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The Best Incentive: Free Shipping

THE BEST INCENTIVE: FREE SHIPPING

Shipping is considered to be a critical stage for any successful transaction between buyers and sellers. Has your store ever consider to offer a free shipping service? Will it help your store increase conversion rate? Will this tactic work to boost conversion rates during the holiday season? Or maybe totally contrast, it can damage your business turnover, make your product price unappealing with an extra fee to cover the shipping fee. And if it works, how can you make the customer pay attention to this offer? You need to make it appear everywhere in your sites to prevent customers from missing this wonderful opportunity.

Just tune in and read this article to find out more!

Table of contents

What is free shipping?

Free shipping or free delivery can be considered to be an effective tactic which persuades store’s customers to convert their order successfully without any extra fee for shipping. With a proportion of online purchasing expense being lifted, your customers will be willing to experience your business services without a second thought.

This is going to a perfect way to make your stores offer more appealing or as appealing as your competitors. It is another step closer to optimize your turnover and attract customer to try out the store’s product/services.

This process is located in the shipping process which is the prime procedure and final stage to help customers purchase better. It has a powerful impact to influence customer thought and behavior to buy products.

What is free shipping

How free shipping supports your stores

Realistic figures

According to WalkerSands Communications, it is one of the prime reasons to persuade customers to purchase store items. Free shipping has a powerful driver to motivate online purchase with the majority of 77% of customers who perceive as the number one reason when considering shopping at an online store.

Despite the fact that online ecommerce has developed and changed significantly, free delivery is still being considered as an effective method to increase virtual stores’ revenue continuously in their annual research from 2014 until now.

Encourage your customer psychologically

Firstly, as your customers who have already familiar with offline purchasing. They can consider shipping fees to be an extra fee they have to purchase for the product. Because of this concept, it causes the buyers to feel annoyed and have their second though when considering to buy the product at an online store.

For example, imagine you are a customer who is purchasing online. After you have successfully added products to cart and the shipping fee continue to add up as an extra cost. Will you consider to buy it right away? or you have to re-consider and compare the cost of buying at a virtual store or a physical store. At that point, you might think that additional shipping expense will make the items more expensive than getting it at a store near your house.

Encourage your customer psychologically

Secondly, free shipping can be considered as an appealing choice to kill your customer hesitation. From physical to online stores, the customer always feels comfortable when they get more choices offered to them. When comparing different options for the customer to get their products, free shipping seems to be the optimal and simplest choice.

The third reason stems from the word “free” as it is being overvalued and make the customer ready to purchase the product. Even when it is compared to other higher quality products. Maybe the word “free” is being over evaluated by the buyers although they still know it is no such thing as a free service as the expense will be added in the product later on.

Let’s take a look at the Amazon case, mentioned by Anna Kegler who works to a Magento company, they offer free shipping in Europe. Their revenue increased drastically in many countries except for France. The “free” word makes the customer to be swayed easily. For the special case of France, the Amazon shipping fee for this country was mistaken to reduce to 1 franc. This had shown that although the shipping fee had been discounted to 1 franc, it is still not convincing enough went comparing it to free shipping offer.

Other top brands have been offering this type of service

Amazon free shipping offer

The most simple reason is that many other major online retailers who have joined the e-commerce have taken advantage of this strategy to attract buyers. It is being considered to be applied by a lot of major businesses such as Dell, Abe books, Ace Hardware, JanSport, Sweetwater, and Amazon, etc. This is all major corporation and they applying it which means it attracts a lot of benefits which they cannot miss.

Possible to set this as short-term tactics

Normally, physical store owners have to maintain extra fees for location, furnish, decorate, hire employees, etc. And, all of these expenses will be added to the product prices.

On the other hand, online business has to worry less about the daily operation fee as it is operated via a virtual platform. They only need a small warehouse instead of an expensive store in a central location. Thus, the extra fee for shipping cannot be as expensive as renting a central location. Every virtual order has to be transported with shipping so it is going to be an attractive deal when customers want to save their money during the holiday season.

Difficulties when applying free shipping

You have low product margins

When you are charging too little for your product or the product value is too small. Your business can end up in debt when offering free shipping. Sometimes, shipping can be even more expensive than the product itself.

