E-commerce businesses that can offer free shipping have a huge advantage over their competitors. According to JungleScout's 2023 Consumer Trends Report, the top three reasons people shop online are because of convenience, fast shipping, and free or low-cost shipping. However, depending on your business goals and philosophy, free shipping has its pros and cons.
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Benefits of offering free shipping for your e-commerce business
Offering free shipping can be a smart strategic move for your e-commerce business. These benefits benefit both customers and businesses alike.
- Reduce cart abandonment. A common reason for cart abandonment is high shipping costs. By offering free shipping, your customers are more likely to complete their purchase.
- Drive higher conversion and sales rates. Free shipping acts as a powerful incentive and can motivate customers to hesitate before making a purchase. This increase in conversions translates into increased sales and revenue.
- Improve customer choice and satisfaction.
Free shipping gives customers more flexibility in choosing products based on their preferences, rather than focusing solely on shipping costs. - Increase customer loyalty and brand awareness. Offering perks like free shipping can create a positive impression and strengthen customer loyalty. Satisfied customers are more likely to make another purchase and more likely to recommend your brand to others.
- Differentiate yourself from your competitors. In a competitive market, free shipping can differentiate your business and serve as an attractive selling point to attract customers who prioritize cost-effective shopping.
Disadvantages of offering free shipping for your e-commerce business
While there are benefits to offering free shipping, there are also some notable drawbacks to consider.
- Increased costs (both for you and the customer). If you offer free shipping, you'll have to pay for shipping yourself, which can put pressure on your profit margins. Alternatively, passing these costs on to customers by increasing the price of the product may deter price-sensitive shoppers.
- Logistical challenges arise. Efficient logistics and inventory management are required to ensure on-time delivery without excessive costs. Dealing with the complexities of shipping, such as international orders and peak season rushes, can be especially difficult.
- It can lead to a poor customer experience. Choosing low-budget shipping methods to offset costs can increase delivery times and reduce customer satisfaction. Delayed or damaged products can cause customer dissatisfaction and negatively impact your brand reputation.
- This can lead to sustainability issues. Offering free shipping may require more frequent and smaller shipments, which can increase your carbon footprint. Balancing sustainability efforts with the desire for free shipping is a challenge, especially as consumers become more environmentally conscious and demand that the companies they patronize also do more. This can be a delicate issue.
[Read more: 10 Eco-Friendly Packaging Options for E-Commerce Business]
A common reason for cart abandonment is high shipping costs. By offering free shipping, your customers are more likely to complete their purchase.
Is free shipping right for your e-commerce business?
Offering free shipping works well for high-volume shippers where product dimensions and weights are consistent. However, businesses with a variety of products or low request volumes should consider alternative strategies such as limited free shipping offers and minimum order requirements.
It may be helpful to think of free shipping as a marketing expense for short-term profit, or as a long-term business cost. By treating free shipping as a marketing tool, businesses can achieve a better return on investment than other advertising costs.
How to offer free e-commerce shipping
Free shipping is a powerful tool for attracting customers. However, achieving the right balance between customer attraction and profitability requires strategic testing and consideration of key factors.
- Understand costs and profit margins. To offer free shipping while remaining profitable, understand shipping costs and profit margins. Please note that costs will be different if you are shipping primarily internationally rather than domestically.
- Please consider local shipping options. Research local shipping carriers to secure better rates than standard retail prices. This significantly reduces shipping costs and helps maintain profitability.
- Streamline your packaging. Minimize shipping costs by optimizing packaging. Choose materials that protect fragile items without adding unnecessary weight. This approach saves shipping costs and increases profitability.
- Please consider free shipping on some items. Consider options like free shipping on orders over a certain amount to increase your average order value and profitability.
Understand that free shipping does not necessarily mean profit. Sometimes it incurs losses to increase market share, but other times it boosts profits. After all, offering free shipping can attract customers, but you need to make sure it doesn't cause significant financial loss to your business.
[Read more: How to Choose E-Commerce Shipping Software]
CO— is dedicated to bringing you inspiration from leading and respected experts. However, before making any business decisions, you should consult a professional who can advise you based on your personal circumstances.
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