It’s a New Year! A time to reset, re-evaluate, and (if you’re an e-commerce business owner) take stock of what’s working—and what’s not.
For many brands, this means diving into the data and understanding consumer expectations for online merchants. In 2023, free shipping is bound to come up in conversation.
Reports from Digital Commerce 360 indicate that 74.7% of online consumers choose some form of free shipping at checkout. Not only that, but 62% of shoppers expect their online retailer to offer free shipping with expedited delivery.
The numbers don’t lie … and those are some large percentages right there.
If you’re wondering how you can offer free shipping without hurting your bottom line—we’ve got some good news. Cost-effective free shipping is doable with proper planning and execution.
Read on as we break down selective free shipping promotions currently at your disposal, that will entice and engage customers, maintain your competitive edge, and continue to support a thriving bottom line.
It’s a New Year after all, and there’s no time like the present to implement something new to level up your business!
The pros and cons of offering free shipping as an e-commerce business
Before we dive into the more tactical learnings of implementing a free shipping promotion, we must understand the pros and cons of free shipping itself.
Reduces or eliminates shopping cart abandonment
Being able to offer free shipping to your customers is a huge advantage when it comes to landing the sale.
One of the biggest pain points for an e-commerce brand is shopping cart abandonment. This is when online shoppers place items in their cart, but never finalize the sale.
A study conducted by the Baymard institute revealed 69.57% of online shopping carts are abandoned. The primary cause? Extra fees made up of shipping costs and taxes. Being able to offer free shipping is a huge incentive for your customers to finish the sale.
As noted above, the majority of online shoppers expect free shipping. This means consumers will gravitate toward a brand that offers it over a brand that doesn’t. In fact, free shipping can attract new customers and drive repeat purchases.
Creating that competitive edge
Total online sales at the end of 2022 reached $1.29 trillion. To say e-commerce is a wildly popular shopping medium is an understatement. Of course, that means a slew of competitors to contend with as well.
In order to be top of mind when customers are searching for similar products, you have to have promotions or incentives that set yourself apart from the competition and attract potential buyers.
Vulnerable to shipping rate increases
In the case of a shipping rate increase, the retailer will need to raise prices to offset the higher shipping costs, which will more than likely repel customers. Alternatively, they’ll have to cough up the difference – giving that bottom line a hit.
Forced to use standard shipping for delivery
If the free shipping offer is not a well-thought-out plan, the retailer might be forced to use standard/economy shipping to avoid the erosion of margins. However, this tactic does not bode well, as long shipping times are a deterrent and could result in shopping cart abandonment.
The cost of free shipping
Let’s keep things real. Free shipping isn’t free. The cost of the shipping is getting paid by someone, there’s just no way around it.
So, who’s footing the bill? Most likely the retailer. But, if the seller is a savvy business owner, they’ve found a way to absorb the costs using strategic promotions that still allow the transaction to be profitable.
If the free shipping offer isn’t a well-planned promotion, it could force sellers to use methods like raising prices on merchandise or using economy shipping methods. Neither of these are good for customers.
How a free promotional shipping strategy boosts your bottom line
If a free shipping promotion is done right, it can absolutely boost your bottom line with no loss to that hard-earned profit.
Here are some of the benefits of a successful launch:
Promotions in general are key sales drivers. The whole premise of a promotion creates a sense of urgency or FOMO. It’s a great strategy to increase sales for a limited time period.
Exclusive offers for loyal customers result in to repeat purchases. Creating promotions targeting your most loyal customers is a win, win strategy. It not only personalizes the experience for your customers and keeps them happy and engaged with your brand, but incentivizes them to continue to purchase and recommend your brand to their friends and family. Cha-ching!
Free shipping increases order volumes. Did you know that customers tend to spend more when they feel like they’re saving money in the process? The irony! Customers will spend more if you also tie in conditional shipping strategies to a free shipping promotion.
Builds brand awareness. Using a free shipping promotion in marketing campaigns or social media will broaden your brand’s reach and visibility, ultimately boosting sales.
Pro-tip: if you have a social commerce strategy that makes purchasing your products seamlessly in-app, it’ll drive sales conversions even higher.
4 Free shipping promotions to consider for your online store
No matter the size, e-commerce businesses can in fact launch a successful shipping promotion. Consider the 4 strategies below to get started:
1. Implement a free shipping threshold
This is a smart marketing strategy to encourage customers to add more items at checkout to reach a minimum order total and receive “free shipping”.
This clever tactic increases the order value – effectively paying the expense of the shipping. However, there is a science to this:
- Gather 6 months to a year’s worth of sales data. Then, find the average customers are paying for their purchases. This will be the median order value.
- From that data – calculate average shipping costs.
- Calculate your gross profit margin. Formula:
- Total sales – Cost of goods sold, then divide by Total sales.
- Test your calculations to find your free shipping threshold.
Learn how to calculate an accurate free shipping threshold here.
2. Conduct a flash sale
Customers love a good sale, and the short window creates (yet again) a sense of urgency to not miss out on the deal. Combining free shipping on top of that, which customers have come to expect, is an added incentive for them to complete the purchase.
3. Apply conditional free shipping.
Instead of having a free shipping promotion on all items, limit the promotion to select items only. By doing this, you can really control a healthy profit margin on each order and not have the promotion end up being counterproductive, essentially losing money on small purchases.
4. Create a free shipping promotion that’s exclusive to VIP loyalty members.
Not only is this a great incentive to get people to join your loyalty program, but it’s also a slam dunk as the exclusivity of the deal is a guaranteed magnet to get your loyal customers to make purchases.
Managing shipping costs and strategies for any business is daunting. And in 2023, there’s even more complexity and competition as in-store shopping gains traction again and a new retail hybrid model takes shape. Plus, the pressure to stand out from the crowd as an e-commerce business has only magnified.
Given all the above, free shipping promotions are a surefire way to meet consumer expectations, reduce shopping cart abandonment, drive repeat purchases, and stay ahead of the game.
Again, it’s the New Year – the perfect time to revamp your business. Implement one or some of the techniques outlined above and you’ll find the benefits of offering free shipping far outweigh the risks!