Without a doubt, free shipping is among the most boom or bust, make or break, must-have customer-based incentive for most, if not all, trusted online retailers. On the one hand, it’s a surefire solution to get customers to fill carts, complete checkouts and keep coming back, again and again, but on another, when done ineffectively and without insight, free shipping can and can ruin an otherwise healthy business.
Just how do some retailers escape with offering such an eye-opening incentive without dropping their profit?
That’s easy, they don’t.
But first, the numbers…
The Boom-Style Great things about “Free Shipping”
Numerous studies have already been conducted in the last five to ten years about consumer-based habits in regards to free shipping. One, completed by the Wharton School of Business in 2004, discovered that 52% of online shoppers abandoned their virtual shopping carts after they hit the shipping and handling part of the process.
Another, more recent survey, performed by Forrester Consulting in Q3 of 2009, found that number to be nearer to 44%.
Either way, normally, nearly 50% of would-be buyers go to a site, fill their carts and then throw it all away after they see the dollar signs rise in regards to the cost and care to getting it to their door.
When you remember that some $38 billion – that’s billion with a b – was spent online in Q1 of 2011, and that already astronomical number will ultimately rise as e-commerce continues to explode, it’s easy to see the amount of free shipping can effect you’re overall business model. (In addition virtual mallrats, normally, spend 30% more, per order, when free shipping is included.)
So how is it done? Again, it isn’t. (Not like you think it is anyway.)
The Myth of Free Shipping
If you’re scanning this as a shipper of goods, an online retailer or an e-commerce upstarter, you probably know by now that nothing in life is free, and that if it says it’s free on leading of the box, there’s undoubtedly a little asterisk next to it with a full deflating explanation on the back. Well, unfortunately, a similar thing applies with free shipping.
Just like the unicorn, the dragon and the loch ness monster, it’s all composed in the mind, or, more to the point, in the fiscal reports and marketing plan.
Offering outright cost-free shipping – essentially eating the entire cost just to appease your customer base – often results in a busted business, or in minimum, a profit implosion. No, to be able to offer the one thing nearly every online customer wants, you need to go all Wizard of Oz on the process and perform some ninja-style mental and mathematical gymnastics.
Below are a few “free shipping” strategies that many successful companies have employed to better their online business.
Free Shipping as a Marketing-Based Incentive. Certainly, shipping for free is a superb way to get clients in the virtual door and keep them coming back. That is why so many retailers use it to their advantage and offer it to specific visitors, like rookies, long timers and the ones who’ve come across ads and emails offering their services. Because it’s so much easier to eat cost as it pertains with a broader, more devoted customer base.
Building it into the Price. Arguably the sneakiest strategy of the lot, though still considered viable, many trusted online retailers choose to go on and add the shipping and handling costs in to the item itself, this way their customers aren’t “blindsided” before their carts cross the final line.
Bulk Orders Only. You see this on Amazon at all times – and nearly everywhere else. Spend such and such dollar amount and get free shipping. That’s since it works. In accordance with a UPS report on Smarter Approaches for Free Shipping, they found that, “few retailers offered free shipping without a threshold, and almost all reported that setting the very least, often above the average transaction of a site, generally drove more units per transaction.”
“Free Shipping” Subscriptions. One of the most popular strategies out there right now is to offer a flat-rate fee, paid monthly or annually, for free shipping incentives. That is a smart way to welcome loyal consumers to “the club” while recouping some of those high-priced delivery costs.
Flat-Rate Shipping. Last but not least, we come to minimal free – rather than nearly as effective – “free shipping” strategy, the flat rate. Yes, by offering a flat rate for several orders, you’ll encourage shoppers to get more for less. However, if someone really wants to buy one item, say for the very first time while visiting your site, they might not like spending more than they usually would.
In general, each incentive offers something of a solution to the required evil of e-commerce – a.k.a. 淘寶傢俬集運 “free shipping.” (And these are only but a few, as there are more out there – a la offering free shipping just a few time per year, like during peak seasons, or only rendering it available to a variety of nearby states.)
Regardless, each business is different and probably the most viable strategy is the one that keeps income high and the consumers coming back. Sometimes that means following trend and doing what others did. Other times it means getting a little creative.