Free shipping. These two words act as an inspiring spell to shop visitors.
But before you use this method to attract new customers, consider whether you will incur losses, and think about the best delivery strategy to choose for your business. We’ll help you with all the nuances.
When you can offer free shipping.
Online stores offering free shipping prefer 84% of customers. And 46% of customers are willing to order a little more if you don’t have to pay for delivery. After such statistics, it seems that your store needs to make delivery free of charge. Take your time.
Don’t offer free shipping just because customers want it, or because you hope to increase your sales
First, calculate everything carefully, taking into account the following factors:
Profit. If you have a wide range of products and you get different profit from different goods, do not rush to offer free delivery to everything.
Goods. The cost of delivery varies depending on the weight and size of the goods. The heavier and bigger the product, the more expensive its delivery, and therefore the more delivery restrictions you have to set.
The average order amount. It is profitable to offer free delivery only when you reach a certain amount of the order, which, of course, is greater than the average order amount in the store. Further on in the article we will tell you how to calculate the threshold order amount for free delivery.
Destination of delivery. If you are delivering goods all over the world, remove free shipping for foreign buyers or at least set a minimum order amount for free delivery.
6 Free Shipping Options
The options can be used individually or in combination.
Free shipping for any product
It’s a good option if it’s a good one:
All your goods are light and small: T-shirts, accessories. Their delivery will cost you cheaply, but customers will be added.
Your business is characterized by a large number of repeat sales. Then increase the conversion in the online store due to free delivery can also be at a loss. If there are a lot of regular customers, you do not need to spend money on their attraction. In such a long term, free delivery will be profitable.
Minimum order amount for free delivery
With this method, you can increase the average order amount in the store. Let’s calculate the minimum order amount for free delivery.
Number of orders – 10
Average order amount – 400 rubles
Profit from order – 25%
The average cost of delivery of one order – 100 rubles
Income 10 x 400 = 4000
Gross profit 4000 x 25 / 100 = 1000
Shipping costs 10 x 100 = 1000
Net profit 1000 – 1000 = 0
It turns out that you will go to zero if you make a free delivery for the order of 400 rubles. To make a net profit of, for example, 1000 rubles, the gross profit should be equal to 2000 rubles. Therefore, the income should be 2000 / 25 x 100 = 8000 rubles, and the minimum order amount – 8000 / 10 = 800 rubles.
Make the same calculation for your business and determine the amount of the order, above which you can offer free delivery.
Free delivery for selected goods
Use this tactic to encourage customers to buy:
Non-movable goods, such as sneakers of a colour that is not the most popular. This is a good way to get rid of the stale remains.
the most popular group of goods (delivery of which does not require significant costs). This will attract and encourage you to buy even more customers (who will also pay attention to related products). But if all the goods are about the same demand, this option is not suitable.
You can also offer free shipping for the purchase of a combination of goods (eg, sneakers + 2 pairs of socks), thereby pushing buyers to spend more.
Free delivery to selected destinations
Tactics works well to attract customers from a region where you have little sales. You can partner with a transportation company and send products to regions where your competitors do not deliver goods, thus occupying an empty niche.
Buyers pay a small fee for membership in your store’s club, and you offer them free shipping and maybe some other special conditions.
From time to time, run promotions and give free membership to uninvolved customers to attract more members to the program. When they appreciate the benefits of a special relationship, they probably won’t want to give it up anymore.
Free shipping is included in the price of goods
Yes, it’s not exactly free shipping, but it’s a working tactic: raise prices by 5-10% to compensate for shipping costs. “Free shipping” will increase the flow of visitors to your store.
Such a strategy will be effective in a low competitive niche. But even if the market is full of goods similar to yours, it is worth testing the way. Especially if competitors already offer free shipping.