How to Offer Free Shipping on Your Products Without Breaking the Bank
While free shipping on online purchases used to be a luxury, it has already become a standard expectation among modern consumers. There are two sorts of free shipping offers: conditional free shipping (free shipping under specific conditions) and universal free shipping (free delivery on all orders) (unconditional free shipping).
Both offers can be pricey, but they don’t have to break the bank.
Here, we’ll look at each sort of offer in detail and discuss how to make them work for your business, regardless of your margins or order volume.
Tips for Offering Conditional Free Shipping
Offering free shipping on everything may sound appealing from a marketing standpoint, but it is rarely a profitable strategy for small businesses.
Here are five ways to add conditional free shipping offers to your store:
- Establish a minimum order value.
A simple strategy to avoid losing money on little transactions is to offer free delivery with a value threshold high enough to protect your profits.
It’s also an efficient approach to persuade customers to make additional purchases. According to BigCommerce’s Shipping Report Survey, 84 percent of shoppers have added an item to their cart just to meet a free shipping minimum order requirement.
Free delivery thresholds are usually easy-to-understand amounts divisible by five or ten, such as $25, $50, or $100. Your store’s limit should be high enough to prevent you from losing money, yet low enough to be considered a reasonable offer. So, where do you look for that sweet spot?
You’ll need to use some of your store’s recent analytics in this calculation to get your zero-loss shipping threshold:
(Average Shipping Cost / Gross Profit Margin) + Average Order Value = Free Shipping Threshold
The figure you get is the smallest amount of free delivery you can ask for without putting a dent in your profit margin.
Assume that your store’s average order value is $60. Each order costs an average of $9.50 to ship, and your gross profit margin is 40%. The formula for determining a profitable free delivery threshold is as follows:
$60 + ($9.50 / 0.40) = $83.75
This value would be rounded up to $85 or $90 to give buyers with a straightforward and digestible number.
If this restriction proves to be too costly to gain momentum with your consumer base, you can easily reduce it at your own expense. Experiment with different minimum order thresholds using the formula below:
(Proposed Threshold) Average Order Value) Gross Profit Margin) Free Shipping Cost = Average Shipping Cost (Proposed Threshold) Average Order Value) Gross Profit Margin)
Here’s what the test-calculation would look like if you could only tolerate a $75 minimum order with the same metrics as above:
($75 $60) 0.40) = $3.50 = $9.50
As a result, you can anticipate to pay no more than $3.50 out of pocket for each order that ships for free.
- Provide free shipping on a limited number of items
Most stores don’t make a very large profit on every item they sell, and shipping prices vary greatly depending on the destination, size, and weight of the package.
Even a high-end eyewear store, for example, sells cart-stuffers such as lens cleaners and microfiber cloths. Free shipping on a low-margin order like this might quickly put you in the hole.
Another option is to limit free shipping to specific products. This method works on items with a low delivery cost and a high enough markup to keep the business profitable after shipping fees are deducted.
- Make it a marketing opportunity
Another approach is to provide free shipping for a limited time. You know that creating a sense of urgency in product descriptions is an effective way to boost sales, and the same concept applies to discounts or promotions.
Provide free shipping to consumers during a holiday or to celebrate a current event. Reduce or eliminate the minimum criterion if you currently offer free delivery on orders over a specific amount.
The goal is to entice potential purchasers and convert them from window shoppers to paying customers. Create an eye-catching post for your social media accounts, send a digital flier to your email marketing list, or invest in some online adverts to promote your promotional activities.
- Provide free standard shipping.
Most carriers offer a low-cost, slow shipping alternative, such as USPS Parcel Post, which is often less expensive than Priority Mail. Offer a low-cost delivery alternative for free to save money on free shipment.
Allow customers to upgrade to speedier delivery by adding the shipping amount to their total at checkout. Customers can choose to enhance their order’s delivery speed after providing their email and shipping address.
You’ll spend less on shipping while preserving the allure of delivering it for free using this strategy, and many buyers will gladly pay for faster shipment if given the option.
- Make use of Fulfillment By Amazon (FBA)
Partnering with Fulfillment By Amazon is a simple way to offer free shipping on your Amazon orders.
Most FBA items are eligible for Prime shipping, which is both free and lightning fast. You’ll already have a ravenous customer base because 200 million people pay for a Prime subscription to obtain access to that facility.
This advantage comes with the convenience of having fulfillment handled by a third party. In addition, being a part of the FBA program benefits Amazon sellers in a variety of ways, including improved search ranks and “buy-box” placement.
While you won’t pay for delivery directly, FBA will charge you a variety of extra costs.
Tips for Making Universal Free Shipping Work For You
Small businesses can frequently achieve the promotional benefit without incurring a significant loss by using conditional free shipping. However, in some circumstances, it’s preferable to remove the requirements and offer free shipping to everyone.
Customers appreciate simplicity, and the all-encompassing benefit of free shipping may be a key sales driver. This is especially true in the age of Amazon (and other behemoth stores), which offers free shipping on over 100 million items.
If your customers can get very similar products on Amazon, you’ll have to at least consider offering sitewide, limitless free shipping to stay competitive. There are two main approaches:
Incorporate Shipping Costs into Your Pricing
This strategy makes use of the word “free” to increase sales. The cost of shipping is factored into the price of each item, resulting in higher product pricing that covers the cost of shipping without the customer having to think about it.
The truth is that free shipping is frequently prioritized by customers over the item’s usual price. Due to the inclination of shoppers (and humans in general) to irrationally appreciate free items, the perceived value of free shipping is often far greater than economical—or even discounted—pricing.
Similarly, the price of an object has a significant impact on its perceived value. Because expensive goods are typically considered as “superior,” just changing a product’s price might increase customer appeal.
When both of these factors are considered, customers are more likely to choose a $50 item with free shipping over a $40 item with $10 shipping.
Adjust your store’s pricing based on the average order value, amount of items per order, and shipping cost. Then promote the alluring convenience of free shipping on all orders.
Absorb Shipping Costs Into Your Margins
You’ll need strong profit margins and tight control over fulfillment and shipping expenses to make this strategy work.
However, if you’re fortunate enough to have a good mix of solid profits and low delivery expenses, unconditional free shipping can be a no-brainer. Jewelry, watches, collectibles, fashion accessories, cosmetics, and supplements are examples of small, expensive items that travel in manageable, lightweight packaging.
Once free delivery is offered, the key to this strategy is to keep a close eye on sales. Most likely, you’ll notice a rise in order volume that compensates for the reduction in margins. Consider switching to a new shipping model if you don’t observe a favorable trend.