Some say the free shipping option for shoppers is like free bread and butter at a restaurant — a way to make friends with customers. But is it really so? In this article, we look at why, unlike the compliments of the chef, free shipping is often a deciding factor when choosing whether to complete a purchase, what other benefits it brings to the sellers, and how to minimize the cons of free shipping.
Pros of free shipping
Increased sales and retention
Free shipping is now somewhat of a market standard, and the expectation to receive this perk is felt strongly in all areas of e-commerce. And we will simply let the statistics speak:
- According to Statista, free shipping is the most important delivery criterion for 69% of Brits shopping online.
- Baymard‘s data from 2022 show that 48% of shoppers abandon their cart if they consider the extra fees, including shipping fee or taxes, too high.
- And Amazon promotes free shipping by stating that it increases sales by 12.4% on average.
Favorable delivery conditions, including free shipping, fast delivery, and free returns, are directly linked to improved customer loyalty — which is crucial to continuous business success.
The potential to increase order value
When implementing a minimum value threshold for free shipping, sellers can nudge shoppers to add more goods to their cart, increasing the average order value. However, this is only one of the possible free shipping strategies that can be used.
Cons of free shipping
A cut in profit margins
If an e-shop specializes in low-profit margin items and typically low-value orders, offering free shipping can reduce profits. When such businesses offer free shipping without calculating the potential profit loss first, they are often forced to find strategies for how to reduce shipping costs.
Challenges when selling globally
Sellers who don’t want to alienate customers choose worldwide shipping, which is often much more expensive to implement and sometimes poses additional administrational burdens. Making worldwide shipping free might be challenging for SMEs and sellers with low-profit margins.
Some sellers say there’s no way back — when customers get used to free shipping, it’s hard to take it away. The expectation of receiving free shipping that grows over time leads to less flexibility in changing the e-commerce delivery strategy in the future.
Free shipping strategies that work
There are many ways to market free shipping to customers. From universal free shipping, minimum order value threshold free shipping, location-based free shipping to limited time, select items, or registered customers free shipping options. Some of them are more straightforward than others. However, despite the chosen strategy, the seller must find a way to reduce the delivery costs to make free shipping profitable.
Here's where Swotzy comes in. With an aggregated last-mile delivery platform that simplifies choosing the cheapest, fastest, and most sustainable delivery providers, Swotzy helps e-commerce businesses reduce shipping costs without extra effort, making free shipping an easy-to-implement customer attraction and retention tool.