The Power of Free Shipping: Boosting Sales in the E-commerce Landscape
In today’s competitive e-commerce landscape, shipping plays a vital role in customer decision-making. Questions such as “How much does shipping cost?” and “When will my order arrive?” have a significant impact on whether a purchase is completed. Customers now expect both free shipping and fast delivery, with two- to three-day shipping becoming the baseline and same-day delivery becoming increasingly common. A McKinsey report reveals that over 90% of US consumers consider two- to three-day delivery as standard, while 30% even expect same-day delivery.
According to JungleScout’s 2021 Consumer Trends Report, 80% of consumers anticipate free shipping for a certain dollar amount of products, and 66% expect it for all online orders. Failing to offer this benefit can lead to lost sales, as shipping fees frequently contribute to shopping cart abandonment rates, which average around 69.9%. Given these statistics, it is crucial to understand the impact of free shipping on sales and how to effectively utilize this strategy to increase conversion rates.
Does Free Shipping Increase Sales?
The question of whether free shipping drives sales can be answered by examining the data:
- Shipping costs cause 48% of online shoppers to abandon their carts.
- 78% of consumers are willing to buy more to qualify for free shipping.
- Free shipping is the number one driver of online shopping.
- 27% of shoppers prefer in-store purchases to avoid shipping costs, posing a risk to online-only businesses.
In short, it indeed increases sales. Customers are more likely to make additional purchases to qualify for it, and they may seek alternative sellers if it is not offered.
However, implementing free shipping requires careful consideration. There are various approaches to offering this benefit, and selecting the right one depends on your business goals, target audience, and their expectations. In the following sections, we explore eight types of strategies to help you determine when and how to use this tactic effectively to boost conversions.
Build Shipping Costs into Pricing
One way to offer this benefit is by incorporating the shipping costs into the product prices. By doing so, you can provide it on every item you sell, increasing the likelihood that customers will choose to shop with you and complete their purchases. However, it is essential to calculate your profit margin and determine whether it will impact your profitability. Tools like Shopify’s profit margin calculator can assist in this process.
Offer at a Certain Spending Threshold
Another option is to offer free shipping to customers who reach a specified spending threshold. For example, Wayfair provides it for orders over $35. To determine the appropriate threshold for your business, consider factors such as your average order value (AOV) or median order value (MOV). Setting the threshold slightly above your AOV or MOV can incentivize customers to increase their order value, thereby boosting your average order value and helping cover shipping costs.
Offer for First-Time Customers
If offering free shipping consistently is not feasible, consider providing it as an incentive to new customers. Creating a one-time use discount code for new accounts can help attract new sales and increase customer acquisition.
Boost sales by offering free shipping for a limited period. For instance, you could create promotions for weekends, major holidays, or special occasions. Limited-time offers create a sense of urgency, encouraging customers who have been postponing their purchases to take advantage of the promotion. Promote these events on your website and social media platforms.
To manage shipping costs, consider offering free shipping only to specific regions, states, provinces, territories, or countries. This approach allows you to cater to a significant portion of your audience, even if you cannot offer it to everyone. Additionally, storing your inventory closer to your customers can reduce carrier costs, enable faster shipping speeds, and provide a competitive advantage.
Offer on Select Items
While offering free shipping on all products may not be financially feasible, consider providing it for smaller items within your product range. This allows you to offer this benefit to customers while managing the shipping costs associated with larger products.
Leverage free shipping as an incentive for customers to take other actions that benefit your business. For instance, offer it to customers who sign up for a store credit card or create an account, thereby driving customer engagement and loyalty. Use this tactic to entice customers to engage with your brand, whether through account creation, newsletter sign-ups, or social media follows.
In-Store/Local Pickup or Delivery
If ongoing free shipping is not feasible, consider offering local delivery or curbside pickup, especially if you have a physical storefront. Research indicates that online shoppers spend more and have larger cart sizes when local pickup and delivery options are available. Customers value supporting local businesses and appreciate the advantages of local shipping and curbside pickup, such as price and faster delivery. Additionally, local delivery presents an opportunity to provide a personalized brand experience, connecting with customers on a deeper level.
The Benefits of Free Shipping for Sales:
While free shipping has become a customer expectation rather than a competitive advantage, it offers several benefits for your business:
Increased Average Order Value:
Setting a threshold can lead to higher average order values. By incentivizing customers to spend a bit more to qualify for free shipping, you not only increase their order value but also boost overall sales. When customers see the value in reaching the free shipping threshold, they are more likely to add additional items to their carts, resulting in increased revenue for your business.
Reduced Cart Abandonment Rate:
Transparent and upfront free shipping can significantly reduce cart abandonment rates. Customers often abandon their carts when they encounter unexpected shipping costs during the checkout process. By offering free shipping, you remove this potential obstacle and create a seamless purchasing experience. This, in turn, encourages customers to complete their purchases and reduces the likelihood of cart abandonment.
Enhanced Sales Performance:
Implementing free shipping often leads to increased sales overall. Customers are more likely to make a purchase when they see the availability of free shipping. It serves as a powerful motivator and can attract new customers to your business. By removing the barrier of shipping costs, you create a more enticing and appealing shopping experience, which can result in a surge in sales and a positive impact on your business’s bottom line.
Improved Competitive Advantage:
In a marketplace where free shipping has become the norm, offering this benefit gives your business a competitive edge. It sets you apart from competitors who may still charge fees or have less favorable shipping policies. By meeting customer expectations and providing a seamless shopping experience with free shipping, you position your business as a preferred choice among consumers. This advantage can help you attract new customers and retain existing ones, ultimately boosting your market position and standing out in a crowded e-commerce landscape.
Increased Conversion Rates:
By eliminating the barrier of shipping costs, free shipping can significantly improve conversion rates. When customers know that shipping is free, they are more likely to proceed with their purchases, resulting in higher conversion rates. This is because it reduces the perceived cost of the transaction and increases the perceived value for the customer. By offering it, you remove a potential hurdle in the buying process and create a more compelling proposition for customers to complete their purchases, ultimately driving more sales and revenue for your business.
Positive Brand Perception:
Offering it contributes to a positive brand perception. Customers perceive your brand as customer-centric and attentive to their needs when you provide a seamless and cost-effective shipping experience. By meeting the customer’s expectations of free shipping, you create a positive association with your brand, fostering trust and loyalty. This positive brand perception can lead to word-of-mouth recommendations, attracting new customers who value the convenience and value you offer. It also enhances your reputation in the market and positions your brand as one that prioritizes customer satisfaction, setting the stage for long-term success and growth.
As customers increasingly view free shipping as a necessity in their online shopping experience, its importance in e-commerce cannot be ignored. By strategically implementing free shipping, you can not only boost sales but also increase average order values and reduce cart abandonment rates. Experiment with different types of approaches, such as setting a threshold or offering it as a limited-time promotion, to find the strategy that aligns best with your business goals and enhances your profitability. Remember to periodically reassess your shipping policies to adapt to changing market conditions and growth milestones, ensuring that your free shipping strategy continues to drive success in your e-commerce endeavors.