Is Free Shipping for Your Business?

September 20, 2021 by First Federal Bank

ShippingWhile many prominent online retailers provide free shipping, you might wonder if it’s financially feasible to offer this benefit as a part of your company’s online storefront. Many entrepreneurs are glad they’ve made the switch — here’s what they had to say about the benefits, along with some potential drawbacks to look out for:

Avoid sticker shock with your customers

When customers go to pay for their purchase on your online storefront and discover they need to input their zip code for shipping calculations, it can give them some serious sticker shock. With free shipping, you can cut back on those unpleasant surprises and drive up conversion. According to Jeff Neal, owner of The Critter Depot, his reptile food company’s free shipping has given him an edge over the competition. That’s because shoppers appreciate a company that won’t hit them with hidden fees — and as a result, they’ll be encouraged to spend more and become repeat customers.

Boost profits with spending minimums

According to entrepreneur Chris Vaughn, offering free shipping with a certain minimum order can encourage your customers to spend more money when shopping with you. Of course, if you’re offering free shipping on small purchases, you’re going to be diminishing your profit margins. However, it’s possible to set the bar too high, warns e-commerce consultant John Lawson. To hit the sweet spot and find the right minimum purchase amount, he suggests figuring out the average size of your customers’ orders and increasing it by just 10-15 percent to encourage more spending.

Cut down on decision friction

Online shopping may be convenient, but it comes with drawbacks — mainly, the amount your customers will pay for shipping. If you think your customers are on the fence about whether to purchase from you or shop at a brick-and-mortar location, free shipping may be what you need to tip the scales in your favor. That doesn’t mean you have to foot the bill on shipping and miss out on profits to gain an edge. Michael Alexis, CEO of TeamBuilding, suggests you build the cost of shipping into your product’s sticker price.

Potential pitfalls of free shipping

When deciding to take the plunge on offering free shipping, Chris Malta warns you shouldn’t expect it to be a silver bullet that skyrockets your sales. You can easily lose money by offering free shipping on all products, with no minimum purchase. Instead, you can test the waters by running limited-time free shipping offers, and by implementing a minimum that customers have to spend before qualifying for free shipping. You should also consider setting up your e-commerce site to display how much your shoppers are saving thanks to free shipping. When you forget to show customers how much they’re saving thanks to your free shipping offer, they can easily take your promotion for granted, explains Matt Silvers, CEO of SEO4Anyone.

Looking for more guidance on making the right shipping decisions for your company? Explore your options with your business partner, evaluate your profit margins, and consider hiring a business consultant for a plan tailor-made for your company’s needs.

 

Categories: Small Business, Entrepreneurship

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