Free shipping is a psychologically enticing sales tactic that can increase conversions and customer loyalty. However, it can also be costly if it is not carefully incorporated into pricing strategies to maintain profitability.
Using a threshold such as a minimum purchase amount can help to manage costs. It can also encourage customers to add items to their carts to qualify for free shipping, which is often good for business.
Cost
Free shipping can be a great way to increase sales and build customer loyalty. However, it can also be a significant cost for the business. Many retailers offer free shipping because it increases their average order value and helps them offset the costs of the service. This is especially true for companies that sell a high volume of low-cost items, such as online grocery stores or fashion brands.
To keep the shipping cost as low as possible, some retailers like Home Depot require that customers spend a minimum before qualifying for free shipping. This can help them to increase their average order value and reduce shopping cart abandonment. Some retailers will also offer free shipping to customers who order at certain times of the year, such as during sales or holiday seasons. This is ideal for increasing sales and building customer loyalty during those periods.
Other retailers will bake the cost of shipping into their product prices to avoid charging an extra fee. This strategy can be effective if the company has established relationships with shipping providers and can negotiate a lower rate. However, it can be risky if the company has established relationships with shipping providers and can pass along the full cost of shipping to their customers.
Some retailers will also charge a premium for fast or tracked shipping, which can effectively improve the customer experience and boost conversions. However, this can be an expensive option for smaller businesses that need a larger customer base or more revenue to support the additional cost.
Time
Shipping furniture requires a significant amount of time, depending on the size and weight of the item and how it is packaged. This can lead to a delay in delivery that can negatively impact customer satisfaction. Additionally, shipping large, bulky items through normal channels can be expensive.
Customers need to be more apprehensive about high shipping costs, which is one of the leading reasons for shopping cart abandonment. Offering free shipping can help reduce the number of abandoned carts, boosting conversion rates and bringing in more revenue.
Another advantage of offering free shipping is that it helps to position a business as an industry leader. Companies that are the first in their industry to offer free shipping often receive a flood of new orders from customers who were previously buying from competitors that charged for shipping.
However, companies that offer free shipping should be careful not to overdo it, as this could end up costing them more in the long run. It is important to have a balanced eCommerce fulfillment strategy that includes free and paid shipping options based on product price, order size, and location. In addition, companies should minimize their shipping costs by getting quotes from multiple reputable furniture shipping companies and shipping during off-season periods when rates are usually lower.
Selection
Free shipping is a powerful marketing tool that customers have grown to expect. Companies that offer free shipping are more likely to retain customers and see higher conversion rates. However, it’s important to carefully consider the costs of your product before making this decision.
For example, if you sell a product for $8 and charge $6 for shipping, your average profit margin is going to be around $3 per sale. If you can afford to cover the cost of shipping without sacrificing your bottom line, then you should offer free shipping.
Another problem with offering free shipping is that it can coerce customers into purchasing products they may not keep based on the perception that they’ll be able to return them for a full refund. This can result in unnecessary returns and loss of revenue for your business.
For this reason, it’s important to understand your customer base and find the right balance between conversion rates and your actual bottom line. One option is to offer free shipping only during certain times of the year or under specific conditions, such as a minimum purchase amount.
Convenience
Free shipping is often seen as a customer perk that boosts conversion rates and increases Average Order Value. However, it’s not a one-size-fits-all solution. Ultimately, the right eCommerce fulfillment strategy will come down to each brand’s specific needs and market.
For example, suppose your brand specializes in budget-conscious products for a particular demographic. In that case, including the shipping price in each product’s list price is more cost-effective. This way, the cost is transparent and a factor in the purchasing decision. On the other hand, if you sell luxury goods, your customers may be accustomed to paying for shipping and are less likely to agree to free delivery as an incentive to shop with your brand.
Another issue with offering free shipping is that you can lose money on each sale if you don’t have a plan to offset carrier fees. As we’re currently seeing with the COVID-19 pandemic and skyrocketing shipping costs, brands need to understand how these increased expenses will affect their bottom line before committing to offering free shipping as an incentive.
For many small businesses, a more viable option is to offer conditional free shipping that applies to orders meeting certain criteria. This way, you can drive buyer urgency and increase your average order value without sacrificing your bottom line. In addition, this method helps you avoid committing to a costly shipping model that could be difficult to maintain during peak demand periods.