A free shipping strategy is key in today’s online marketplace. You have 100% confidence in your product. The price can’t be beaten. Customer service is off the charts. You receive a customer’s order and prepare products for shipping. And then it happens…the shipping process begins, and this is where your control ends. Or does it?
Shipping can easily make or break a relationship with your customers. It can have a huge effect on your bottom-line. Shipping costs can be what turns your customers off completely before they even complete a transaction. What are the steps you can take to ensure your customer has a great product experience from beginning to end? What should you look for with a free shipping strategy?
Free Shipping: Do or Don’t
To begin with, as a shopper, free shipping is a major factor in my online purchases. In fact, the first thing I do on Amazon is filter by Prime eligible. Other sites will instantly lose my business if shipping costs are too high. Why? I know there is a great chance that I can find the same or similar product from a company that does offer free or discounted shipping. In fact, a June 2014 study from UPS and comScore showed that 58% of shoppers will abandon their cart if shipping costs are too high.
There is even a national Free Shipping Day that was started in 2008! This year it is Friday, December 14, 2019. Many retailers take advantage of this, just search Twitter for #FreeShippingDay.
Free shipping does not have to be Fast shipping
Keep in mind a free shipping strategy does not necessarily mean FAST shipping. I am willing to wait a little longer to receive an item if it keeps shipping costs to a minimum, or better yet, means shipping is free. According to a recent article on FierceRetail.com, I’m not alone on this. The article claims that 88% of shoppers prefer free to fast shipping – favoring free shipping over 5-7 days rather than paying a shipping fee to receive items in just a couple of days. Moreover, 60% of customers were willing to increase the number of items in their cart to qualify for free shipping.
There are ways to balance the need for higher web traffic and purchases with the cost of shipping. Here are a few:
Free shipping – with an *
A free shipping strategy might not make sense to offer free shipping on ALL of your products. Obviously this would vary depending on what you’re selling. However, take a look at specific products where you might want to boost sales. Would it help to offer free shipping to start moving these products? Or offer discounted rates or free shipping on specific items only.
Alternatively, providing free shipping for minimum order amounts or items may help to offset your costs as well. Knowing the weight and basic shipping costs of popular items will also help determine where it makes sense to offer shipping price breaks.
Pass the Buck
While you may not want to spread shipping costs equally over all products, it may behoove you to include shipping costs (or at least a portion) in some of the higher end, higher cost items. Keeping smaller items at a lower price will still allow you to be competitive where shipping costs would be lower anyway. Passing on the shipping costs to consumers on the higher end items might not sound ideal, but this is where the lure of “FREE SHIPPING” can come into play. Think about it: would you be more inclined to purchase something if the cost was a little higher than other businesses, but the shipping was free? Therefore making the total purchase LESS than the lower priced item plus shipping? I would.
Do Your Homework
Step back a minute and actually look at your packaging supplies. Do you really need a 12x12x12 box to ship a product the size of a pack of gum? A quick search on the internet could provide you with a variety of options that may be better suited for your particular product. The last thing you want is for customers to think they’re paying – one way or another – for wasteful shipping. This is key to a successful free shipping strategy.
Other Alternatives If Free Isn’t an Option
So what if a free shipping strategy is not possible with your online business. This is the case many times, margins might be too low or the industry standard is abnormal. What else can a retailer do in order to make shipping a competitive advantage?
Real-time Shipping Quotes
It’s possible to set up real-time quotes in some shopping carts. (Shopify, one of our partners, allows this function!). While this may not be the cheapest option for consumers, it does give the customer a chance to see what the actual cost is. Knowing that they are paying to only cover the actual cost as opposed to padding your wallet may actually be considered a ‘win’ for the customer. Plus, it helps take out the guesswork on your end.
Flat or Average Rate
Perhaps your products are similar in size and weight and there is not much variety in the shipping costs. Charging customers an average amount of your shipping costs is easy to calculate strategy. In other words, a flat rate. However, what if you have a large variety of inventory and your products vary greatly in size, shape, and weight? Maybe you want to take a look at your average cost per pound shipped and use this to determine what shipping rate you will charge.
Cost Per Pound Shipped
Regardless of what option you choose, the best thing for you to do to keep shipping costs at a minimum is to know your data. It’s hard to choose where to cut costs if you don’t know where you’re overspending. Likewise, are you getting the best rates? Could you save yourself and your customer’s money by finding a better shipping method or carrier?
One option is to use your average cost per pound shipped to determine how much to add to your sale price for each item. You know how much each item in your store weighs, and you know the dimensions. With Refund Retriever, you have access to see what your cost per pound shipped is for each UPS or FedEx service.
For example, say we are selling a 10-pound kettlebell with delivery to a house. The kettlebell costs us $5.25 wholesale. If we use FedEx Home Delivery it will cost us about $11.26 on average looking at our report above. The cost to the customer’s door will be $16.51 total, so we can determine the sale price. While this might not work in every situation, it is a very simple example or easy way to start.
Where are the majority of your packages going? In addition, what is the average cost for that zone?
If you know that 45% of your packages are shipped to Zone 5 and the average cost of your package to that zone is $15.51, you can use this to pad your sale price to cover the majority of your shipping costs across the board.
I know of a few companies that use this rule, and all shipping costs are eventually covered. This is not the best option in my opinion, but a viable option if you do not have the proper shipping technology in place.
Free Shipping Strategy Conclusion
A successful free shipping strategy will strengthen your online business and reduce shopping cart abandonment. You obviously need to go with whatever shipping option is best for your business model. What will the cost of shipping be versus the cost of losing a sale? In summary, the best solution is to stay informed. Refund Retriever provides our customers with ample data to provide confidence in your decision making. That’s one option every customer deserves.