Offering free shipping is often expected now when it comes to online shopping, but it is more challenging for some businesses, particularly smaller ones. Free shipping can affect your profit margin, so you have to be confident you can afford to implement a free shipping policy and that the benefits of offering it outweigh the drawbacks.

In this article, we’re going to look at some of the benefits of offering free shipping, how you can cover the costs of free shipping, and how to decide whether you should offer free shipping at all. Keep reading to learn more.

How Offering Free Shipping Can Help Your Online Store

Offering free shipping is a great way to boost sales and increase customer retention, and it is almost expected now of online stores. But what are the actual benefits for you and your eCommerce store?

The benefits of choosing to offer free shipping include:

  • It can lead to an increase in the average overall order value – When customers know that they don’t need to set aside any shipping costs, they are more likely to spend. They may also buy more to hit a free shipping threshold you set.
  • It builds brand reputation and loyalty – If customers know you have a free shipping offer, they’re more likely to purchase something that one time. If they see you offer year-round free shipping, they will likely keep coming back to you to take advantage of products with no shipping cost.
  • It helps you to compete with brick-and-mortar stores – Some customers may feel when they’re shopping online that they spend more money on delivery fees than if they were to just go into the physical store. By adding free shipping promotions to your online store, customers feel they’re actually saving money.
  • It gives you an advantage over online competitors, too – The industry you operate in will usually set some standards for the kind of shipping fees you can charge, but offering free shipping will always set you apart from competitors, especially if it isn’t commonly done in your industry.

How To Cover The Cost Of eCommerce Free Shipping

To offer free shipping to your customers, you’re going to need to be able to absorb the costs of free shipping. You can do a few things as part of your free shipping strategy to ensure that you can offer free shipping to your customers.

These include:

  • Increasing the product price – No one wants to increase the product price, but customers are more likely to buy something if they do not have to pay the shipping on it. Free shipping gives the illusion of saving money, even if you’re adding the shipping cost to the product price.
  • Increasing your customer lifetime value – Though it won’t help you in the short term, offering free shipping means your customers are more likely to return and spend more over time.
  • Increasing average order value by offering bundles, deals, or membership – By getting your customers to spend more through deals, you’re more likely to be able to absorb the cost of shipping.
  • Offer free shipping with a threshold – This is one of the best free shipping tactics you can add to your site, and it means you’re more likely to cover the cost of shipping with a sale. By setting a limit to reach before you get automatic free shipping, you’re enticing customers to pay a certain amount before they’re rewarded.

What Is A Minimum Order Threshold?

A minimum order threshold or free shipping threshold is a great way to offer free shipping and get your customers to spend more. With a minimum order value, you set how much a customer must spend to be rewarded with free shipping. For example, you may set £20 as your minimum order threshold before customers no longer have to pay the shipping costs.

When deciding on a free shipping threshold, you will need to find a balance between a limit that allows you to absorb free shipping costs and an amount that people will be willing to spend to avoid shipping costs. It is sometimes recommended that you increase your average order value by 30% and then round this figure to a whole number.

Note that this strategy may allow you to offer free shipping, but it usually comes with more returns as customers spend more to receive free shipping and then return the unwanted products they bought.

How To Decide The Best Shipping Costs For Your Business

When it comes to your shipping costs, you need to decide what is best for you. You may consider increasing product prices or setting a threshold to offer free shipping, and the decision will always be influenced by your industry, your business size, and how much you can afford.

While free shipping does draw in customers, shipping cost is not the only thing that increases your sales. As well as low shipping costs, customers like fast delivery and quality products, so if you cannot implement a free shipping policy or reduce shipping costs, think of other ways to draw customers in.

Final Thoughts

Free shipping draws in customers, and any online retailer can benefit from this, but free shipping isn’t the only thing customers seek when shopping online. If you cannot afford to offer free shipping, you could reduce your delivery times or ensure all of your products are of the highest quality.

Frequently Asked Questions

How do sellers offer free shipping?

Most often, sellers will offer free shipping by increasing the prices of their products or offering bundles to online shoppers. Both of these strategies mean people will spend more with online retailers to cover free shipping costs. Other sellers may offer free shipping once a threshold is met, ensuring that shipping rates are covered as customers are rewarded with free shipping.

Is it smart to offer free shipping?

Free shipping is thought to result in increased sales, increased average order value, and increased customer retention, which all help you make more money. A free shipping option is thought to actually affect purchasing behaviour and push people to spend more money when online shopping. It is smart to offer free shipping, but it does not come without drawbacks. When you offer free shipping, you are also opening yourself up to an increase in returns, especially if you offer free returns. Before adding a free or express shipping option, consider whether the benefits outweigh the drawbacks.

Does free shipping increase sales?

It is thought that free shipping can inspire customer loyalty, increasing sales over time. Adding a free shipping threshold can also help to increase sales and your average order value. This is because people are more likely to spend over this threshold to get free shipping. However, with a free shipping threshold, it is more likely that your returns will increase, too, as people return products they only bought to get the free shipping.

How is free shipping profitable?

When it comes to offering free shipping, it can seem incongruous with making a profit. If the customer isn’t paying the shipping costs, then you are. This means you need to make adjustments for it to be profitable. This can be done by increasing product prices, offering bundles or loyalty programs to get free shipping, and adding a free shipping threshold value to ensure people spend enough for free shipping to be profitable for you.

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