In order to stay competitive in today’s world of e-commerce, many companies are moving to a model of free shipping when it comes to their e-commerce shipping approach. It sounds great on the surface: you’re saving your customers money, which makes them happy and loyal. However, someone has to eat those costs and it’s you. Here are some of the pros and cons of offering free shipping.
What’s right for YOUR business?
Pros of Free Shipping
It’s no secret that the #1 reason consumers abandon their shopping carts is because of higher-than-expected shipping and handling fees. Therefore, it stands to reason that offering free shipping will prevent that sticker shock that scares so many consumers away at that critical checkout point. In fact, studies show that 36% of online shoppers won’t make a purchase online unless they are offered free shipping. It’s hard to swallow the fact that you’re losing 40% of your potential customers right off the bat due to shipping and handling issues.
There are quite a few benefits to offering free shipping as a merchant:
Boost online sales in the short term: Not only can you boost online sales in the short term, your offer of free shipping can lead to larger orders when you set a minimum amount to qualify.
Boost online sales in the long term: Your long term gains can be realized when you get repeat customers thanks to your free shipping offer, as well as increased loyalty. Remember, you may never have acquired those new customers had it not been for the free shipping.
Competitive edge: Free shipping can help you level the playing field, capturing more of the share from your competitors.
Drawbacks of Free Shipping
The main drawbacks of free shipping have to do with cost. It has to come from somewhere – shipping costs don’t just disappear just because you offer it for free. You may decide to raise your product prices to cover those additional costs, or you may do a combination of raising prices a little bit and absorbing them on your end a little bit. Here are some cons to free shipping:
Loss of profit margin: The cost of shipping parcels is not going down; in fact, it’s only gone up over the past five years. You can offset this by offering economy shipping options but this often results in slower delivery times and a decrease in order tracking.
Programming and marketing expenses: Your IT team will be tasked with devoting much more time to programming so that your free shipping offer works the way it should on the website. You also have to consider the increase in marketing costs to design and advertise such an offer so that consumers are aware of it.
Unnecessary incentive: Of course, there are customers who would’ve made a purchase from your company anyway, regardless of your free shipping offer.
As you can see, it’s not a cut and dried decision when creating an effective e-commerce shipping offer. Fulfilltopia can help you cut costs when it comes to order fulfillment and distribution. Find out more by emailing email@example.com or contact us here.