From getting a customer through your door to delivering a package on their doorstep, shipping plays an important role in how your customers interacts with your brand. Research shows free shipping is the top concern for customers when checking out. But of course, we know that shipping is never actually free. In fact, data shows that shipping accounts for 12.5 percent of Amazon’s overall costs and an astounding 35 percent of an SMB’s cost.
So, in an age where free shipping offers competitive advantages to online businesses, how can you use this tactic to secure customers’ business without completely eating away your margins?
Here are three things to consider when using free shipping for your business.
Free shipping leads to action
Research shows that 93 percent of shoppers will take action to qualify for free shipping, and the most frequently taken action is adding items to a cart to meet shipping requirements. You can capitalize on this by incentivizing shipping minimums in several ways:
Only offer free shipping with a minimum purchase value. Determine your threshold by calculating your current average order value and setting the free shipping minimum slightly above it. This will drive the customer to add at least one more item to the cart in order to qualify.
By offering free shipping with a minimum purchase threshold, you reap the benefits of a free shipping promotion while only covering shipping costs for your best customers.
Just be careful not to set your threshold too high. If your average order value is $30 and you set your free shipping minimum at $100, you’re not offering enough savings to counteract the increased spend by the customer.
Offer free shipping with the purchase of a specific category or brand of items. For example, you could offer free shipping with the purchase of a mug or free shipping on Nike shoes. This is a great way to promote new items or clear older inventory.
Free shipping during certain times
You don’t have to offer free shipping year round, but seasonal free shipping can provide a welcome boost in sales. For example, to boost end-of-summer sales, promote and offer free shipping for a week during August.
Give customers options
Fifty percent of consumers will choose a slower transit time to qualify for free shipping, and 83 percent of buyers are willing to wait an additional two or more days to get free shipping.
Pro tip: Customers like variety, and offering multiple shipping options can lead to more satisfied customers and higher retention rates.
The key is to be transparent about transit times for various shipping options so the consumer can select the best shipping option for them. It’s fine to offer ground shipping as your free option, so long as the estimated delivery time is clearly presented.
Measure the impact
It’s important to measure the impact of any changes you make to determine the success of individual approaches. Shipping can make a huge difference in your revenue stream and customer retention, so track results accordingly. Key metrics to track are:
Conversion rate. Are more visitors converting into buyers with the free shipping offer than before?
Average order value. What was the average order value before the free shipping offer? How much has the average order value increased since implementing the free shipping offer?
Margin per order. How much margin is the cost of free shipping eating up?
Evaluating these three data points will help you determine the success of your free shipping approach.
Deliver with free shipping
The main point here is for you to get creative. To grow your company, you should evaluate all aspects of your business and shipping strategy, and then select the most effective shipping method for you. If you’re looking for more shippings tips to elevate your online store to the next level, check out this article. Happy shipping!