As consumers, we’re always looking to save an extra buck.
Whether it’s 10% off a pair of $200 Timberland boots or $5 off your first meal package from Hello Fresh, there’s nothing better than getting a great deal.
Discounts create a sense of urgency we simply cannot ignore. If we don’t take advantage of a limited-time-only discount, we’re essentially losing money. It’s human psychology – according to the Pleasure Principle, we seek pleasure to avoid pain – and missing out on a discount is a pain we want to avoid.
However, if there’s one deal we’re most attracted to and swayed by, it’s free shipping.
In fact, according to a recent survey completed by expert ecommerce researchers, the Baymard Institute, 60% of shoppers abandon cart because of unexpected costs or additional costs that were too high (i.e. shipping).
Image: A Better Lemonade Stand
With this logic, customers are more inclined to check out or spend more to reach the “free shipping” threshold – meaning your customers get the satisfaction of a great deal and your ecommerce business gets a tasty influx of upsells and sales.
It’s a win-win situation.
But there’s an art to offering free shipping not all ecommerce businesses can achieve – on the one hand, free shipping encourages customers to spend more and check out. On the other hand, free shipping comes at a cost for your business. It’s a balancing act – and we want to help you make an informed decision about free shipping for your business.
In this blog, we offer some actionable advice around free shipping so you can increase your conversion rate – without breaking the bank!
#1. Assess your internal costs
Before we get ahead of ourselves and start offering free shipping left, right and centre, it’s important to get a better understanding of your internal costs and general shipping costs to determine whether free shipping is, you know, doable!
We recommend taking a look at your product margins and actual shipping costs before offering free shipping.
Reviewing your current domestic and international shipping costs will have a profound impact on the offer you’re capable of giving your customers. For example, if you’re selling large, heavy or oversized items, free shipping is most likely not going to be viable or sustainable for your business.
Cast a critical eye over your finances, product margin and shipping costs to determine whether or not free shipping is worth your time. If it is, we can move onto steps two, three and four!
#2. Set a minimum order amount
Naturally, you don’t want to be out of pocket for offering free shipping for your customers. Allowing customers to make small purchases and get free shipping is a total steal for them – and a loss for you.
As a business model, this just doesn’t work.
You can avoid paying for customer shipping out of your own pocket by setting a minimum order value. For example, you could advertise free shipping for any orders over, say, fifty dollars.
Setting a limit can help ensure you’re making your money’s worth (i.e. customers aren’t ordering $5 socks and getting free shipping worth a solid $6, plus you can also encourage customers to buy more to reach the free shipping limit.
According to a recent survey from shipping company, Press Room UPS, 48% of shoppers have added items to their shopping carts to qualify for free shipping.
There’s a kind of magic about the words “free shipping” – customers will avoid shipping costs wherever they can and the word “free” gives customers the permission to buy.
If shipping is free, you’re essentially saving money, right?
How to set a minimum order value
Liking the sound of this spending limit?
Take note from eBay Platinum Powerseller, John Lawson:
“To set a minimum order amount for your free shipping offer, take your average order amount and set your minimum about 10% to 15% higher… Ideally, the amount should be low enough to be perceived as a promotion that attracts new customers, but high enough so you aren’t losing money.”
Pretty smart, huh?
Ecommerce stores who do this well: BlackMilk Clothing
Back in the day, BlackMilk Clothing offered free shipping for orders of all shapes and sizes – from sale items to large, bulky parcels packed with spandex dresses and slinky leggings.
However, in the last couple of years, the Australian clothing company has moved away from free shipping and set a limit for customers – free express shipping for orders over $99 and a flat rate fee of $4.95 for orders under $99.
Image: BlackMilk Clothing
Since the average cost of their items is around $80 – $110, free shipping over $99 ain’t bad – in fact, when items cost close to $99 anyway, you may as well treat yourself and get something extra to qualify for the free shipping!
#3. Run a “spend & save” promotion
Another way to upsell customers and make money by offering free shipping is to include the discounted shipping in an additional promotion. For example, you could offer a “two-for-one” deal and chuck in free shipping as an extra incentive.
Alternatively, you could run a “spend and save” promotion where customers get bigger discounts the more they spend – then make sure free shipping is offered over a certain amount e.g. $50.
Again, this encourages customers to spend more for a) a higher discount off their shopping cart and b) free shipping on their order.
Ecommerce stores who do this well: Cotton On
If there’s one thing Cotton On & Co. loves, it’s a once-in-a-lifetime “spend and save” promotion. Cotton On offers free express shipping over $55 as the norm, but on special occasions they tend to offer free shipping as part of a major promotion, sale or deal. For example, see the advertisement below.
Image: Cotton On
In this particular sale, Cotton On offered three enticing price points:
- $10 off when you spend more than $50
- $20 off when you spend more than $75
- $30 when you spend more than $100
However, here’s the kicker – customers can only qualify for free shipping when they purchase $75 or more worth of stock. The first price point doesn’t offer free shipping as part of the promotion – customers have to spend at least $75 and reach the free shipping threshold for the additional discount on shipping.
This encourages customers to add a few extra sale items or smaller items to their cart to get that additional deal.
#4. Offer free shipping for a limited time only
If you’re thinking about giving free shipping a whirl, one way to test whether it works for your business is to offer it as a promotion. For example, consider offering free shipping “this week only” or “this long weekend” etc.
If you market the promotion right, you’ll find a lot of window shoppers turn into paying customers – consider doing the rounds on social media platforms like Facebook, Instagram and even Google Posts. Through these platforms, you can advertise the promotion for free (or give it an extra nudge with “boosted” or paid posts) and get the word out about you’re fresh, free shipping.
Alternatively, advertise the free shipping promotion through an email newsletter (if you’ve got the email database to support this kind of advertising).
Get the word out and you’re sure to see more customers flooding onto your website to take advantage of the free shipping.
Ecommerce stores who do this well: Hello Kitty
If you’re looking for super kawaii (cute) stationery, plush toys, bags and accessories, you need not look further than everyone’s favourite animated kitty cat, Hello Kitty.
At the moment, Sanrio (the owners of Hello Kitty) don’t offer free shipping in the United States, Canada or worldwide – so, to help entice customers and make a few extra bucks, Sanrio is running a “free shipping weekend” for orders in the United States.
Putting a time limit on the promotion (e.g. “this weekend only”) makes the offer seem exclusive, encouraging customers to take advantage of the deal while it lasts. This is a great method of testing free shipping and determining whether or not it could be a lasting and valuable business model for you.
Master the art of free shipping and make a mint from online sales
Customers love free shipping – there’s no doubt about it. After reading this blog and assessing your current shipping costs, you should be able to make an informed decision about offering free shipping to your customers (a serious up-seller… trust us).
Transdirect has helped tonnes of ecommerce businesses around Australia achieve free shipping. The secret – finding an affordable, flexible courier.
Through our exclusive Members Area, you can compare prices between couriers and find a price which works for your business, so you can offer free shipping and still make a profit.
Don’t believe us? Just ask natural protein and free freight business, Googys. These guys have achieved a higher level of profit through free shipping – and Transdirect helped them get there with our selection of affordable couriers.