You have low product margins

As a result, stores with low margin should not apply these tactics for your stores. Due to the free shipping included in the good price may be too high for the customer. And they eventually end up not buying your product and the tactics will fail. In orders to make this works stores need to create conditional free shipping or create other tractive offers like free return, store pickup, etc.

Shipping cost is too high

Another problem when applying this marketing tool is when the shipping cost is too high. The increase in shipping fee from 2018 to 2019 can influence the online significantly as the customer “additional cost” will continue to arise and the seller needs to be ready to offer the optimal pricing for their beloved customers. Based on the listed figure by Allen Press we can see the increasing from 2018 to 2019.

Shipping cost is too high

  • For UPs, they continue to adopt the pricing change for:
    • Pricing change for Ups Ground, UPS Air, and international services will increase by 4.9%
    • Another fee for package will be added with $2 when the Package Level detail is not provided before delivery
    • Other certain added services and other charges will also be increased
  • For Fed Ex, changes also being made in January 2019 as follow:
    • For the U.S, U.S export and U.S import services, an average of 4.9% will take place in FedEx Express package and freight
    • Also, an average of 4.9 percent will increase for FedEx Ground and FedEx Home Delivery Standard
    • FedEx rate will also increase with an average of 5.9%

In general, the expense of shipping services was increased by 4,9% in average. As a result, stores need to create tactics such as creating a threshold to encourage customers to buy more to cover the high shipping fee.

A practical application that business can add free shipping

1# Accommodate free shipping by adjusting product costs

To make sure that the free shipping does not hurt your store’s margin, you can easily divide the expense directly to add in the product price. By using this method, you can still generate margin at the same time with creating an advertising campaign and many other fees.

adjusting product costs

To do this you’ll need to do some math in this application with the average expense for the shipping fee being added in each the product price.

2# Create threshold in your policy

When applying free shipping you need to create more money from the customer. As a result, stores need to increase the average order value. To receive an order for free, many savvy-buyers will willing to buy add more product to their card to reach the requirements. Besides, when your products have good quality and affordable in price then just be confident and encourage your buyers to purchase more and gain higher profits.

You will offer free shipping but with a specific condition and the customer must spend a certain amount of money to experience free shipping. To make it suitable for your store, merchants have to create many experiments to find which solution works best for your stores.

For example, when a customer buys more than $500 will receive free shipping and below that value will have to pay a fixed rate. This is an ideal way to upsell your product.

After having a clear and win-win shipping policy ready to offer, you can actually employ some tools or have your store customized to get these specific features. On Magento 2, Shipping Rules extension can help you define delivery fees based on shopping cart data while Free Shipping Bar module helps you notice buyers about your campaign and motivate them to buy more.

3# Restrict the weight and distance for shipping

You need to restrict the shipping fee based on distance. To make sure that free delivery is applied to the right customers in the restricted area, owners can experience Shipping Restrictions extension provided by Mageplaza which helps to restrict shipping depending on postcode, region, state, country. Or, maybe you want a free tryout to limit your shipping fee based on different countries then you can try out Multiple Flat Rates Shipping module.

Restrict the weight and distance for shipping

Weight restriction for free shipping should also be available to prevent any losses when the total weight is too big and need to a paid extra charge. Although store providing the freeship, exceptions have to be created for expensive shipping price due to help business maximize profits.

Applying appropriate pricing for different delivery conditions is very important, see 15 most popular shipping rules which are applied all over the globe.

Final Words

In a nutshell, the holiday season is the most suitable occasion for you to apply free shipping as an incentive during the highly-competitive period. With the support of this tactic, your stores will have more chance to draw more revenue by encouraging purchase decision and boost the average order value. However, it needs some restrictions:

  • Add the shipping cost to products - avoid losses or narrow margins
  • Create a threshold - it is the best way to increase average order value
  • Cost-effective with weight and distance restriction - optimize your store system with up-to-date extension for better control of free shipping

However, business with smaller margin needs to find a suitable strategy as free shipping is infeasible. Other possible tactics can be free return, pick-up in-store or BOPIS this will be a beneficial method other than free shipping.

Posted by Rainy in Blog . July 11, 2019

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