Is Free Shipping Really Sustainable for E-commerce?

Is Free Shipping Really Sustainable for E commerce compressor 2

Right or wrong, free shipping is used more and more among e-commerce. Offering free shipping definitely increased online stores’ conversion rates, but it isn’t free for everyone, and especially not for you! As online shop owner, you will have to pay the expense. More than 90% of e-shoppers declare shipping options are very important for their overall online shopping experience. Then, do you really need to propose free shipping to your customers? Can your e-commerce afford it? This is what we will try to determine in this article.

Why should you think about free shipping implementation?

If you decide to offer free shipping to your dear customers then your store is likely to increase its sales. Results will be different depending on what you sell and your target market but some stores actually observed about 90% increase after they added this option!
But be careful, even if the hope of such raise is inevitable, you will need to assess the real possibilities to offer free shipping, because it is not worth offering it if you can’t turn it into something profitable. Worst, it can also destroy your profit margins if you’re not careful about enough. The point is, take enough time to run some tests and don’t expect results to change overnight.
People don’t appreciate feeling like they are paying extra. A lot of online shoppers will abandon their cart if the shipping cost are to high or if the shipping time is too long (even when free). Study shows that people are willing to wait more to benefit from free shipping. More that ¾ of e-shoppers think that free shipping with 5-7 day delivery time seems more attractive to them than having to pay extra for a 1-2 day delivery.
Today so many online stores propose free shipping that you might also be willing to consider it, just to be able to stay in the competition.

Reduce cart abandonment

Criteria like the value that customers place on your products is important for the price they will be willing to pay for shipment. If they really appreciate your products then they will agree more to pay for shipping. But even your biggest fans will follow the trend at some point and expect free shipping possibility. There are different possibilities to explain why customers want free shipping:
– “I am the one spending a lot of money on your website, are you not going to do me a favor?”
If you offer free shipping for a minimum order amount to these kind of customers, you will increase your sale but you will also please them as you will make them feel special.
– “I am doing you a favor by buying your products, so you should take care of sending them to me. Why should I pay for that?”
If you can offer free shipping to this kind of e-shoppers, chance are big that you will decrease the number of cart abandonment since study show that 62% of online shoppers say they would not purchase on a site where they don’t receive free shipping.

How a “cost free” concept affects customers

The effects of the word “Free”

The idea of getting something free, whatever it is, will always be tempting. Money has always been important to determine the value of “things,” from services to tangible products. But there are cultures where money is more important than others.
For example, in the US, 2014 research showed that about 80% of the population would rather go with a 5% raise than having a full week of paid holiday. If your target market includes money driven countries, then offering a “free” something is a good idea, let it be the shipment.
When customers see something “free” they unconsciously give it more value. Even when they compare the free item or service to what could be a better deal (meaning they have to pay, even just a small price, but get a better quality product).
The power of getting something “free” is so important that for example, when Amazon entered the European market, the shipping price in France was not free but reduced to less than a Euro, by mistake. The sales did not take off until they switched to free shipping.

Customers need to have the choice

Well, at least they need to think that they have the choice. Customers don’t want to feel like they have been trapped, they want to feel like they are completely in charge, able to make their own choices, even though that can be somewhat artificial.
When your customer sees the free option available they will be forced to choose between their desire to get more things, which induce spending more but getting something free at the same time (which happens in the majority of cases) or paying shipping fees.
If you offer free shipping for a minimum order value, you will motivate customer to buy more on your website because they will think they are in control of the amount they spend. About 60% of them have increased their total order amount to qualify for free shipping in the past.

How to decide what your best shipping methods are?

Before you decide to join the free shipping world there are criteria you should assess.

Follow the path to find your way through free shipping

Is Free Shipping Really Sustainable for E-commerce?

Using this flowchart from BigCommerce (based on the US), you will find useful questions to ask yourself to help you decide what kind of shipping strategy you want to implement for your e-commerce.

Run some tests

You will need to run some tests before deciding whether your e-commerce can afford it or not. You can compare the number of sales with and without the free shipping offer, decide of the minimum order value, chose some only some items, etc. To finish, try to increase a little bit the prices of your products (to compensate the loss), then compare the profit.
A/B testing is a must-do. In order to verify that your e-commerce will come out victorious of free shipping implementation, save some money from other marketing medium and use it to do some A/B testing. You will need to have 2 different versions of your website available to customers. You will then be able to analyze the difference between the two.

