The number one perk that drives online conversion
56% of shoppers agree that when they decide to check out, unexpected costs like shipping fees, handling fees or other charges that weren’t made clear in the original price, are what drive them away.
59% stated that if the shipping costs were high (even if stated upfront), in comparison to the perceived value of the product being sold, they would give a negative recommendation.
77% of shoppers said that free shipping was the most important part in deciding whether or not to abandon their shopping cart.
68% stated that they would likely recommend the store to another person if free shipping was offered.
More than half (60%) have added items to their cart simply to qualify for free shipping.
Shipping Costs Are a Huge Factor in Your Customers’ Purchase Decision
Being presented with unexpected costs is the number one reason shoppers abandon their cart without completing their purchase. In a recent large-scale study conducted by comScore and UPS, they found that:
The Power of Free Shipping
Free shipping is a powerful offering that will drive your sales. A free shipping strategy can significantly increase conversion on your website, and even the size of your orders. According to the same comScore/UPS study mentioned above:
According to a Deloitte’s 26th annual holiday survey of consumer spending intentions and trends:
69% are more likely to shop online retailers who offer free shipping.
Additionally, free shipping is the top reason 20% of shoppers will shop with a particular retailer.
How Your Business Can Benefit From Free Shipping
Based on the statistics, the benefits of offering free shipping are manyfold:
Short-term gains — Free shipping will lead to more orders. It can also lead to increased average order size, particularly when a minimum value threshold is required to qualify for the offer.
Long-term gains — Many online shoppers will buy only from stores that offer free shipping, and will recommend stores that offer this perk, so gains are seen in the long-term from repeat customers and their lifetime value.
Remaining competitive — Larger retailers have set the bar, and unfortunately even if a business doesn’t gain competitive advantage or see profits by offering free-shipping, it may be what merely levels the playing field.
What Form of “Free Shipping” Will Work Best For Your Business?
Of course free shipping is great for shoppers, but is it an option for every merchant? Unless you’re Amazon, Zappos, Nordstrom’s or another giant online retailer, it may not be possible for your business to offer “truly”, no-strings attached, free shipping. Absorbing all shipping and handling costs has drawbacks, the most obvious one being the loss of profit margins.
So let’s look at other approaches for offering the conversion-driving perk so you can reap the benefits and stay competitive. Keep in mind that you’re not limited to implementing a single “free shipping” offer, and that you might find that combining a few different approaches might allow you to satisfy more of your customers.
All free shipping, all the time — Free shipping is offered regardless of the item or order value. This method is most viable for retailers with small, lightweight products. This method could also be limited to certain locations such as a country. Zappos offers all free shipping, all the time (as well as free return shipping) on US domestic orders.
Free return shipping — The item is shipped at a cost, but free shipping is offered on returns. While 73% of shoppers agree that free shipping is the most important feature when purchasing online, 70% indicate that free returns is also up there. This offer is typically used with apparel and footwear retailers, as it reassures the shopper that if the item doesn’t fit, they can easily return it. E-tailers with high return rates should consider and test offering free shipping on such items, as it’s common and expected. Topshop offers free return shipping on domestic US orders.
Free shipping with minimum thresholds — Free shipping is offered if a minimum threshold is met. If your average order value is $40, offer free shipping on $50 orders. This method is far more realistic for retailers than the all free, all the time method. Asos offers free shipping with minimum thresholds in the US on orders above $25 and in Canada above $35.
Free shipping to certain locations — Free shipping is offered to certain locations, whether it’s within a country or continent. Costs are kept to a minimum with domestic shipping fees, avoiding hefty international rates.
Free shipping on certain items — Free shipping on specific items is a common method for retailers. Offering the perk on higher margin items will more easily absorb the shipping cost. Note: if your higher margin items span multiple product categories, you may want to make an exception to lower-margin items as well in order to communicate the offer more clearly. Free shipping on certain items could also be a way of getting rid of overstock.
Free shipping during certain times of year — Offering free shipping periodically rather than all year round. Holidays are typically when competition is at its peak and shoppers’ expectations are high. Periodic yet consistent free shipping will bring new customers, bring back loyal customers and will predictably drive sales. American Eagle offers free shipping every year on December 18th, for “last minute holiday shoppers”.
Free shipping to members only — Offering free shipping to members only is increasingly popular. Members pay an annual fee in return for exclusivity and perks like free shipping, faster delivery times, pre-sales offers, etc. Amazon Prime is an example of the free shipping, members onlymethodology.
Free shipping with loyalty programs — Free shipping is offered as an incentive to encourage repeat purchasing. There are many ways to structure your loyalty programs, the most common being points and tiers. Your loyal customers experience the free shipping perk while you experience long-term gains by increasing the lifetime value of your customers. Dell’s loyalty program offers 2nd business day shipping. Read more about different types of loyalty programs, here.
Flat rate shipping — This is not free shipping, rather a flat rate shipping cost no matter the item size, weight or destination. The benefits of offering flat rate shipping is that it encourages larger orders and your customers will end up paying less shipping than they would have otherwise. The drawback is that it works to the opposite effect for smaller orders, discouraging shoppers who want to buy a single or small item. At Yankee Candle you’ll pay a flat rate of $5.99 for all orders under $100.
Shipping fees included in price — This is also not free shipping, but including the shipping fees in the original price of the products, allows your customers to make their purchase decision based on all the pricing information at once. This leaves no room for surprises with additional costs at a later stage (at the checkout). The drawback is your prices will appear higher than competitors, and despite the “free-shipping” perk, it might drive shoppers away.
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In Conclusion
Figure out what works best for your business by forming a hypothesis, then testing and closely monitoring the effect of the implementation over time. You know your store, your products, your margins and your demographics, more than anyone else, but understanding the behavior and habits of your shoppers will always be the biggest challenge. Let data be the driver behind your decisions and you’ll find what truly works best for your business. It’ll pay dividends, not to mention, your customers will thank you for it.
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