How to Offer Free Shipping on Your eCommerce Store + FAQs

Introduction

A lack of free shipping options has had many excited shoppers stare dejectedly at the checkout page. No matter their cart total, customers are strictly opposed to paying for shipping unless it’s for a same-day or next-day delivery.

Even then, most of us expect it to be free, and over 90% of people agree shipping options greatly influence their buying decisions.

This constant consumer expectation has led many ecommerce stores to offer free shipping, but we can say beyond a doubt that it’s a tough decision. After all, shipping has to be paid for by somebody. If you want to provide your shoppers with free shipping but don’t know how to offset the cost, then this article is for you. 

We’ll be discussing how you can offer free shipping while keeping profits, whether it is the right call for your business, and how to make the most of this strategy. Let’s begin!

What is Free Shipping, and Why Should Your Ecommerce Store Offer It?

Free shipping is a delivery option provided by retailers where customers don’t have to pay any shipping charges for the items they buy. This sales strategy has become a given for many brands since Amazon Prime introduced it in 2005. 

Free shipping caught on like wildfire, with customers expecting nothing less than that. And showed results, too, for every shop that adopted free shipping. Some of the key benefits of free shipping are:

1) Higher Sales 

Customers show a higher tendency to buy from an online company that does not charge for shipping. They are also more likely to shell out some extra money to qualify for free shipping if there is a minimum order value requirement.

2) Lower Cart Abandonment Rates 

Shipping costs that pop up suddenly at the end of the buying journey sometimes dissuade customers from completing the purchase. Free shipping is known to considerably reduce cart abandonment percentages.

3) Repeat Buyers 

When a customer has a good shopping experience with your brand, they will definitely come back again. Free shipping makes their buying journey hassle-free. This builds brand loyalty.

4) An Edge over the Competition

Free shipping is a service that can give you a competitive edge over the rest of the industry. 

As we’ve seen, there are many crucial benefits to offering free shipping, but how do you provide this service without burning your capital? We’ll answer this question and more in the following sections.

Let’s Do the Math: Factors Affecting Free Shipping Availability

Turning free shipping into a successful strategy is a matter of careful planning. Ecommerce stores don’t necessarily have to offer free shipping on all their items. How you make that selection should depend on a couple of key factors, like:

1. Product Weight and Size 

It’s natural for businesses to put limitations on free shipping for items that are too heavy or too big to be transported in regular containers. This is because most carriers charge a special fee for accommodating such products. 

However, they might consider free shipping for customers who order such products in bulk. FTL or FCL (Full Truckload or Full Container Load) shipping helps sellers bring down overall costs through economies of scale.

2. Profit Margins

Every product in your inventory must give you different profit margins. When offering free shipping, give yourself some wiggle room by opting for items that provide a wider margin. Of course, the number of categories you can offer free shipping to and for the lowest cart total would depend on your industry. 

Fashion and electronic goods retailers enjoy the highest profit margins and are, therefore, more comfortable offering free shipping. While grocery and perishables companies must limit themselves in that respect. 

3. Shipping Destination and Duration

Do you cater to a mostly international customer base, or are your buyers located domestically? Do you provide expedited shipping? You need a definitive answer to these questions if you want an effective free shipping game plan.

Most online companies do not offer free international shipping. If your audience is a mix of both domestic and international, then you could solve this problem by only providing free shipping on domestic destinations.

However, if most of your buyers come from abroad, then you seriously need to evaluate your business plan and profitability. 

For most online sellers except Amazon, expedited shipping options are chargeable. But due to the growing competition, many companies today are aiming to make these options free.

If you feel your store can balance that expense through a higher footfall and sales generated by this strategy, then go for it. 

4 Ways to Cover Cost When Offering Free Shipping

Let’s look at some of the ways in which businesses can stay cash positive even while shipping products for free to their customers. 

