THE FREE SHIPPING STRATEGY
Recent research suggests that over 60% of online shoppers would prefer the offer of free shipping than not. This bit of research suggests that an offer of free shipping converts better than an offer of a discount for online sales.
Also a 2008 study by paypal and ComScore discovered that 43% of shoppers abandon their shopping carts because of unexpectedly high shipping charges. It is suggested that free shipping psychologically wins out over a discount even though this may not be the better option.
How do you as the seller manage to incorporate free shipping without losing out?
You could increase the purchase price which will incorporate the increased shipping cost. This, of course, could then make your products more pricey so there will have to be a pay off to offset this.
You could also try the bundling technique, where the price quoted includes shipping and handling. Once again, there is significant concern that the bundled price is still going to drive away customers who are not willing to do the math.
Another problem with adding the shipping to the price is the returns. If a customer returns an item, you need to return the cost of the product plus the shipping cost. Therefore you then end up paying shipping for returned goods yourself.
Sellers could absorb the cost of shipping by considering it to be a major part of their marketing strategy. You still need a marketing budget that is sufficient to get the word out that you offer free shipping.
The advantage is that ads promoting free shipping tend to convert better than ads promoting a discount.
There are alternatives to free shipping if it becomes too prohibitive. There is a concept known as intelligent shipping.
This methodology charges shipping differently, based upon customer information such as amount of purchase, geographic location, customer loyalty and so on.
You could use a flat rate shipping system which is a charge independent of the customer spend and number of products bought.
If by introducing this type of free shipping offer your average order value starts increasing then this is the right strategy for your market and it has paid off.
You can offer free shipping over £50/$50 or over £100/$100 or whatever makes sense. It is worthwhile to try different levels and see what works. If you find that there is no significant difference in rate of purchase at a £60/$60 free shipping floor versus an £100/stay with the higher number.
Whatever you decide to do to increase revenue with regard to the shipping costs is vital to analyse the effect. Also test options within your marketplace to drive your decision making.