Should My Website Offer Free Shipping?
Short Answer: Yes.
But let's back up a bit. Of course there are factors to consider. What are your margins? What are your shipping rates? How large and how heavy are your goods? Who are your shipping partners? Are you handling shipping yourself, or are you using a third party logistics company (3PL) like HD Fulfillment? Do you have any competitors? If so, do they offer free shipping?
Let's not dance around the issue; shipping is expensive, especially if you handle your own fulfillment and don't get the benefit of volume rates. When customers pay for shipping, they offset a significant component of your cost of goods sold, and your bottom line looks all the better. But what does that do to your sales volume?
Studies indicate that free shipping may increase retail conversion rates (the rate at which people make purchases) by 25-40%. That is an absolutely enormous lift - but it isn't without cost. A typical average sale for online retail is $75, and $7.50 is a roughly average shipping cost. Accordingly, paying for shipping eats roughly 10% of your gross revenue (and likely 20% of your net revenue if we assume your cost of goods is 50% of your sales price). This means you'll need a roughly 20% boost in sales from the free shipping in order to break even.
Luckily, this is easy to test! We're of the opinion after myriad tests on our own various e-commerce properties that free shipping is the only way to fly, but it's easy to try on your own site. Offer free shipping for a limited time, without any additional promotions, and watch your conversion rate and your revenue increase. Once you've reached a sample size that you consider representative, make the call.
If you happen to source your own products, or you have a monopoly on your particular vertical, then you should still offer free shipping. Just bake the shipping cost into the cost of your goods! Instead of selling that shirt for $68 with $7 in shipping, sell it for $75 with free shipping. It sounds sooo much more appealing.
And it's not like you're stuck with your decision for eternity. If you're running on Shopify (which we highly recommend), you can make these changes in a matter of minutes. And you can also be creative with it. Want to push up your average order value? Set your free shipping threshold just north of your average cart value. For example:
Average Cart: $72.99
Free Shipping Threshold: $75
Watch both your average cart and your conversion rate soar!
The fact is that Amazon has changed the way e-commerce operates forever. Customers expect free shipping, and if you don't offer it, they'll find a different place to spend their money. It's not ideal, but it's something you can make work to your advantage.
If you're interested in converting more customers, updating your website, or building a website fresh from scratch, drop us a line. We're e-commerce veterans who handle everything from web development to warehousing and fulfillment, and we'd love to learn about your business.
