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Is Offering Free Shipping Right for My Business?

We all know that Amazon has set a behavioral standard for how quickly we want our online orders to arrive.  

There is also plenty of research out there that shows "free shipping" is the one trigger to customers hitting the buy button in their online shopping carts. In a survey conducted by FuturePay, online shoppers highlighted their top reasons for abandoning their shopping carts. 86% of the survey's participants claimed that they chose not to order from online retailers and other mail-to-order businesses because shipping costs were too expensive.

A study conducted by the National Retail Federation (NRF) found that 75% of U.S. consumers expect free shipping. And yet another retail study revealed that 90% of survey participants agree free shipping is the number one incentive to shop online more often and that nearly a third of all consumers shop online at least once a week.

This data illustrates the importance of free shipping to consumers. Many businesses are implementing the offer into their marketing efforts to attract more customers and boost sales.

But is free shipping right for your brand?  

WHEN YOU SHOULD OFFER FREE SHIPPING 

You should offer free shipping on your orders when...

  • Competitors offer it. To stay competitive in your particular market, it's a good idea to offer free shipping if your competitors are doing it. Even if they aren't, you can maintain a competitive edge over them and attract customers to buy your products. According to AdWeek, 81% of online shoppers do research before buying a product, which means that they will browse a few stores before making a purchase. So remaining a key competitor is important.
  • You want to increase your customer base and the number of orders. Offering free shipping is likely to make more people buy from your brand, likely increasing your volume of orders. This can increase revenue and profits.
  • You can afford it and won't lose profits as a result. Can the costs of your products cover shipping costs and still return you a profit? The cost of shipping should not exceed the price of your merchandise. You may get more customers and orders, but you will lose profits in the end.

BENEFITS OF FREE SHIPPING

There are many benefits to offering free shipping. In addition to boosting sales and conversions, offering free shipping can:

  • Boost average order value (AOV). Free shipping offers encourage some buyers to spend more because they believe free shipping will save them money. This is especially true when free shipping offers include a minimum purchase threshold (i.e. $25, $75, $100,etc.) as online shoppers add items in their carts to qualify for free shipping.
  • Increase profits and revenue. If your business is managing free shipping options the right way and is accounting for profit margins, offering free shipping can lead to an increase in profits.
  • Help your e-commerce store remain competitive. If you remain up to par with other businesses in your market by offering free shipping, you can level the playing field.

SHORTCOMINGS OF FREE SHIPPING

Just as free shipping has its benefits for your brand, it also has some drawbacks, which can result in negative consequences. Keeping up with the cost of shipping can get expensive. The concept of free shipping is extremely popular among consumers and brands. But there's no such thing. Someone has to pay for it. And if your business is offering this perk, then you are responsible for shipping costs. This could result in a profit loss.

Because companies want to save on shipping costs, they often opt for economy shipping, which results in slower delivery. This could cause customer dissatisfaction and as a result, the loss of customers.

Your brand shouldn't offer free shipping:

  • When your products are relatively inexpensive. For example, if your business is selling a product for only $6, and the cost of shipping is $8, you won't make a profit and you'll lose a lot of money as a result.
  • If you plan to ship internationally. International shipping is much more expensive than domestic shipping.

Here at CTL Global, we are committed to offering customized shipping solutions tailored to your specific shipping needs. Contact us today to learn more about why our customers Count on Us.

 

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