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The #1 Way to Make or Break Your Ecommerce Business this Holiday

by Mike DeFabis on 2015-11-04 12:23:34

According to a just-released report from Deloitte LLC, nearly half of all shoppers will buy online this holiday season. And, when it comes to winning online shoppers’ business, free shipping tops the list. The ability to offer free shipping is almost a necessity in order to become and stay competitive.  While the cost of offering free shipping might scare many online retailers, the benefits can be tremendous.  From increased sales to increased conversion rates, the ability to offer free shipping can make or break your ecommerce business.

Shipping is a Cost of Doing Business

There is an argument to be made that shipping costs are just a ‘cost of doing business’ and building the price of shipping into the purchase price is normal business practice.  Online retailers don’t separate out their marketing costs or packaging material costs, so there should be little reason to separate out the shipping costs. 

The Psychology of Free Shipping

Anna Kegler wrote a blog titled “The Psychology of Free Shipping: Why it Works as a Marketing Tool” last year.  There are many great points in this blog, but one of the most important is that free shipping helps customers rationalize buying something online rather than going to the store.  The shipping fee becomes an annoying extra fee that is tacked on at the end of the shipment and if the product is something that can be easily purchased at the store, then why should they pay the annoying fee. 

Kegler also points out that the idea of getting something for ‘free’ has tremendous power for a shopper.  Everyone likes to get something for free, and for the people that place such a high value on that something ‘free’, they will spend more or even convert more because they are getting something that is perceived as ‘free’.

Increased Sales

The obvious idea that offering free shipping to customers will increase sales should not come as a surprise.  There are numerous studies out there from Amazon to eBay to Target that show offering free shipping to customers has a dramatic impact on an increase in sales.  There is no sure-fire way to know how much of your sales will increase, as it depends on the availability of the product you are selling and your competition, but you can certainly test the idea of free shipping. 

By offering free shipping as an option, retailers can also offer an expedited shipping option and charge a small fee.  Many customers are willing to pay a little extra for the expedited shipment which may be just a UPS/FedEx ground option as opposed to a mail consolidation program.  If the cost to the retailer is only slightly more than the free shipping option, retailers might be able to have less of an expense on the expedited option if they are able to charge more than the difference.  This idea has shown to be profitable for many companies.

Finding the Right Free Shipping Option

By offering free shipping to your customers, you are able to have some fun with the method in which you ship your product.  While it might seem that you want to offer the cheapest possible method, that might cause delays in transit times and increase the calls into your customer service team.  This could end up costing you more money than it is saving you.  Take time to evaluate what is the appropriate transit time that your customers will be satisfied with when offering free shipping.  Refer to “Optimizing you D2C Parcel Shipping” for more information on this topic.

Making Free Shipping Work for Your Business

While free shipping will certainly help to increase sales, it can be difficult to make it work.  Play around with the idea of offering free shipping and the costs of your product.  Also, look at the shipping method you are using.  Being able to make free shipping work for your business can lead to tremendous success as an online retailer.

For more information on how IDS can help you offer free shipping to your customers, Contact Us Today.

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