A lot of big online retailers will offer free shipping, but for small online businesses it’s a lot harder to cover delivery costs and still make a profit. We take a look at the benefits of offering free shipping, what you need to be careful of and the different ways you can implement a free shipping offer.
Should you offer free shipping?
According to a UPS survey, 93% of shoppers will take action to qualify for free shipping, with 58% saying they would add items to their order. Here’s how free shipping could help your business:
1. Increase sales
Shipping costs are one of the main things that make people hesitate before buying online. If people are viewing your online shop but not buying, then offering free shipping is an almost guaranteed way to increase the number of potential customers that decide to buy from you.
2. Compete with brick and mortar stores
People will often look online expecting to find cheaper prices, however if they then find that they have to pay £3 for delivery some people will consider buying from a physical store. By offering free shipping you can compete with brick and mortar stores.
3. Increase average order value
It might not always be possible to offer free shipping on everything, especially if you sell a lot of low margin items. However, if you offer free shipping with a minimum spend, this will encourage people to spend more.
Things to consider before you offer free shipping
Offering free shipping isn’t as simple as just changing the prices on your website or marketplace listings. You’ll need to do some research into how much shipping will be for different items depending on size and weight, and look at the margins for them to work out whether you’ll end up making a profit.
Customers may be attracted by free shipping, but if that means the item will take a long time to arrive then they’ll be put off - shoppers are usually happy to wait up to a week for a free delivery, depending on the item this might be longer. If shipping takes longer than a week buyers are likely to purchase from a local shop even if it’s more expensive.
It’s also important to consider where your customers are, you might have to restrict international buyers from receiving free shipping, or increase the thresholds for them.
Free shipping is usually going to be the slowest shipping method in order to keep costs but there will always be a few last minute shoppers that are prepared to pay extra for their items to arrive sooner, so make sure you still offer expedited shipping options.
How can you afford to offer free shipping?
Very few small online businesses will be able to offer free shipping on all their items and still make a profit. Here’s a number of ways that you can offer free shipping to help your online shop:
1. Incorporate shipping into the price
One of the best ways to make free shipping affordable to your business is to increase the price of your products to incorporate some, if not all, of the costs of shipping. This will still appeal to buyers influenced by free shipping but you won’t be spending all of your profits from the product on shipping it. However, your prices still need to stay competitive because a lot of buyers will look around for the best price.
2. Minimum spend
If you want to increase your average order value then offer free shipping once the buyer has spent a certain amount. This is also a good way of making free shipping affordable to you, because the buyer has to spend more and probably buy more than one item so the cost of the shipping is spread over the margins for several things.
3. Offer free shipping for a limited time
If you can’t afford to offer free shipping all year round, use it is a promotional offer - it will encourage customers that have been thinking about purchasing to buy. Treat it like any other sale and promote it on your homepage, send out emails and post on your social media accounts.
How to offer free shipping: Summary
Margins: work out your margins and the cost of shipping, make sure you'll still make a profit if you offer free shipping.
Limit your free shipping: set a minimum spend, offer it on certain items, or for a limited time.
- Offer alternative methods: make sure you still offer faster, paid shipping options.