Offering free shipping
You would have probably seen companies offer free shipping on online sites and wondered how they do it while still maintaining their profits. If you want to be like these online sites, this article will go through all the ins and outs of profit-making even when free shipping is offered.
Why offer free shipping
Statistics have shown that more than 70% of customers are more likely to order an item if there is free shipping, while less than 45% would buy it if there are shipping fees to be paid. This means that more than half of shoppers would abandon their carts if they had to pay more for shipping.
Free shipping helps to reduce the likelihood of customers abandoning their cart, which can also help increase customer loyalty. With the saturated e-commerce market today, free shipping could make all the difference. This could translate into repeated purchases, word-of-mouth recommendations and more positive reviews about what you sell – all while still earning a profit!
Some things to consider before providing free shipping
Though there are many upsides to free shipping, you should also consider the following factors that can influence your decision. It may not be prudent to offer free shipping for bulky items or items overseas. Here are some factors to consider:
- Average order value
- Average order size
- Product dimensions and weights
- Shipping rates by carrier
- Shipping radius
Ways to offer free shipping
At the end of the day, despite who is paying for the shipping cost, your customers will still see “free shipping” on their page and this is incentive enough for them to check out their cart. Here are some ways you can offer free shipping at a low cost while still making profits.
Set a minimum order value
This method will work if you find a value that is attainable to your customers and would encourage them to shop more. If the value is too high, they may not even try to reach that amount. If it is too low, you might lose money when you offer free shipping. You should also display clearly on your cart how much they need to spend to get free shipping and how close they are to qualify for free shipping as they start adding items to their cart. This is likely to encourage your shopper to add more items to the cart.
You can apply a single flat rate for shipping on every order or by shipping box volume. For example, you can set a shipping fee of $10 for deliveries sent within Singapore. If you are doing shipping by box volume, it may require a little more planning.
It will require you to assess which items are habitually purchased by your customer and what other items they are purchased together with. Fill in the commonly purchased items together in an average-sized box and see how much space you have. From there, you just need to fine-tune your accompanying offerings and free shipping threshold.
Free shipping with membership
Amazon Prime is an example of this e-commerce membership program. Customers pay monthly or yearly fees to be members and get free delivery on Amazon Prime eligible items. This works as the membership fee and repeated business would make up for shipping costs that the company pays. Furthermore, it keeps customers from returning to the site as they are already paying a monthly fee.
This is one of the cheapest options – customers often do not mind trading in longer waiting times for free shipping. While air cargo would be faster, it is more expensive. Ground shipping reduces shipping carrier costs.
Outsource fulfilment and shipping
By outsourcing fulfilment and shipping, you had over the job of packing and dispatching to someone else. This allows you to focus on running your business and save costs for you as you won’t need to set up a distribution centre.
Third-party logistic providers could offer more discounts as well due as they ship large volumes of orders. These savings could even be passed on to your customers so that they can enjoy free shipping without cutting into your profit margin.
Offer local store or drive-thru pickup
Another option that you can provide is to work with local stores and provide curbside or drive-thru pickups as an option. This method would work best for businesses with both online and physical stores. If your customer opts for the pickup option, you should set their shipping rate to ‘free’ automatically on the store site.
Limited-time free shipping
If you are unable to offer free shipping all year round, you can take advantage of holidays to boost your sales using free shipping. This method will allow you to get a short-term boost in profits.
Free shipping for first-time customers
Another method for companies that are unable to offer free shipping across the platform throughout the year is to target first-time customers. Give them a one-time use coupon code to use on your online store with every signup. Not only does this create an incentive for them to purchase from your company, but also increases your reach to potential customers and returning customers.
Profit-making while offering free shipping
These are just some of the more common and usable tips that companies can use to increase their profit margin in the long run and attract more customers. As an e-commerce company, you would also probably need your paperwork and accounts to be settled for you to deal with daily operations with peace of mind. If you are looking for assistance, feel free to drop us a call or WhatsApp chat.