Offering free shipping, or even discounted shipping, is a must if you want to convert more customers. As many as 74% of shoppers will abandon shopping carts due to high shipping costs. Small retailers, however, often struggle to compete with the free shipping incentives offered by retail goliaths like Amazon and Wal-mart.
Let's take a look at a few ways that you can start offering free shipping for your customers today.
Establish a free shipping threshold
This is easily the most popular method of offering free shipping. Hundreds of online retailers advertise free shipping on orders over a certain dollar amount. Amazon offers free shipping on orders over $35. Staples' threshold is $49.99. Wal-Mart will ship for free after you've spent $50.
Free shipping thresholds work. They entice customers to spend a bit more money in your store in order to qualify for free shipping.
How do you establish a threshold for your store?
It's best to base your threshold on your average order size and profit margins, according to Practical Ecommerce.
For example, let's say that your average order size is $20, but you need that order size to be at least $35 before offering free shipping, based on your profit margins. You'd then set your shipping threshold at $35.
Eat the shipping cost on high-margin items
If your margins are too low for you to feel comfortable about offering free shipping on all of your items, then you can simply offer free shipping on your high-margin items.
This kind of model is popular in the jewelry industry, where expensive items like diamonds can command a pretty high profit margin, but shipping costs are low. You would gladly take the relatively small hit on shipping if it meant a highly profitable sale. Free shipping will definitely be a factor in receiving more orders for your higher profit margin items.
Subscription-based free shipping
This is a model that's been made incredibly popular by Amazon. For $79 a year, Amazon Prime members receive free shipping on thousands of items. While your online store probably doesn't have the clout of Amazon, or the vast media library accompanied by a Prime membership, you can still offer a "membership" that gives subscribers free shipping all year long.
Along with free shipping, you could promise access to exclusive deals and promotions to help sweeten the subscription. Having an "elite" group of subscribers to whom you can market would do a lot to help customer retention.
While not free shipping, flat-rate shipping is an attractive option for businesses offering lower-margin items, but whose customers typically order multiple items during a single transaction.
Flat-rate shipping is just as it sounds, a flat shipping rate for every product on your site. This can be defined per item, per shipping class (products of a similar size or weight), or per order. Employing a flat rate helps reduce friction and/or price shock for buyers that reach the payment stage. You should display your flat rate prominently across your site so that customers know exactly what they're getting into when ordering products.
Flat rate shipping can also encourage larger orders. According to the Wall Street Journal, vitamin retailer GNC changed to a flat-rate shipping policy after their research showed them that customers would be willing to spend more money to make shipping costs "worth it."
Which strategy fits your business best?
A shipping-based incentive is increasingly a table-stakes component of a viable ecommerce business. If your business can afford to offer free shipping in some form, do it. If you can't afford it, employ the shipping strategy that will best reduce friction for your customers. You will increase your conversion rate and customer retention while decreasing abandoned carts.
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