Does Free Shipping Increase Sales?

Virginia Miller

September 11, 2024

As a business owner, generating sales to drive revenue and grow your business is essential. But how do you attract customers? One way might be offering free shipping as part of your online shopping experience. While this is an expensive initiative, is there any tangible benefit that could make it worth the cost? In this blog post, we'll explore if free shipping can increase sales for your business and discuss potential ways to mitigate the associated costs.

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How To Offer Free Shipping And Make Money?

Free shipping is a powerful but sometimes expensive sales tool. Can businesses offer free shipping while still making a profit? Is free shipping worth it or not?

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The short answer is yes, but getting there can be challenging. As a result, it's critical to reconsider why your eCommerce store might want to offer free shipping. Several studies have found that offering free shipping increases sales, order volume, and conversion rate. Because 88% of shoppers prefer free shipping overpaying for shipping, and 81% research multiple websites before purchasing, this perk could be the difference between buying from you or your competitor.

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Here are some strategies you can use to offer free shipping and still come out ahead:

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Include Shipping Costs In Your Product Prices

One of the simplest ways to offer free shipping is by adding the average shipment cost into all your product prices. This ensures that customers already assume they're paying for the delivery when they buy an item, so technically they are getting "free" shipping even though the cost has been built into each purchase. It's essential to calculate the average cost carefully so products stay affordable, but this method allows you to handle delivery without reducing your margins more than necessary.

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Offer Free Shipping for All Orders Above a Certain Threshold

Encouraging more oversized orders through lower/no delivery fees is another common strategy businesses use that want both happy customers and higher profits from their sales volumes. Offering no charge for shipments over X dollars encourages shoppers who may have only purchased 1 or 2 items at a time before into buying in bulk; not only do these orders add an extra revenue stream with increased quantities bought per order, but they also give you plenty of opportunity upsell add-ons or complimentary products with each sale too!

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Use Flat Rate Shipping

A flat rate technique works best when most items shipped have very similar weights; swap out any pound-based payments with fixed values instead so every order comes out exactly as expected every time, regardless of weight (or size). Choosing one primary carrier helps simplify things further since there's usually just one fee rather than multiple quotes from multiple pages on each shipment – this drastically cuts down on estimating costs too! Alternatively, if it'd work better for your business, then having various rates based on estimated weight could be helpful to keep those processing fees low!

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Pass On fulfillment Fees To Customers

If using third parties such as fulfillment centers or drop shippers, then note there may be additional charges passed onto consumers during their checkout process (in specific cases like returns, etc.), which can help cover part or all of whatever expenses were incurred from outsourcing various functions away from yourself initially in setting up operations like this – great if you want someone else managing stock/deliveries, etc., but factor in those additional savings/costs first before making any decisions here!

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Work Out Discount Deals With Courier Companies

Finally, look around at courier companies operating in your area; offering discounts on certain services could mean more long-term profits if deals negotiated now become regular customers later. Always weigh everything against potential losses suffered versus rewards gained before agreeing on anything, though; always remember loyalty counts both ways, after all! Besides, it's always worth exploring the idea of negotiating discounts for bulk orders, too - although that depends on your relationship with them.

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The Pros Of Free Shipping

Increased Sales

Increased sales can be achieved when retailers ensure their customers aren't aware of additional shipping costs. By offering free or discounted shipping, customers are more likely to go ahead and purchase a product, as the cost of delivery is no longer a deterrent. This can boost sales and improve customer satisfaction levels. Additionally, providing customers faster delivery times and more flexible options can encourage people to buy from you.

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Improved Customer Loyalty

Improved customer loyalty is essential to any successful business, as repeat customers can help drive growth and profitability. To ensure that customers keep coming back to you, it's necessary to provide a great customer experience. This includes offering reliable delivery times, free or discounted shipping options, flexible payment terms, and tailored customer service. Additionally, special offers targeted to loyal customers can increase their satisfaction and motivate them to continue shopping with you.

