To Provide Or Not To Provide Free Delivery?
Offering free delivery is a proven tactic for gaining attention and increasing conversions. On the other hand, free delivery can significantly reduce the seller’s profits. You need a thorough analysis to decide whether or not to provide free delivery .
If you are considering offering free shipping, you need to know:
- How much does the delivery of the shipment to the customer cost you,
- How your competitors handle transport,
- What is your margin?
By answering these questions, you will get a basic overview of your options for providing or not providing free delivery.
Before deciding, answer these key questions:
What are the expectations of your target group?
Your shipping and postage strategy depends heavily on your customers’ preferences. The more you know your market and customers, the sooner you can consider the decision to deliver for free. Your strategy should not only be influenced by demographics, such as income level, level of education, age, gender. Also take into account psychological criteria, attitudes, behavior, lifestyle, preferences.
What is your competition doing?
How many different modes of transport (delivery) do your competitors provide?
Do they offer free shipping? If so, do they present it clearly and in a visible place for customers?
What happens when you add goods to the competition cart? How are their e-shop user zones set up?
In short, make sure you are competitive. Try to find a competitive advantage for your online store and you can avoid being subject to the price of delivery.
What is your profit margin?
The key question is to start thinking about offering free delivery at all.
A well-thought-out transport and postage strategy will prevent you from negatively impacting your profit. Keep in mind that with free shipping, you provide customers with value and choice. Find the “golden mean” that will satisfy the customer and at the same time prevent a rapid decline in your profit.
If you decide to offer free delivery, make sure you can afford it.
Do you have a high enough margin to offer free delivery?
How to start with free delivery?
The type of goods you sell and the margin are the first place you can start looking for profitable transportation options. We can narrow the approach and divide the products into 3 categories.
Low margin products
If you sell cheap products or have very low margins, a free introduction of free shipping will not be a good choice. Delivery costs are likely to be higher than the extra profit from the increased number of orders. Instead, you can offer free shipping above a specified minimum order threshold . For example, “Free shipping on orders over $50. This way, you avoid shipping costs for cheap items. We recommend setting the limit about 10-15$ higher than the average value of the order. The value set in this way will motivate customers to increase their purchase in order to receive free shipping.
If your store sells products that are unique and hard to find on the Internet, we recommend that you offer free shipping, but also indicate the average shipping cost for the products. If potential customers do not have the ability to easily compare prices, then this process is most likely to lead to additional orders and an increase in conversion rate. You can “hide” the price of transport in your prices and you can take advantage of free transport, because your product is difficult to find or has no competition.
High margin products
There is nothing to think about with expensive products or products with a high margin. Surveys show that free shipping reduces shopping cart exits and increases sales. If your margins are high, extra conversions and orders will cover the cost of free shipping.
Setting the minimum amount for free shipping is very individual. We recommend that you always TEST and ANALYZE any form of free shipping for its impact on sales and profits. Your decision should be based on real numbers.
Present free delivery to customers properly.
Let customers know about it. Mention this fact in the texts of advertisements, on the front page of the eshop, for products. Create an email campaign. Also inform about free delivery for the products concerned, preferably next to the order button.
If you offer free shipping from a certain order amount, include this fact on the website. Inform the customer during the entire ordering process about the minimum amount of the order, which will ensure free delivery. Do not allow the customer to find out until completing the order.
You still want to convince undecided customers to buy from you.
If you’re wondering if free delivery is right for your business, try one of the following:
- Do market research to see if you can include a portion of shipping costs in the prices of your products.
- Offer free delivery as an incentive to encourage customers to sign up for your newsletter or join loyalty programs.
- Take a free delivery promotion during periods of low sales or periods of increasing competition, such as before the holidays
- Offer free shipping only to selected products that are very popular or to items that you are trying to sell out.
Need more ideas? Ask us. We will help you make the best possible decision.
Can free delivery affect sales?
The surveys they carried out behind the “big bang” included free shipping among highly effective marketing tools. Surveys show that it is more effective than providing percentage discounts.
To what extent do shipping costs actually contribute to a customer’s decision to buy online?
Let’s take a look at some survey results:
- 93% of respondents to the survey said they would shop more online if the order was delivered for free,
- A 10% decrease in overall satisfaction was recorded for customers who paid for transport compared to those who had free transport,
- High transport costs were assessed as one of the reasons why consumers were not satisfied with online shopping,
- 3 out of 5 customers increased the value of their order to achieve free delivery
We can also be convinced of the power of free transport during the Free Transport Day event, organized by Heureka. Online stores with a Verified Customer certificate can join the event.
In 2015, 422 e-shops took part in this event. The result? 23485 orders and the turnover of the involved shops reached the amount of € 1,831,604. Nice numbers in 24 hours. Many of the participating shops recorded several times higher number of orders than the average on the day of the event .
Customer Relationship, Customers love free shipping when shopping online. They see it as a key motivation for online shopping. Save money and time.
Another US study from Accenture showed that the average order value for online purchases without free shipping is $ 86.58. With free delivery on the same purchases, the value of the order climbed to $ 112.55. Free shipping often increases the final value of the order. During the survey, the value of orders increased by an average of 30%
Use the numbers to decide whether or not to offer free delivery.
Take into account your margin, track delivery costs, number of orders, average order price…
Test and analyze the impact on your sales.
Free shipping in any design is the ideal marketing tool. You can offer it, for example, at regular intervals; 1st week of the month, every Monday and the like. When making a decision, take into account the reactions of customers and, of course, efficiency.
Benefits of free shipping:
- It keeps you competitive
- It allows you to “subordinate” your competitors in the price of transport
- Improves conversions
- Increases the average value of the order
- Reduces the rate of leaving the cart
Disadvantages of free shipping:
You bear the full cost of transport, which can affect your economy.
Increasing product prices to cover shipping costs can affect your competitive advantage, reduce conversions, and therefore your profits.
Although at first glance the advantages outweigh the disadvantages, this may not always be the case. Remember that both parties must benefit – your company and your customers.