How to maintain your e-commerce sustainability?

Parcels transportation costs have increased a lot over the past few last years. Can your e-commerce really afford it? Well, the thing is, it depends. Knowing that 90% of e-shoppers declare that free shipping is the number one incentive to purchase online more often, chances are you will benefit from it as well. 
To be objective about results, don’t monitor every single sale you make. Take a step back and look only at the monthly results. You will inevitably win some and you will lose some. It’s a constant rule in commerce.
First you have to think about short and long term gain. What will work well for another business might not work for yours. On short term, even if free shipping is likely to increase your sales, it can also destroy your margin if not implemented correctly. Research show that 46% of e-commerce owners saw a real increase in their profits whereas 35% of them didn’t see any result.
On the long term perspective however, many online shoppers will purchase only from websites offering free shipping. You should then expect to attract new customers by doing so. Repeat purchase in the long term is what will make your online store sustainable.

Increase prices

Let’s face it, there is no such thing as free shipping on your side of the screen! In order to compensate the expense, you might need to increase a little bit the price of your products. But do it wisely, as it can create a negative reaction from your current customers.
No one like to pay more except if you propose a product that is absolutely worth to do so, or if you manage to get your customers’ attention toward the great deal they now get with free shipping. While doing so, be sure to advertise the free shipping option. It must be well noticeable otherwise they might think that you increased your price for no reason.
If your product if fantastic though, you almost don’t need to pay attention to shipping cost as your customers won’t look at it either. But if you think they will be mad because of the price increase, remember the psychological benefits of getting something for free.
Your customers might not be upset for long, because once they visually see that they are getting free something, they might even add more items to their cart to match the minimum. All just because they are getting something for free! Plus, for some product categories, a higher price can even lead to increase customer’s perception of your product value.
This is why you should study the difference in conversion rate with products displaying higher prices but with free shipping vs your regular price.

Set up limitations

Geographical limit: Depending on your the location of your e-commerce warehouse(s) and supply facilities, you might choose to limit the free shipping option. If you sell internationally and some places are really expensive for transportation matter, then you might consider to exclude them.
For example, let’s say you are located in France, then maybe you should limit free shipping to France contiguous countries – Andorra, Belgium, Germany, Italy, Luxembourg, Monaco, Switzerland & Spain. People from farther locations might expect to pay extra shipping fees anyway.
Products limit: After deciding if products provide you enough margins to potentially offer their shipment, you need check their size and weight as well. The larger and heavier they are, the more expensive the get.
Order value minimum: One of your goal as e-commerce owner is to increase sales. To do so and make free shipping profitable, you can measure what is the average order value, and offer free shipping possibility way above that limit.

Charge more for other fast delivery option

The point is, whenever the customer get to the checkout moment, it is already committed to the sale. What if your customer finally wants its item so badly that he can’t wait several days to receive and can have it for just another 10$? This is your big chance to benefit from surcharging faster shipment methods. This usually happens during holiday season. This surcharge will participate to compensate the free shipping you are offering on the other side.

9 ways to implement free shipping concept

So, now you know the importance of free shipping to customers and the benefit you can gain to use it. Time has come to decide how to implement it on your own e-commerce. Here is a list of all the possibilities you have:

  1. Member programs: charge annual fees to offer free shipping.
  2. Customer loyalty programs: for more incentive, offer free shipping as the reward for loyalty.
  3. Total free shipping: can potentially work for small sellers with light weight items.
  4. Set up a minimum order value: more common, it creates incentive to spend more.
  5. Choose few items: the ones with better margins of course.
  6. Free shipping to your brick-and-mortar stores: can also contribute to buy more once in the store.
  7. Define a special period: like holiday season.
  8. Increase product prices: not so free for your customers, but allow you to advertise free shipping.
  9. Free return: to promote especially if you own a clothing or footwear store.

Free shipping is a real incentive to online shoppers. This is why you definitely should try to find the version of it that fits the most your e-commerce business model and enjoy the sales increase. But don’t be too confident on what you can offer your customers either, go step by step, run some test before setting your own free shipping policies and everything should be okay.


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ECN Team
E-Commerce Nation is The 1st B2B Web Media about E-Commerce in Europe. The team of E-Commerce Explorers help businesses to reach new potential market through delivering useful content. Let us know in comment if you enjoyed this content.