Ecommerce Fulfilment: Should You Offer Free Shipping?
The ongoing global growth in buying online has seen a marked increase in online sellers outsourcing their ecommerce fulfilment to companies like myWarehouse.
But as outsourcing increases the running costs of selling online, it is tempting to pass on some of these expenses to customers by charging for delivery.
But if you do, will your customers stop buying from you will they feel a delivery charge is perfectly acceptable?
In 2019, a study by Statista, based on US consumers, showed around 63% of cart abandonments were due to extra shipping costs.
To help you decide whether your business should or shouldn’t offer free delivery, we’ve put together a short list of factors to consider.
When You Should Offer Free Shipping
Cost Calculations Show its Worth It
If your net profit per order is acceptable to you after deducting the cost of products, fulfilment fees and delivery charges, then do it!
It’s a no brainer. Everyone loves free delivery so your sales will only increase if you offer free shipping
If you’re unable to afford free shipping consider offering a reduced fee. For example, £1.99 may not cover the actual cost of delivery but if it is a fee that your customers feel is reasonable then this will help reduce the impact of true delivery costs on your bottom line.
Alternatively, you could offer free shipping for lower cost options such as 3 day but charge a premium for next day
Another idea is to offer free shipping but charge slightly more for your product. In some marketplaces, consumers can filter their search by including only sellers who offer free shipping. In these marketplaces you may find it a more profitable strategy to increase your product price by a small amount.
Your Competitors Have It
If your competitors are offering free shipping then you may not have a choice.
Amazon has changed the expectation of the consumer to accept either free shipping (via their Prime service) or very cheap delivery due to their significant volumes and buying power.
You may not feel your business competes directly with Amazon, but consumers get used to trends online and may not want to buy from a seller who charges delivery.
When You Shouldn’t Offer Free Shipping
Costs are too high
Shipping costs are the highest proportion of order fulfilment fees so it may be that you simply cannot afford to offer your customers free shipping.
In this instance, you could either offer an attractive shipping rate that contributes to your costs or simply explain y=to your customers why a delivery charge has to be applied.
All your competitors charge a shipping fee
Clearly, customers buying your products expect to pay a delivery charge (e.g. furniture, heavy items, very expensive products etc) so just make sure your charge is in line with your competitors
Use Free Shipping as a Promotional Tool
Try running a promotion using ‘free shipping’ as the hook. This would be a good idea to run during any quiet times of the year to tickle more sales
Or you can copy Amazon and create your own loyalty program. But this will only work if customers buy frequently from you. e.g. replacement ink cartridges, toiletries, protein powders etc
Free shipping is no longer the ad hoc marketing tactic it used to be. With customers now feeling aggrieved without it, you may want to carefully consider working free shipping into your business model.
The best method in assessing whether your sales will increase by offering free shipping is to A/B test it.
Nearly all shopping carts provide A/B testing, so have two checkout pages: one with a delivery charge and one offering free shipping and analyse the results after a month.
If free shipping does increase your order volumes then do the maths and see if your business can afford to offer free shipping all the time.