Looking for ways to promote free shipping without breaking the bank?
While your customers might be excited about not spending any more for delivery, your accountant is likely sweating bullets while they try to figure out who will pay the courier costs.
Even Amazon struggles to cover the costs of free delivery. They recently raised the minimum order threshold from $25 to $35 in the US. So, how can your small business afford this offering?
The good news is that there are multiple strategies to provide free shipping to customers that won't bankrupt your business.
In this article, we'll dive deep into whether your business should have free shipping offers, the different strategies you can deploy, and some alternatives to free shipping to look into.
Should Your Business Offer Free Shipping?
The Australia Post Delivery Experience Report revealed that 81% of shoppers expected free delivery when the total cost was above a certain threshold. The Baymard Institute also found in 2020 that extra expenses, like shipping, are the top reason customers abandon their shopping carts.
But before you can announce that you're offering free shipping, you need to determine if you can afford to provide it. Use this table to determine if it's right for you.
| Ask Yourself | Yes? | No? |
| Can you absorb the costs of free shipping? | Calculate how many additional sales you need to make to compensate for the reduced profits per order. If you can consistently reach these volumes, then offering free shipping is worth exploring. | If you sell lower-priced items, absorbing the cost of free shipping might mean you'll be operating at a loss. You may need to lift the price of your products or look at alternatives to free shipping. |
| Do your competitors offer free shipping? | You may need to if your competitors provide free shipping on all purchases. If your competitors don't include free shipping, it could make your business a differentiator. | If your competitors don’t include free shipping, it could make your business a differentiator. |
| Will you need to increase your product prices? | Review your profit margins and compare costs with competitors to ensure you're not priced out of the market. If you can maintain healthy margins and offer free shipping, then you should explore this opportunity. | Consider your long-term goals, such as expanding your inventory or scaling globally. |
| Do your customers expect free shipping? | You can tell if your customers expect free shipping by reviewing your cart abandonment rate. | Act as a mystery shopper and review how popular competitors manage shipping costs. If they don’t provide free shipping, you may not need to consider it for your business. |
10 Strategies to Provide Free Shipping to Customers and Still Make Money
There are many methods of offering free shipping. The key is finding an approach that suits your business and won't detrimentally impact your bottom line.
Offer Free Shipping on All Orders
The easiest way to promote free shipping is to include it on all your orders. You can add a banner to your website and social media content. Before you activate this feature, follow these steps:
- Review your margins to confirm you can absorb the cost of free shipping.
- Align free delivery with your long-term strategy, such as increasing your product range and scaling globally.
- Calculate how many sales you need to make to cover the cost of free shipping.
- Determine where your customers are located and budget your delivery costs accordingly.
Provide Free Shipping on High-Margin Products
Instead of giving customers free delivery on all orders, you can provide it on a specific product range with healthy margins. This will make it easier for your business to absorb the courier costs while allowing you to promote the offering to customers. Take this approach to implement it into your business:
- Review your profit margins to determine the best products eligible for free shipping.
- Forecast the long-term likelihood of margins being impacted by supply chain issues or disruptions.
- Determine the maximum margin impact your business can withstand by offering free delivery.
Raise the Product Price
If you’re adamant about offering free shipping, you may need to consider raising your prices to accommodate it. This is easier if you haven’t launched your online store. But if you have, you may need to review how the changes will impact your existing customers.
- Compare prices and shipping with competitors to determine the best value offering.
- Monitor the drop-off of returned customers after raising the prices of your products.
- Review social media for any negative sentiments on the increase in prices.
Increase the Customer Lifetime Value
Many brands are willing to take a loss on margins for the first purchase if it means customers will return again and again. To achieve this, you must keep shoppers engaged by personalising campaigns, offering a referral program or providing outstanding customer service.
- Retrieve your company's total revenue over a specific period and divide it by the total number of orders made by customers during that timeframe to get the average order value.
- Find the total number of purchases made and divide it by the count of unique customers who made purchases during that same period to identify the average purchase frequency rate.
- Determine the average number of years a customer continues to purchase from your company to work out the average customer lifespan.
- To get the customer lifetime value figure, multiply the average order value by the average purchase frequency by the average customer lifespan.
Increase the Average Order Value
Raising the average order value can provide a buffer to your margins when you offer free shipping. You can take different approaches depending on the type of products you sell.