1. Increase Product Prices

The term ‘free shipping’ is actually a misnomer because most sellers who offer it include the shipping costs within the product price. Increasing item value helps businesses pay for free shipping without running into losses.

Buyers like consistency in their shopping experience. This is why a change in the total cart value with added shipping charges during checkout flusters them. The same customers, however, will not think twice before buying an item if its price is increased from $20 to $30 right from the start to include shipping.

2. Offer Bundles or Raise AOV

Another great way of offsetting shipping charges is by raising the average order value (AOV) by encouraging customers to buy more than one item. Many business owners do this by setting a minimum order value for free shipping, for example, free shipping on orders above $50. 

You could also do it by providing easy bundling options at the checkout. By showing customers other products that go with their selected one, you make shopping easier and more worthwhile for them.

It’s seen that customers are more than willing to pay a little extra to avail of free shipping. You could also offer a package of assorted items (kitting), for instance, a shower gel, body butter, and body oil combo for faster checkouts.

3. Use a Member-Only Model for a Higher Customer LTV

It makes sense for a brand to invest more in a customer who plans to make repeat purchases, thereby increasing their lifetime value (LTV). In the initial phase, trying out the free shipping model for subscribers or members can be very effective. 

A popular fast-fashion brand, H&M, uses the same strategy to encourage more customers to become members. The process becomes doubly rewarding if membership is free and poses other benefits like exclusive prices, early access to sale items, etc. 

4. Create Limited-Time Free-Shipping Deals

Lastly, if you are still on the fence about whether to offer free shipping, we say try it out for limited-time events like Black Friday, Cyber Monday (BFCM), or End of Season sales. Since sale events typically witness a higher-than-normal AOV, providing free shipping while still keeping margins is not that hard. 

Moreover, the tempting prospect of free shipping lets businesses clear out dead stock, which would otherwise remain unsaleable. We feel the sales season is the perfect time for experimenting with free shipping because it lasts for a short duration and offers enough chances to learn about the business and the customers. 

Is Offering Free Shipping the Right Choice for My Online Store?

The decision to ship products for free is one that requires much deliberation and forethought. The kind of free shipping one offers also depends on the type of business one runs. 

Small cottage businesses operating on razor-thin margins will find it hard to make shipping free. Medium-sized businesses, too, may find it easier to provide free shipping selectively rather than universally. 

To figure out whether free shipping is feasible for your online store, you must calculate the minimum order value at which you can offer free shipping without incurring a loss. This is also known as the free shipping threshold. 

Free Shipping Minimum Threshold = (Average Shipping Cost per Order / Gross Profit Margin Percentage) + Average Order Value

The free shipping threshold value will differ for every business. If the amount is too high, say $250, free shipping may not make a lot of sense if your average order value is nowhere near that number. 

Businesses that find themselves in this predicament can instead opt for flat-rate shipping that uses dimensional weight to calculate shipping charges.

If online sellers tie up with the right shipping carriers, they might be able to provide their customers with very affordable shipping rates. 

Lastly, creating valuable customer-brand interactions, enabling free shipping on returns, and better post-purchase customer service can set you apart from your competitors. These services give equal opportunity to win customers’ hearts. 

Conclusion

The prospect of free shipping is very enticing for online shoppers and is guaranteed to build brand loyalty. However, it can be a slippery slope if business owners jump in too quickly without weighing the pros and cons. 

We’ve discussed in detail everything a business needs to know before offering free shipping on their online store. We hope our tips help you carve out a solid free shipping strategy when you’re ready for it. All the best!

FAQs

1. How much does free shipping cost a business?

Unless a business chooses to absorb shipping costs by raising product prices, it ends up paying the same amount in shipping as a customer would. In free shipping, the entire shipping cost is borne by the business unless it uses a strategy to offset the cost.

2. What are the benefits of offering free shipping?

The biggest benefits of free shipping are increased sales, lower cart abandonment rates, and repeat customers. It can be one of the most noteworthy differentiators of an online business.