Monday, May 27, 2024

Can offering free shipping boost your bottom line?

You know a concept is popular when it gets its own day. Valentine’s Day may be for lovers, but Free Shipping Day is for shoppers who love saving money. But for online businesses, the question is: Will offering free shipping love you back?

Free Shipping Day is a one-day, online-shopping event when thousands of merchants offer free shipping with delivery by Christmas Eve. In its seventh year, Free Shipping Day falls this year on Thursday, December 18. It’s grown consistently since it was launched seven years ago. Canadian retailers joined the movement in 2012.

It’s a opportunistic day to take advantage of the holiday shopping season. But what about the other 364 days of the year? As small business owners quickly find out, there really is no such thing as free shipping. The cost of offering the service can quickly cut into profit margins. For parcel carriers, online retailing has been a boon. You can bet they don’t believe in free shipping.

Consumers, though, embrace the concept. Data compiled by Forrester Research showed that nearly 60 percent of adults who shopped online in the U.S. gravitated towards retailers that offered free shipping. At the same time, online shoppers will often abandon their cart when the shipping cost pushed the final price beyond their budget. Forrester found that 44 percent of Web shoppers surveyed didn’t complete online transactions because shipping and handling costs were too high.

So, “to free” or “not to free”, that is the question.

If you go with free shipping, feature it in your marketing strategy. In Canada, especially, free shipping can make you stand out in the marketplace. To limit the impact on your margin, and maybe even boost profit, have a minimum order to qualify. And don’t be modest – feature free shipping prominently on your site. Many other online retailers, especially in Canada, are not doing it. Get the most from the money you’ll now be spending on shipping.
Be an honest broker. Some shopping carts, such as those offered by Shopify, let you set up real-time shipping quotes. They point out that Simple Sugars, a store that was recently on Shark Tank, uses this tool. Customers can even choose the shipper they want to employ. It’s not as catchy as “free shipping”, but the parcel carriers are now competing for the business, and maybe in the long run, if more businesses do it, they’ll offer more competitive rates. At the very least, your customer sees they are only paying what you pay.

Crunch the numbers and figure out some flat rates. Flat is not as flashy an offering as free, but you – and the customer – have costs to manage. Some companies base the flat rate on weight, but if you do it per order, customers might even be tempted to throw a few more items in the virtual cart since they’re paying the flat rate anyway.

Remember, tackling shipping costs is one of those problems that are good to have in your business. It means products are moving off your shelves. By thinking strategically about shipping policies, it can even boost those sales further.


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