Free Shipping: Does It Increase Ecommerce Sales?
Free shipping is the holy grail of online shopping. The promise of zero delivery fees can compel even the most hesitant browser to whip out their credit card faster than you can say “Prime membership.”But is this shiny carrot on a stick actually an effective tactic for boosting ecommerce sales? Let’s weigh the evidence.
The Allure of Free Shipping
Free shipping taps right into the human psyche. As consumers, we love getting stuff for free. It just feels good!
When a retailer offers free shipping, it’s like they give us a gift we don’t have to pay for. Gifts release dopamine, the “feel good” neurotransmitter in our brains.
We’re so attracted to free shipping that we’ll alter our shopping habits to get it:
- 78% of shoppers will add more items to their carts to qualify for free shipping minimums.
- 45% of shoppers will choose one retailer over another if they offer free shipping.
Clearly, we’re willing to jump through hoops like trained poodles to score this monetary treat.
Sinking or Swimming: The Free Shipping Gamble
Offering free shipping is a calculated risk for ecommerce merchants. Absorbing shipping costs cuts right into profits.
But the potential sales rewards usually outweigh the risks. Just look at these stats:
- Average order values are 20-30% higher with free shipping
- Abandoned cart rates drop by 31% when free shipping is offered
- Repeat purchase rates increase by 25-45% with free shipping
Still, the success of a free shipping campaign rests heavily on the retailer’s shoulders. As famous philanthropist Ben Franklin once quipped:
“Beware of little expenses. A small leak will sink a great ship.“
To stay afloat, merchants must carefully balance free shipping costs with other revenue drivers like average order value and conversion rate.
Navigating the Free Shipping Tradeoff
Implementing free shipping requires a thoughtful strategy. Retailers have a few options to make this customer perk financially viable:
Absorb the Costs
Simply build shipping costs into overall pricing and product margins. This allows the merchant to offer free shipping on every order.
Pros: Very attractive to customers, can increase conversion rates
Cons: Eats into profits on every sale
Set a Free Shipping Minimum
Only orders over a certain dollar value qualify for free shipping. Encourages customers to spend more per order.
Pros: Drives up average order value, reduces free shipping costs
Cons: It may deter some low-budget shoppers
Charge a Membership Fee
Offer free shipping to loyalty program members who pay a recurring subscription fee. Generates a predictable revenue stream to offset costs.
Pros: Creates a “value halo” that encourages repeat purchases
Cons: Adds extra barrier to first-time purchases
Provide Free Shipping Occasionally
Run periodic free shipping promotions to incentivize purchases during slow sales cycles.
Pros: Temporarily stimulates sales, builds customer goodwill
Cons: Can train customers to only buy during promotions
The Customer Expectation Effect
There’s no doubt about it – free shipping strongly influences online shopping behaviour. The meteoric rise of Amazon Prime only strengthened this consumer expectation.
But while customers love free shipping, they understand reasonable minimums. According to a 2022 Digital Commerce 360 survey:
- Only 20% of retailers offer free shipping with no strings attached
- 45% offer free shipping on orders over a minimum dollar amount
- 15% offer free shipping to loyalty program members
So, most consumers are now conditioned to spend a little to save a little. As the adage goes, “There ain’t no such thing as a free lunch.”The key is finding the right balance for your ecommerce store.
Monitor the impacts of any free shipping minimums or promotions you try. Adjust the thresholds periodically to align with business growth and changes in shipping rates.
Frequently Asked Questions:
What percentage of customers will abandon their cart without free shipping?
Studies show abandoned cart rates drop by 31% when free shipping is offered. So without it, abandonment rates increase significantly.
What is the best free shipping minimum amount?
The ideal minimum amount depends on your profit margins and average order value. Typically $25-$50 balances customer incentive with profitability. Monitor order metrics as you adjust the minimums.
Should I offer free shipping all the time or just for promotions?
Try offering free standard shipping all the time on orders over a minimum dollar amount. Then run free expedited shipping promotions periodically to incentivize larger purchases.
Free shipping remains an extremely powerful tool for boosting ecommerce revenue. The incremental sales gains usually make up for the shipping costs absorbed.
Ensure your store can sustain long-term profitability before diving head first into free delivery. And feel free to test different minimums and promotional strategies.
Remember, smooth seas never made a skilled sailor! Adjust your sails according to the winds of change, and your ecommerce ship will sail smoothly for years.
*The information this blog provides is for general informational purposes only and is not intended as financial or professional advice. The information may not reflect current developments and may be changed or updated without notice. Any opinions expressed on this blog are the author’s own and do not necessarily reflect the views of the author’s employer or any other organization. You should not act or rely on any information contained in this blog without first seeking the advice of a professional. No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained in this blog. The author and affiliated parties assume no liability for any errors or omissions.