Do you see a lot of abandoned carts in your online shop and can’t seem to explain why?
Check your shipping costs.
If a customer is about to make a purchase and then sees some unexpected shipping costs, most of the time it’s going to end up being an abandoned cart.
On the other hand, a big sign saying “FREE Shipping” acts in an almost magical way to lock in sales.
Want to learn how to use free shipping as a tool to increase your sales?
If so, you won’t want to skip today’s post. ;)
👉 What are shipping fees?
Here’s a definition of what may seem obvious:
Shipping fees for a sale on the Internet means the cost of sending those articles from the ecommerce shop’s warehouse to the delivery address that the buyer indicates.
However, something so simple can also be a very powerful sales tool – so much so that it can determine, for better or for worse, the volume of orders that your shop receives.
We’ll explain why.
👉 Why you should offer free shipping in your ecommerce
It’s not a valid opinion for all types of businesses, but you should certainly give it some thought. And if you do decide to use free shipping, announce it from the very first second a potential customer lands on your shop’s website.
For example, look at how The Power Site makes it more than clear that not only is the shipping free, but that you’ll have your order the next day as well.
Multichannel Merchant confirmed that in 61% of the abandoned carts in 2018 were a result of extra costs (such as shipping costs) “appearing” in the final steps of the buying process.
That’s an almost 20% increase in abandoned carts in just 7 years.
It’s clear that excessively high or unexpected shipping costs can lead to a drop in sales from your ecommerce because they are the #1 reason behind a shopper not completing there purchase.
What’s the conclusion to be drawn from all that?
It’s that offering free shipping may be the option you’re looking for to increase the number of orders from your ecommerce shop.
But can you permit not charging the cost of shipping your products or is there some other alternative?
Let’s take a look at the other options to respond to these questions.
👉 Alternatives to free shipping
Completely free shipping is quite appealing to your customers, but if your items are:
Then you have to calculate your profit margins carefully to make sure it’s worth it.
One option that you have is to negotiate with your logistics operator to reduce your costs or to try buying from another provider (while being careful not to reduce the quality of service).
If what you gain on one side is lost on another, it’s not a good tradeoff.
That said, let’s go ahead and see the options you have when it comes to defining a free shipping strategy.
1️⃣ Shipping costs based on weight or volume
The Bodeboca wine portal sets their shipping rates based on the number of bottles that the customer orders.
Their website informs customers clearly and the rates are detailed in their General Conditions section so that the customers can decide if they want to increase their order or not depending on the additional shipping costs.
2️⃣ Flat rate for shipping
This means setting a fixed cost for shipping no matter what the order amount is.
If you can negotiate a good rate from your logistics operator and have competitive prices, this may work well for you.
3️⃣ Reducing costs by adding delivery options
- Increasing the delivery time (72 hours instead of 24).
- Offering different pickup points.
These can both help you reduce shipping costs, so what’s the best route to take?
Giving various options and letting the customer be the one who chooses!
4️⃣ Charging a fee that includes all the shipping in a given time period
Sound like a strange idea?
Think about Amazon Prime: You pay an annual membership fee and have free (and fast) shipping for all your orders throughout the year.
And if you think that you can’t create a membership-based ecommerce, all we have to say is to remember the power of imagination.
Have you heard of My Panty Box?
They offer a subscription-based service for lingerie that includes sending new underwear to your house each month.
5️⃣ Increasing the cost of your items to compensate
Be careful with this one because buyers aren’t stupid.
If you choose to go this route and increase the cost of your articles and the final price ends up being much higher than your competitors… your customers obviously aren’t going to buy anything.
You can only do this when your prices continue to be competitive and acceptable for your customers.
6⃣ Offering free shipping on orders over a certain amount
This is our preferred option for one simple reason:
It means increasing the average checkout price since customers add additional items to their cart just to reach the minimum amount needed to “save” on shipping costs.
This alternative is widely used by our clients. Look at how LeCreuset offers free shipping on orders over €50.
