The term “free shipping” has become more and more common in the ecommerce marketplace these days, but in order for your business to be able to offer free shipping, there are several strategies that you should consider and decide which one makes the most sense.
By offering something for free, it can influence customer behavior and make them think that they are getting a better deal than they actually are. When most people think about free shipping today they think about Amazon and their Prime service. It is available to Prime members who pay, either a yearly or monthly fee, to have their orders shipped next-day, or two-day (depending on the product and where the customer is located). Once the sole domain of Amazon, many larger ecommerce retailers such as Walmart and Target now offer free shipping options as well.
With this growing competition and increased shipping promotions it has become almost necessary for ecommerce sellers to include some variety of free or two-day shipping as part of their sales process. With the rise in shipping and transportation costs this has become an increasing challenge to keep up with competitors while not sacrificing profit margins. If you are able to determine what strategy is right for your ecommerce business it can help you beat your competitors, acquire new customers, meet the rising expectations all while growing your market share.
Below are several strategies that can help you offer free shipping. It is imperative to analyze each one and decide which would work best for your unique situation. If you are working with a third-party logistics provider (3PL) or looking to partner with one, there are different strategies you can leverage through their services. These are also discussed below.
Basic Strategies to Offer Free Shipping
1. Require a Minimum Order Amount
If you offer a minimum threshold amount that customers meet it can allow you to offer free shipping by increasing the average order volume, while at the same time your customers will feel like they are getting a great deal by saving on the cost of shipping. For instance, Walmart offers free shipping on orders over $35. In order for this option to work, the minimum threshold to qualify for free shipping should be higher than what your average order size is. This can induce customers to purchase more products to trigger free shipping, which would obviously increase your sales volume.
2. Free Shipping When Purchasing Multiple Items
Much like requiring a minimum order threshold, this type of free shipping will help boost the average number of items per order. When shoppers add one item to their cart, your ecommerce site can offer a pop up message or prompt that says “Add an additional item to your cart to qualify for free shipping.”
3. Increase the Price of Products
In almost any situation where you offer free shipping, you will have to increase the consumer cost of the products that you sell to ensure that you don’t wind up losing money on orders and lowering your profit margin. It takes some calculations to figure out how much you would have to raise each of your various SKUs so that you are sure this option would work.
4. Free Shipping for First-Time Customers
Instead of offering free shipping to everyone, you can target new customers only. This can be done by promoting it directly on your website, or offering a coupon for new accounts within your ecommerce store. It’s a great way to incentivize new customers and build your customer base. Hopefully they will like your products and become return customers.
5. Free Shipping When Purchasing Specific Items
If you want to minimize the negative impact free shipping might have on your overall profits, consider limiting it to only select items within your online store. For example, you can exclude all oversized products, or smaller products that have a much lower profit margin for your business.
3PL Strategies for Free Shipping
When you partner to outsource your order fulfillment with a 3PL, an expert in all-things shipping, these are the ways your 3PL can reduce your overall costs which will, in-turn allow you to offer your customers free shipping.
1. Increased Reliability in Order Fulfillment
Fast and accurate order fulfillment is a critical component to keeping costs down for ecommerce retailers. Too many inaccurate orders will destroy any ecommerce business. Lost revenue due to the costs of returning incorrect orders, labor costs, and re-shipping correct orders] can quickly cut into your profits.
Utilizing a 3PL can simplify the fulfillment process to increase order accuracy and efficiency. They are experts at optimizing storage, picking, and packaging of shipments which can reduce your overall fulfillment costs. Those savings can then be passed onto your customers by offering free shipping.
2. Ability to Leverage Carrier Relationships
If you have high order volumes, shipping carriers will want your business and will likely be able to offer lower prices in order to secure it. While your sales volume might not be enough to qualify for the best discounts offered, a 3PL will have enough volume spread across their various customers to have access to these lower costs. A 3PL can pass down discounted shipping rates because they have relationships with all of the major carriers and a track record of high volume daily shipments that are desirable to shipping carriers.
3. Benefit from Multiple Locations
Most 3PLs have fulfillment centers strategically located throughout the country to reduce the distance a package has to travel to reach its end destination. This is known as distributed inventory. Shorter distances equal lower shipping costs and faster delivery times. Shipping from multiple locations gives ecommerce retailers access to 2-day shipping without the fees of expedited delivery that often come along with it. Another benefit of having your orders shipped from multiple locations is the ability to leverage additional savings through the use of regional carriers. Faster delivery can also lessen the workload for your customer support team. Shorter delivery times lead to fewer inquiries regarding delivery status from customers.
With rising shipping costs it can be a challenge for ecommerce sellers to offer free shipping for their products. But there are strategies such as raising the price of your products or working with a 3PL that can allow you to offer free shipping without sacrificing your profits. There is no solution that fits for all businesses the same, so it is important to research the available options and decide which one is best for you.
If you are considering offering free shipping for your ecommerce store we would love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.