Free Shipping - Smarter Strategies for E-Commerce Companies

March 13, 2017

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Free shipping is something most e-commerce companies need to consider. It is true that many worry about hurting profit margins, however, the benefits outweigh the risks many times when a proper strategy is in place. 

According to a recent study, free shipping was the most important option to 77% of online shoppers and that 60% of online shoppers added more to their cart to qualify for free shipping. People also consider free return shipping while shopping revealing 67% review a return policy before buying, while 66% want free return shipping. These numbers alone show how important free shipping is to customer purchases and satisfaction. 

Free shipping will allow short-term gains, increasing number of customers and sales. The study shows the importance when customers consider products. It will also provide gains in the long run as many people only shop when free shipping is an option increasing customer loyalty. Finally, appealing shipping options can be a competitive advantage based on what your competition's shipping strategy is. 

When considering free shipping, it is vital to have a strategy in place that makes the offer a win-win for both you and the customer. Below are some suggested free shipping options for online retailers that allow for flexibility while maintaining profit margins.

Free Shipping All The Time

Allowing free shipping on everything is risky especially for smaller online retailers or for products that have smaller margins. Many large corporations do free shipping, but minimums or limit locations (see below for details on these options). 

Free Return Shipping

This option is good for companies who may not be able to offer free shipping, but still want to provide customers an attractive offer. As stated earlier, 67% of consumers look at return shipping policies before making a purchase and 66% want free return shipping to be offered. If selling apparel, this is extremely valuable as it relieves customer anxiety knowing they can ship items back if they do not fit.

Free Shipping with Minimum Thresholds

This option is popular among e-commerce companies and works well for online retailers selling multiple products. In order to qualify for free shipping, a customer must meet a certain threshold. This can entice customers to add more items to their order to take advantage of free shipping and may help boost sales. As stated previously, a study by comScore showed 60% of online shoppers stated they would add items to their shopping cart in order to qualify for a free shipping incentive. It is important to do your research before offering this free shipping strategy. Although it is much safer than all free shipping all the time, you need to find the right minimum based on your expenses and margins.

Free Shipping on Certain Items

This strategy works best with higher priced items. The higher margin the item, the better it absorbs shipping costs. This figures into pricing before offering the item and free shipping. Other items get separated as paid shipping before check-out. This avoids confusion for customers.

Free Shipping During Holidays

When it comes to winning over consumers during the holidays, free shipping is at the top of the list. Free shipping is now viewed as a more valuable offer by customers than fast shipping. The Walker Sands 2016 Future of Retail Study revealed that free shipping continues to be a top shopping incentive, with almost nine in 10 consumers reporting that free shipping would make them shop more online, while nearly half of consumers say same-day shipping would make them shop more online. With online holiday sales up over 17% in 2016, it is important for e-commerce companies to keep free shipping front of mind when planning for this year's holiday shopping season. 

Membership and Loyalty Free Shipping

Both of these strategies have grown in popularity over the years.  Both encourage repeat business. When using membership free shipping offers, it is important to set the membership fee optimally. Loyalty free shipping rewards repeat customers with either points or a tier system. Both allow sustaining satisfied customers who return regularly.

Reducing Shipping Costs with an Order Fulfillment Partner

The above shipping strategies are options for staying competitive with product delivery. One way to ensure you still making a profit and offering shipping options customers prefer is to partner with a fulfillment center. Choosing the right fulfillment provider can reduce shipping costs and allow you to pass the savings on to your customers. PBD helps our clients reduce overall transportation spend by building strong, strategic partnerships with all major carriers and pooling the volume of our vast client base to negotiate lower rates. Also, finding a 3PL provider with distribution centers in a central location or near the majority of your client base will help reduce shipping costs and delivery times. Contact us today to learn more about our distribution centers, order fulfillment services and how your business could benefit from partnering with PBD Worldwide.

Topics: shipping options, shipping strategy, 3pl provider, ecommerce fulfillment, Fulfillment Center, Distribution Center, free shipping, order fulfillment, order fulfillment services, Third Party Logistics, 3pl company, logistics companies

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