When you are in charge of an ecommerce company, free shipping could be an essential step to care about. Although it seems such a simple and granted service, it is something that it allows you to gather greater customers’ groups. Nowadays, free shipping is a service that many companies offer to their customers and in return, people look forward to it.
As per a research conducted in 2014, Business Insider’s reported that in the first Quarter of 2014, around 58% of the American e-commerce customers in the U.S. received free shipping as part of their order, which was 48% just one year earlier.
Further according to a poll conducted by National Retail Federation they found it that 66% of online shoppers say free shipping is “very important” aspect to them when they consider online shopping.
To satisfy the expectations of such customers, it has become necessary to find some effective way to provide free shipping to them, without risking your profits.
Reasons to offer free shipping: why do it
Free shipping is a wonderful idea that might help you get the attention of new and interested customers, so you could become more successful. It may look strange, but it makes a lot of difference and draws people to your products, despite many other details or flaws. Such a minor feature, such as the chance of free shipping, seems to shift the perspective around the purchase in such a fast and strange way, that it might interest to give it a go. However, it may influence some aspects of your company. That is why analyse every advantage of offering some free shipping:
Increasing sales and revenue
Free shipping will slowly increase your sales and get you new customers. This service is getting more and more popular with the advance of the ecommerce world, but it still gives you an advantage, since it would not force your customers to pay for a service, which nowadays taken as for granted. If your shipping process is good and fast enough, you should not worry, and you will have many clients. For example, according to some case studies in 2010, free shipping options have encouraged almost 93 percent of customers to buy more on online companies.
Create your loyal customers group
It is believed in these days, especially in the ecommerce market, that offering free shipping could really attract many new customers and it could help conquer their loyalty. Some companies have reported that almost 54 percent of their customers are more drawn to shop, when they receive some free shipping offer through email. This shows how the relationship between the company and the customers can grow and feel more familiar; hence they could feel more confident to return for the next purchase.
Your average order value will skyrocket
The boost in sales and income that you will receive from your free shipping offers will come to your revenue in many forms, and one of these will be through your order value. In fact, most of the times you could include a price range, from which you could provide this offer. It might seem odd, but it will draw more customers to you! As some studies have reported in the past, in 2015 almost 53% of the American population have purchased more than what they wanted to get initially, just to reach the minimum order for free shipping. This behaviour will boost your order of revenue. According to a study in 2014 in an ecommerce company, because of free shipping their order revenue increased of almost 7.32 percent.
How to offer free shipping: find out how to stand out
However, despite of how much profitable could seem to offer free shipping to your online store and company, this sudden change could seem a little complex and troubling, since it could influence your company’s profit margins. But you should not be too worried about it, since you could follow a few tips and methods that could help you, not only to offer a good shipping promotion but also to increase your number of online shoppers, and your incomes.
One of the many methods that you can use to apply some quality for free shipping, but without risking the fulfilment of your company, would be to manage your free shipping costs. Through some changes in the shipping process and costs, you could drastically help your company and gain some profit margins, with the advantages of free shipping. This option could be applied by following many directions, such as:
Fulfilment company would change your shipping process
Fulfilment companies, such as NextSmartShip, may be helpful to your company, since they could completely shift your shipping options, especially if you are considering international shipping, while reducing your expenses. In this way, you could deliver your products much faster to your customers, without spending too much on the process.
Change the package for the better
How you package and ship your products are still very important, but they might influence the shipping costs in a way that could not help you. If you succeed to minimize them and maybe reduce the surrounding fees, you could be able to provide a package that would still be good, robust, and useful, but at lower costs.
Choose carefully your free shipping options
A service such as free shipping is very important and it could influence your company, hence why you should not be afraid to create some specific shipping offers. You should be able to use it at your own advantage, just like a marketing tool. For example, you could set a minimum order that the customer should reach, to gain the privilege of free shipping. You could also vary your options: you could offer free international shipping, but with a greater product price, while keeping shipping costs for countries closer to you, but with a lower minimum order.
How is free shipping threshold calculated?
After analysing the general advantages, analyse your company’s data. In fact, you should be able to dive into the details of this process and understand your free shipping threshold. According to many sources who studied the phenomena, these are some simple rule that you could follow, to calculate it correctly.
First, understand that the shipping threshold should not be a number, that you should choose it by guess or, even worse, by thinking about the customers’ preferences. In fact, stick to your numbers and the value you know you could offer with your products, to offer a value which could counteract the increasing costs that the customer will pay. If not, they will force you to manage too much work, without receiving effectively any profit from your hard work. That is why take into consideration some numbers in your company.
The fundamental elements that you should take into account are the average order value, average shipping cost, the gross profit margin and the proposed minimum cart value. They all represent some values that could be essential to your production and shipping processes, hence you should be very careful about it. After finding out these numbers, follow a golden rule: calculate the difference between proposed minimum cart value and average order value, take the result and multiply it by the gross profit margin and finally, from the overall number, find the difference with the average shipping cost. After these calculations, you will have finally the cost of your free shipping process. You could start by working from that number, to find the most satisfying solution for you.
Now that you have all of your data, you should not be afraid to make some initial trials and find out on the field, how you could adjust the shipping process to these costs. In fact, even though these numbers may help you, you should not feel obliged to follow these instructions. Since every company is different, their needs must be different and have different approaches. The only true stronghold in this case is to fact-check every decision with numbers and test every possible new option that you might want to try, before putting it in the public. As it was highlighted before, there are many ways you could work a free shipping offer, without risking your companies’ finances, such as free shipping on high margins, profit products or promoting free shipping on more frequent customers. You might get creative as you want, as long as you will follow the data and have some tactile proofs.
Free shipping offers: the right solution
At first, contemplating offering some free shipping offers to your customers could be scary. If you never dwelled into the idea, you might not understand properly how to work this option out. However, following the proper directions and process, you will find the perfect opportunity to make your company grow. You might draw to your online store many loyal customers and increase your profit margins. So, you will soon find out that this fresh path could be the right solution.