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Helps In Outcompeting Your Rivals

Free shipping can be a powerful tool for outcompeting your rivals and boosting your profits. By eliminating or discounting the cost of shipping, you can make your products more accessible to customers and improve their buying experience. This helps attract more customers away from your competitors, as people are likely to choose the retailer that offers free or discounted shipping. Additionally, faster delivery times can set you apart from other retailers and give you an edge in the market.

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Increases Order Size

Offering free delivery can increase the size of customers' orders. Customers are likely to add more items to their cart if they need to reach a certain order total in order to qualify for free shipping. This can encourage them to purchase additional items they may not have bought otherwise, helping boost your profits and giving them better value for their money. Additionally, providing special discounts on bulk orders or orders over a certain amount can lead to larger orders and increased customer loyalty.

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It helps Stand Out From the Crowd

Free shipping can be an excellent way for small businesses to stand out. In today's crowded market, offering something unique that sets your business apart from other retailers is essential. Offering free or discounted shipping can distinguish your business from others, as customers will likely choose the retailer with the better value. Additionally, providing faster delivery times than competitors can help make your business stand out, as customers look for convenience and quick turnaround times when shopping online.

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The Cons Of Free Shipping

Increases The Product Price

Free shipping may mean you need to increase the base price of each item to make up for the cost. However, this could be risky as it could lead to decreased sales due to customers finding your product more expensive than similar items from competing retailers. Additionally, any increases in prices could also damage customer loyalty, causing them to switch to another retailer with lower prices. For these reasons, it is important to do thorough research and consider all the factors before deciding on how best to offset the costs of providing free shipping.

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Alters Customer Behavior

Free shipping can have a dramatic effect on customer behavior. When customers do not have to pay for a delivery, they are more likely to become frequent and repeat customers as they don't have to worry about what additional costs may be incurred on individual orders. Furthermore, shoppers tend to purchase items in bulk when there is no cost associated with delivery, which can result in increased sales volumes for the business. These effects increase customer satisfaction and loyalty, making free shipping attractive for companies looking to generate more sales.

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Increases Returns

Offering free shipping may increase returns as customers will be more willing to purchase items without fully considering the details of their purchase. This is because customers are more likely to buy multiple items at once when they don't have to pay for a delivery, which increases the likelihood of them not being satisfied with one or more of those items. Additionally, when customers know that delivery costs won't affect their purchase decision, they may become less hesitant about ordering something only to return it a few days later. For these reasons, it is essential to ensure that your business has clear return policies and procedures in place in order to mitigate any potential negative impacts of offering free shipping.

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Could harm your High Street Performance

Offering free shipping on online orders can be a great way to attract customers to your website. However, it could also have a detrimental effect on the performance of your physical store. Customers may become accustomed to having items delivered to their doorstep with no additional cost and may be more inclined to shop online rather than taking the time and effort to visit your physical store in person. This could impact footfall and sales at the physical store, reducing profits overall for the business. Therefore, before investing in this promotion, companies must consider whether offering free shipping could harm their high-street performance.

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Bad for the Environment

Are you concerned about the environment? Being eco-friendly as an online brand can be difficult, especially when every one of your orders must be shipped out.

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How To Determine If Free Shipping Is Right For Your Business?

It's more complex than switching to implementing free shipping. It necessitates meticulous planning and even more meticulous execution. Consider the following factors to determine the cost of free shipping for your company and whether it is the right move for you.

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Several important factors should be considered when considering if free shipping is right for your business.

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Consider The Additional Costs

Free shipping is not necessarily accessible for your business. The cost of packaging and shipping materials and the time taken to package and ship each order will be passed on to you in some way. Additionally, the costs could add up quickly if you offer free shipping on heavy items or large orders. Make sure you understand all of the associated costs before making a decision.

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Figure Out How Much Revenue Free Shipping Will Bring

Free shipping can increase sales by encouraging customers to purchase more items at once or entice them to buy immediately instead of waiting until they have enough money for expensive shipping charges. Carefully consider the average order size versus the impact of any additional expenses related to offering free shipping.

