The world of e-commerce can be unkind, a place where customer loyalty is fickle and the next big sale by a competitor could lure away your customer. Free shipping programmes are increasingly-popular as sale promotions for e-commerce sites, where the customer does not have to pay an additional delivery charge for an order. Free shipping is appealing to customers who appreciate a simple pricing structure, and it contributes to your competitive advantage.
These days free shipping is no longer considered as an extra benefit it almost comes standard. There are psychological reasons behind a customer’s interest in a free delivery offer.
When surveyed, customers feel that they get a better deal with free shipping than they do with a discount offer. Additionally, in many customer insight surveys over the last couple of years on conversion-boosting trends, nearly one-fourth of online shoppers were willing to spend more than they originally intended in order to get free delivery.
There are obvious reasons for this interest, most commonly because customers love free stuff and they do feel that they have achieved that when shipping is free. When customers receive free shipping, they are more likely to purchase a second item. Customers who, then they see ‘only one left’ might if they also see ‘free shipping’ make the purchase.
In doing the math it is easy to see that a second purchase by several customers will cover the bill for the shipping for all.
There was an exciting flash sale the other day from a brand who rarely has a sale. I was excited to score a designer pair of trousers I had been in love with for a while, and you know, while I was there I added a few other things to my cart. Why? Because the free shipping banner was flashing and I thought, well, it is only what I would have spent on shipping. Despite it being a $80 top and I would’ve only spent maybe $17 on shipping. Comme ci, comme ça right? The store covered their courier costs and also profited from it. That is if they were absorbing the cost, and had not already built the price into the product pricing.
Shipping is not an easy matter for any manufacturer, supplier or designer. For those who want free shipping, equally, some would prefer transparent shipping costs with options to click-and-collect. Some customers demand overnight delivery, while others will happily wait two weeks or more for their parcel. It is a fact though that shipping costs can make or break a sale and account as the reason for a large proportion of abandoned carts online. There is a lot more to shipping than slapping a generic shipping price at the checkout. Here are some options but as always, tailor your shipping options to what suits your brand and your customer profile best.
Let’s dive right into it. Customers love free shipping. As a business owner, there are two main ways to achieve free shipping, either build the delivery cost into the listed product price or absorb it against volume sales. The upside of free shipping is customers are likely to spend more because the second item purchased replaced the cost of shipping. (See my purchase above.) Between paying $17 on shipping or adding an $80 on-sale shirt, they will probably go with the shirt. Not sure why, it just feels like a bargain. Free shipping also removes any barrier for the customer to buy and actively encourages purchase. There’s no hesitation at the checkout by customers and far less abandoned carts.
The most basic way to begin calculating shipping is to take measurements of the products before listing them for sale. Measure the weight and dimensions of the package. The shipping charge is automatically calculated based on the package measurements and the customer’s location.
Flat-rate shipping means what it says – a flat rate. The total price of shipping is not tied to the shape, weight, or size of the shipped item. Small business customers utilise flat-rate shipping because it’s convenient and reliable. However, a bigger company with more volume has more logistics to think about. First, you need to calculate the average of all the company’s shipping costs. Be sure to pay attention to the changing average over the year and any seasonal changes. If average costs fall, allow the price you charge for flat rate shipping to fall as well. Similarly, if overall costs rise, adjust shipping charges to rise to reduce or eliminate any losses. Flat rate shipping charges need to be carefully monitored and adjusted – this can be an area of loss if care is not taken to audit regularly.
At the end of the day, each business determines shipping costs differently depending on your company, your customer, and logistics. Think strategically about packaging, post and handling costs in relation to your customer base and company revenue. Give your customers the best option, while still recovering the costs of packaging, handling and despatch.