- Offer free shipping to customers that bundle orders. They can opt to select the items they’re after, or you can promote popular packages shoppers like them purchase.
- Consider a minimum order threshold before a customer is eligible for free shipping. This is one of the ways Amazon absorbs the costs of free shipping.
- Provide free delivery on bulk orders. Consider setting a minimum amount before this offer becomes available. Review your figures for a cost-efficient and realistic number.
Utilise Free Shipping During Peak Sales Periods
Instead of offering free delivery 365 days a year, you can reserve it for special events. You can then use it in promotions and as a sweetener to convince customers to go through with their purchase.
- Black Friday and Cyber Monday are two of the year's busiest shopping days.
- Boxing Day sales are another popular shopping event for people who didn’t get what they really wanted for Christmas.
- Don’t forget days like Mother’s Day, Father’s Day and Valentine’s Day. You may even want to offer free shipping on the anniversary of the opening of your online store.
Offer Free Shipping for First-Time Buyers
Some first-time visitors to your website will need a little nudge to get them over the line. Some businesses will offer discounts on their first purchase. But free shipping is an even better carrot to dangle that can convince them to complete the checkout journey.
- Collect an email address to validate the customer is a first-time buyer before providing a code to activate free shipping.
- Send an abandoned cart email to remind first-time shoppers they haven’t completed their checkout. Include a code for free shipping to win them back.
- Offer free shipping for new customers for their second purchase to encourage them to return to your online store.
Create a Member Program
Amazon Prime is an excellent example of a member program that provides customers benefits such as free shipping. For a monthly or annual fee, you can provide shoppers free delivery for some or all of your items.
- Early access to new products and offerings.
- VIP experiences on Black Friday and Cyber Monday.
- Exclusive discounts during peak sales seasons.
Design a Loyalty Program
Another option is to offer repeat customers free shipping. By advertising a loyalty program, you’ll not only encourage shoppers to continually purchase from you, but you’ll also grow a fanbase that can promote your online store with friends and family.
- Free shipping on every 5th purchase.
- Free deliveries after a specific dollar amount is spent.
- Free shipping for multiple referrals to your online store.
Start a Subscription Service
You can even include free shipping when customers sign up for a subscription service. If you’re not sure what to have as a part of this offering, consider these options:
- Monthly or quarterly refills on popular items such as makeup, clothing, or wellness materials.
- Monthly coupons for deals on your store. For example, 10% off, two-for-one deals, or free shipping on orders over a dollar amount.
- Send a collection of sample products monthly to encourage customers to purchase the larger item. You could offer free shipping if they buy it to help increase conversions.
Alternatives to Providing Free Shipping
In cases where offering free shipping isn't financially feasible, exploring alternative approaches to attract and retain customers becomes crucial. The good news is that there are creative methods to stay competitive among your peers.
Live Shipping Rates
Live shipping rates show customers the real-time shipping cost for a range of different couriers. It looks at the weight, size, and destination of your product and finds the cheapest options available on various different courier sites.
This assures customers that they're paying the correct shipping cost, with the choice of express, standard, and same-day options. Live shipping rates are a feature you can use on the Interparcel platform if you have either a Shopify or Woocommerce store.
Offer Free Returns
Consider offering free returns as an alternative to free shipping. Customers will appreciate the flexibility of hassle-free returns when garments don't fit or align with their style preferences.
Before you promote this option, review your finances and frequency of returns to determine if it’s a profitable solution.
Provide a Flat Delivery Rate
Instead of surprising customers with unexpected shipping fees at the checkout, consider implementing a clear and upfront flat rate for delivery, regardless of the order total. This approach provides transparency and ensures that customers know their delivery costs from the beginning.
Determining the appropriate flat rate requires a careful evaluation to strike a balance that doesn't compromise your profit margins. However, this strategy can effectively reduce cart abandonment rates, as customers will have clarity about their delivery expenses before reaching the payment stage.
How to Create a Free Shipping Strategy
Taking a tailored approach that aligns with your unique circumstances is essential before offering free shipping. Try to avoid comparing your business to Amazon or eBay. Focus your attention on popular smaller ecommerce businesses and review their approach to free delivery.
If you need expert advice to determine if free shipping is right for your business, contact our team of shipping solution specialists. They can provide personalised insights and walk you through your options.
Book a call today, or create a free account to explore our different fulfilment solutions.
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