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Why Free Shipping is a Must for Retail Sites? E-commerce Development Tips

22 October, 2016

Why offering free shipping is a must for retail sites to remain competitive and still earn profits?

Benefits of free shipping for consumers are obvious but how does it benefit the organizations?


Fee Shipping never sounds a great thing to the retail sites, but it has become a mandate to survive in the cut-throat competition. Though we cannot deny the fact that we have no other option but to follow the norm and keep shipping free there are certain ways which can help you still keep the shipping cost low and manage the show without burning a hole in your own pocket.


Customers will opt to pay for shipping only in case they have an urgency like last minute shopping, last minute gifts purchase, a unique item which they don't mind paying for.

It is wise to keep the minimum order value for free shipping not too high. No customer would start shopping and at the end before buying notices that he is still 7$ away from getting free shipping. In most cases, they abandon the cart and don't visit again. It has a log ripple effect on his buying behaviour and refrain visiting that shopping site again. 


If we compare to retail stores offering a free shipping is still a lot more convenient and not much of a burden and neither eats away more profits. In retail stores while they offer 10%-30% discounts and happily do their sales, free shipping if compared doesn't even cost that much.

why-offer-free-shipping
Why offer Free Shipping?


# 1. Why Offer Free Shipping?


A study conducted by comScore reports some interesting facts about free shipping and online purchase behaviour of the consumers. It reports, " 4 out of 5 consumers feel that free shipping is an important factor while making an online purchase. "


While consumers are willing to wait to get their order but not willing to pay to receive order earlier. 83% consumer say they will wait two days more to get a free shipping. 




1. Beat Competition


Just because everyone is offering free shipping you can't think of beating the competition by not doing it. So, one can't afford to charge for shipping for the products where others are delivering without any shipping charge.



2. Boost Sales


Free shipping boosts the sales. Though we get low-profit margins but more volume as compared to when we charge for shipping as less cart abandonment happens in the case of free shipping. 


Usually, customers when they see something free even if it is not truly free they are grasped by the psychology and affect their buying behaviour to a large extent.
Thus, free shipping also tends to increase the average order value. As, price sensitive customers add more items to their cart once they get a reasonable price for their total purchase.

3. Customer Retention

 

Free shipping also usually popularises a website and helps get repeat purchase and loyal customers. 

# 2. Where it Hurts?


1. Low - Profit margins


Giving away shipping for no cost always brings down the profit margins which gets exhausted in paying for the shipping cost.



2. Low Profits from Price Insensitive Consumers also


Price insensitive customers have nothing to do with free shipping but since we offer, we lose the revenue which price insensitive customers could have brought to us. 


How to Control the Shipping Costs?


1. Limit on Fee Shipping



By limiting free shipping, you at least secure the basic cost of shipping from the profit margins and don't end up paying from your pocket. Set up minimum order value depending upon the distance and cost incurred for shipping.


2. Reduce Packaging Cost



Use the packaging offered by the shipping companies instead of wasting on your additional wraps. Just keep the bare minimum for branding purpose.


3. Use Fulfilment services



Fulfilment Services help to bring down the cost by shipping to the nearby area. Even if the charge a fulfilment fee its always better and faster than shipping all from your end.


4. Choose and negotiate with Carriers


Choose the best carriers depending upon the area and region you are delivering to. Some carriers have good rates and services for domestic and some for international. Within country also some do better in some areas. Speak to many before finalising upon one after negotiating and get the best rates.


5. Association Discounts



Some carriers give association discounts if you use their services exclusively. Find out the one who is offering the best association discount but do check their services are good in all areas.


Most of the customers shop online to save upon money and the number of choices they have while they shop online. It also is a convenient option rather than going to the stores and spending a lot of time and inconveniences of traditional shopping.

So if customers are trying to save time and money doing online shopping and not get the value for their money they will move to a better option or website offering value for their money.

What's their value of point of shopping online if they have to pay unreasonably high price for buying something online which they could buy in stores at a much better price.

Also, customers never want to pay for shipping cost even if they are aware that they are still paying less. For example, if a website is offering the same shirt for 180$ and charging 10$ for shipping and another website is giving free shipping and selling for 190$ customer would opt to buy from the one offering free shipping as they understand the value of a shirt but paying for shipping doesn't sound a good idea for them.


Online shopping still is not the most exciting thing for shoppers as they don't get to see the product physically before buying, they don't get a feel of the product and many other benefits of traditional shopping. So if it has to be made exciting to them one can't afford to charge for shipping.


Rather than an additional cost, retailers need to think free shipping as a marketing tool and shipping cost as advertising or promotional cost. 


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