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Running an eCommerce Business

Is offering free shipping stopping your store from growing?

Is offering free shipping stopping your store from growing?

by John Larkin

John runs the blog here at eCommerceLift and is a verified Shopify Expert. Interested in an initial growth consultation? Click here

2 years ago


Is offering free shipping stopping your store from growing?

Free shipping - customers love it, ecommerce stores are wary of it. Nevertheless, in today’s market free shipping is something retailers feel like they have to offer, but should they? Although there is no one right answer, there are some questions and factors that eCommerce stores should consider before embracing free shipping on mass. We have presented a handy guideline of the pros and cons of free shipping so that you can decided if it is right for your eCommerce business. 

The Pros of Free Shipping

1. Increases potential customer base
Here is an interesting fact: 1/3 of online shoppers say they would not purchase from an online retail who doesn’t offer free shipping. There a massive number of consumers avoiding certain retailers, offering it could put your eCommerce store ahead and grow your potential customer base. Simply by adding free shipping, the numbers of customer that see your ecommerce store as a viable shopping option increases exponentially. Furthermore, it eliminates wasted time, effort and money squandered in marketing to a customer base that avoids your store simply due to the added cost of shipping. 

2. Increases customer order size
Free shipping is a massive incentive for customers to spend more. When free shipping is offered it is seen as an added bonus and a great deal for customers that encourages them to spend more. In fact free shipping leads to customer spending on average 30% more, making it an undeniably brilliant tool that helps grow your store. Just make sure you let them know how much they are saving!

3. Helps solve abandoned cart problems
Abandoned carts is perhaps one of the most common problems that eCommerce merchants complain about. One of the main contributors to this issue is shipping costs as customers often feel blindsided, annoyed or ripped off when seeing the shipping costs added on. In fact 52% of abandoned carts are due to customers being unsatisfied with shipping costs. Free shipping is an easy and effect way to placate this problem as it removes one of the biggest concerns customers have when ordering online. 

To learn more about how to solve abandon cart issues, read this: eCommerce essentials: Overcoming the Abandoned Cart

4. Increases sales and profitability
With so many customers looking for those magic words “free shipping”, it is no surprise that more customers are turning to businesses offering it, therefore increasing profitability and sales for many eCommerce stores.  Upon implementing free shipping, 46% of ecommerce stores reported an increase in profits compared to traditional paid shipping. 

5. Helps retain customers
As 60% of consumers declared that free shipping is a very important factor when considering an online store, it is easy to see how customers as be lured by it. By offering free shipping it encourages shoppers to return to your website and shun competitors that do not offer the same attractive buying incentives. Figures show that up to 72% of customers said if online stores did not offer free shipping, they would consider switching to a competitors site, therefore proving free shipping puts you ahead of your competitors and helps retain your existing customers. 

72% of customers consider switching to competitors that offer free shipping. #eCommerce
The Cons of Free Shipping

1. Effects on Profit Margins
However, although free shipping does have its charms, it is not always the best solution for an eCommerce store. Many businesses fail to calculate or appreciate the effect of offering free shipping has on their overall profit margin. When offering free shipping, retailers must consider the cost of free shipping and how much of their profits are taken and absorbed by the practice to see if it is worth it overall. Consider implementing a minimum spend slightly higher than your average cart order to help combat this.

2. Impact on customer service
Although customers believe that free shipping is a priority when making a purchase decision, customer service is also something they covet and free shipping may effect this. Many eCommerce stores find that in order to afford free shipping, less expensive routes have to be choosen, leading to later arrivals and slower delivery times. Customers, however, still expect prompt service as 95% of online shopper expect a free shipping offer to deliver the product within 3 to 7 days, therefore business and customers may have to compromise on which they feel is more important.

3. A necessary motivation?
Offering free shipping may not always be a necessary incentive for customers to shop. Although some customers view it as a must, others will happily pay the extra charges and your customer might be one of them. It may be difficult to evaluate but some eCommerce stores may just be wasting money offering something their customers may not value or care about. Your customer profiles may help you evaluate whether this is an issue for you or not.

Questions to consider?

So with so many positives and negatives in relation to free shipping what can an ecommerce store do to decide if free shipping is the right choice for them? There are some simply yet effective issues that online shops should take into consideration.

Profit margins
A simple and the most effective gauge to assess whether free shipping is worth it for your eCommerce store is to look at how it will affect your profit margins. This is a straight forward method of knowing if it is a feasible move for your company and what impact it could have on the future profitability of your company.

Where are your customers?
The location of your customer base is going to have a large impact on the cost of shipping so why not assess where your customers are located to see if you can or can’t offer shipping. The fact that whether your customers are domestic or international will mean a major difference in your ability to offer free shipping and make the decision much more clear-cut for you.

What are you selling?
Not all products are created equal when being priced for shipping. Size, perishability, security, fragility, etc. are all issues that affect cost when shipping. If these issues impact the method of shipping then it is imperative that an online store considers the impact of challenging shipments in their ability to offer such free shipping. 

What do your competitors offer?
If you have some real clear cut competition in the marketplace, it is definitely worth taking a look at what they offer. Maybe there is an advantage to be had.

While, there is no clear right or wrong answer when it comes to deciding on free shipping, there are considerations and implications to doing it that are both positive and negative. eCommerce stores must individually calculate whether this tool will work for them as it can impact business is so many ways. 

Does your eCommerce store offering free shipping? Let us know in the comments why or why not you use it.

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