saying goodbye to these small orders anyway). Another downside is that you might have to cover a lot of the shipping costs yourself. Especially if you see a surge of larger orders where the actual shipping fee is higher than the flat rate.
Charging Actual Shipping Fees
If you don’t feel comfortable charging a flat rate, there’s nothing wrong with charging the actual shipping and handling fee. Just make sure it’s clear to the shopper every step of the way. Display the delivery fee alongside the item price, or allow them to calculate it by entering in their zip code. Then, continue displaying the total order amount in a sidebar as shoppers add more to their cart. This will reduce the chance of “sticker shock” when they checkout.
You can find these features in most eCommerce platforms, though you may need to upgrade to a more advanced edition. If you want to learn more about these features you can check out our buyer’s guide of the top eCommerce platforms.
Charging Higher Fees (Profiting From Shipping)
Inflated shipping costs is a tactic that has been around well before internet shopping. You might recall TV commercials that advertised a free book or kitchen gadget. All you had to pay was the shipping and handling. Well, as anyone who called probably found out, the item was not actually free. The shipping charges were simply raised enough so the retailer could make a profit.
Is it a good idea to use this revenue model today? Probably not. Though some found success (and still do) it’s no way to build a trustworthy relationship with your customers. Offering something for free or at a lower price might attract more customers to your website, but as the research on shopping cart abandonment shows, not too many will follow through at checkout.
Being transparent in your shipping prices matters far more than the amount you charge. Whether you ship free, charge a flat rate or charge variable prices, you need to let the shopper know right away. Give them the exact order amount somewhere on the menu and you should see fewer cases of abandoned shopping carts at checkout.