👉 What’s the threshold for free shipping?
Some clients set it at a certain amount, like Dietética Central, who have theirs set at €10.
Why is the minimum order amount different for each business?
Because each business has calculated their optimal free shipping threshold.
Let’s dig into that idea a bit more.
According to a publication on TechCrunch, 58% of online buyers add items to their cart to reach the minimum order amount needed to get free shipping.
If you can’t afford to offer completely free shipping, the most logical option is to offer it on orders over a certain amount. What that means is determining a free shipping threshold.
A free shipping threshold is the minimum order amount that a customer needs to reach to have their items sent without them paying the shipping costs.
If you decide to set it, you can’t just pick the first number that comes to mind:
- If your threshold is too low: you lose money because you end up covering all the shipping costs.
- If it’s too high: you increase the number of abandoned carts and don’t encourage any cross-selling.
So then, what should you do?
👉 How to set a “fair” free shipping threshold
The secret is the same as always – measuring. Our KPI Mega Guide for E-Commerce already explained how essential analytics are for any online shop.
The numbers you need now (from the last 6-12 months) for the time being are:
- Number of orders
- The average checkout price from your customers.
And now is the time for a rule of thumb:
You can set your free shipping threshold at 10-20% above the average checkout price.
Let’s see an example with real numbers to make it easier to understand.
If the average checkout price in your shop is €50, you can start offering free shipping for orders over €60 (20% above the average). The increased amount isn’t a huge difference, which is why it works to motivate buyers to increase their order in order to get the free shipping.
Sounds like a good option, right?
But you do need to make it easy on your customers so that “finding” that additional €10 in purchases doesn’t take much time or effort (and they don’t just abandon their cart instead).
Some ideas to help them find more items are detailed in this post about cross-selling, but we’ll give you the gist:
- Show products related to what your customers have already chosen.
- Display a panel saying “Other users also bought…” or “Normally bought together”.
- Offer complementary products (“Don’t forget the batteries” when they buy a toy that requires them, for example).
- Growth Hacking techniques to try to increase the average checkout price of each order.
And, as you may have come to expect, use a professional search engine that helps your customers quickly find everything they’re looking for. What’s more, you can try Doofinder free for 30 days!
👉 What happens with return fees if you offer free shipping?
Before we get to that, it’s important to clarify one point that can be quite confusing.
By law, in Spain, any customer who buys a product on the Internet has 14 calendar days to return it at no cost without having to give any explanation whatsoever.
This is called right of withdrawal.
👉 BUT – this does NOT mean that you must absorb the full shipping cost for the return. You can make the customer cover the cost of returning products (from their home to the warehouse).
And that’s where a lot of headaches are caused for many online shop owners. What should you decide to do about those costs?
- Do you just cover the full cost?
- Do you make the client pay?
First and foremost, our advice is to be as clear and transparent as possible.
Establish a return policy and leave a visible link to it on your home page. The important thing is to clearly inform your customers so that there are no “surprises” later.
That said, you have to find the balance between the service you want to provide and the profitability of your sales. Once again, the secret is to measure.
Revise your data and check:
- Your average profit margin.
- Your average shipping cost.
- The return rate for your products.
With that data in your hands, you can make an informed decision about which option you want to offer:
- Cover the cost of any return: This way you encourage impulse shopping. It’s the trump card used by shops like Mango, for example.
- The client pays for the return: This shop that sells fabric by the meter, La Casa de las Telas, specifies this in their return policy.
- Set a fixed price for returns: This is how Megacalzado does it. They charge a fixed rate of €5 per return.
Don’t be afraid to try different methods. Do a promotion offering free shipping for a month and analyze your conversion rate and how it relates to ROI. Once that’s clear, you can make your decision. ;)
👉 Update your shipping policy to boost your sales
How have you been handling shipping up till now?
And after reading this article do you think you’ll make some changes?
Do some tests, measure, and decide which method will help turn your shipping policy into a tool that sends your sales through the roof!