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Weigh The Pros And Cons

As with any decision, weighing the pros and cons of offering free shipping is essential. Consider both the cost savings to customers and your potential increased revenue against any additional costs you may incur due to this policy change.

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Understand Customer Expectations

Customers expect fast and affordable delivery options now more than ever. Offering free shipping can help differentiate your business from competitors who charge for shipping; however, if you need to keep up with customer expectations regarding delivery speed or reliability, offering free shipping may not be worth it in the long run.

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Consider Flat-Rate Shipping

If you decide to offer free shipping, consider flat-rate shipping. This allows customers to pay a fixed rate for their entire order regardless of how much they buy. The rate should be enough for your business to cover the cost associated with delivering the goods without negatively impacting your bottom line.

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Set Your Free Shipping Limit

If you decide to offer free shipping, set a minimum order limit. This will help ensure your delivery costs are covered, and customers are encouraged to purchase more items for their order to qualify for the free shipping option.

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Tips For Offering Free Shipping Without Hurting Your Bottom Line

If you're ready to create your free shipping strategy, follow these guidelines to develop a program appealing to online shoppers while not destroying your bottom line.

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1) Increase Product Prices to Cover Shipping Costs

The most straightforward way to cover shipping costs is to raise the price of your product accordingly. This technique works best for products with a high ticket value purchased in bulk or frequently.

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2) Provide a "Free Shipping on Orders Over" Model

This model helps you increase your Average Order Value while offering free shipping. By incentivizing customers to spend more, you can recoup some of the cost of their shipment. Setting minimum order sizes also allows you to restrict free shipping to larger orders with a more significant net profit after covering the shipping cost.

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3) Increase LTV by Offering Subscription-Based Products

Subscription-based services are a great way to build customer loyalty and increase lifetime value, but they also provide a bonus of covering the cost of free shipping for customers. When customers sign up for a subscription-based product or service, you can include free shipping in the package to encourage them to stay with your company longer.

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4) Restrict Free Shipping to Specific Products, Customers, or Locations

If you're looking for ways to reduce your shipping costs without sacrificing the convenience of offering free shipping, consider restricting it to specific products, customers, or locations. For example, you might offer free domestic shipping on all orders over $50 but restrict international orders to only those above $100. This method allows you still to provide customers with the convenience of free shipping while minimizing your costs.

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5) Collaborate With a Third-Party Logistics Company to Provide Free (Sometimes Two-Day) Shipping on a Large Scale

Partnering with a third-party logistics company can efficiently provide quick, convenient shipping for your customers without breaking the bank. Most companies offer two-day delivery options; some even offer free same-day delivery for qualifying orders, so you can satisfy customer expectations without sacrificing profitability.

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6) Reduce the Cost of Your Packaging

By cutting back on packaging materials, you can reduce the cost of shipping products. Consider using lighter-weight materials to pack items to cut down on materials and postage costs. Additionally, ensure you're only using the necessary packaging and not including any extra materials.

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7) Make a One-Time Free Shipping Offer

If you want to boost sales without sacrificing too much profit, consider making a one-time free shipping offer. This can be accomplished by providing customers with a coupon code or other incentive that allows them to receive free shipping for their orders. The key here is to ensure that the cost of offering free shipping doesn't exceed the profits from your sale. You'll also want to consider how long your offer should last; if it's too short, customers may miss out on it, but if it's too long, you'll end up eating costs unnecessarily.

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Conclusion

In conclusion, offering free shipping can significantly boost business profits while providing excellent customer service. You should consider implementing a free-shipping strategy if you're looking to make your eCommerce business more profitable. However, it is essential to ensure you are still making a profit when offering free shipping; otherwise, the promotion could backfire and lead to losses instead of gains. Consider your options before choosing the right strategy for your business needs. Remember that there are also third-party companies that can provide additional help with shipping and order fulfillment services so that you can maximize your savings. Finally, to get the most out of offering free shipping and increase online sales conversion rates, keep track of consumer preferences and consider adding incentives—such as discounts for buying multiple items or loyalty programs—to motivate them further. Need help fulfilling Amazon orders? Get in touch with Simpl today and start boosting your profits!

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