Did you know that 9 out of 10 customers say free shipping is the top incentive to shop online more, and orders with free shipping average around 30% higher in value? As online shopping has been rising unstoppably; free shipping became one of the best ways for increasing sales in eCommerce. A recent research from Invesp shows that 93% of online customers are encouraged to buy more products if free shipping is promised. Whereas 58% of customers add more items to cart to be eligible for free shipping.
With the digitalization, customers are constantly experiencing new ways to shop, and their perceptions of retail have shifted significantly. When companies like Amazon first introduced free shipping options a few years ago, it did not make any sense for the SMBs to follow suit. Yet, as customers have gotten used to online shopping; and, the division between online and brick-mortar is lifted, customers tend to have similar expectations of their shopping experience. Namely, shipping is increasingly expected to be free. Showing that for 36% of customers abandon their carts because of the delivery costs, a survey from AlixPartners proves this to be true.
Delivery cost is certainly a competitive necessity for eCommerces. Even though there is a considerable amount of cost to bear, there are also some reasons to feel good about offering it. Hence, below we will demonstrate the benefits of offering free shipping and how free shipping may increasing your sales in eCommerce.
Improved Average Order Value
Free shipping is often provided if a minimum purchase threshold, like $25, $50, or $100, is met. As a matter of fact, it works. A recent research from UPS shows that 94% of customers take action to qualify for free shipping. If you like to try this method, the key is to set the threshold in proportion to the average order value of your store. It needs to be high enough to result in profit, but it also needs to be low enough so that your customers still want to add more items to the cart. Furthermore, setting a threshold shines as a good way to try some up-selling or cross-selling tactics that might convince your customers to buy different items.
Boosted Sales and Revenue
If you will implement free shipping for all orders, you may need to increase your prices to compensate for the shipping costs which were previously shown as an additional cost. Thus, you will need to have to put in some brainpower and do little math to figure out how to offer it, and still make money. Yet, even though you need to increase the prices, you need to do it gradually to not scare off your existing customers. In 2016, Printful ran a year-long free shipping campaign on one of their online stores. The experiment lasted from June 2016 to July 2017 for customers in the US. The prices were increased by $5 before the launch, and during the experiment the number of incoming orders grew by 10% resulting in a $250 monthly revenue. Moreover, StitchLabs also found out that eCommerces that always offer free shipping can directly increase revenue by 10% in a year.
Increased Customer Loyalty
Even though offering free shipping seems to be considered a short term strategy since it is widely known for increasing sales and improving average order value; it also boosts your customer loyalty and has a long term impact on your eCommerce business when used effectively. Such that, according to a report from CIRP, Amazon Prime members spend an average of $1,500 annually whereas Amazon customers who are not Prime members spend an average of $625. In another study, Compete found that overall customer satisfaction is 10% lower for those who paid for shipping compared to those who did not. Thus, it shall also be regarded as a retention strategy which will ultimately determine the success of any business.
Free shipping has passed the stage where it was considered as a fad or a growing trend in the eCommerce industry. Today free shipping is regarded as a must-have factor for many eCommerce businesses for remaining competitive, and for increasing sales. It is clear that customers pay great attention to the free delivery, whereas it can also be used as a powerful weapon for the growth of businesses. While it can help you to improve average order value, boost sales, and increase customer loyalty; it may also have a negative impact on your profit margins. Thus, free delivery needs to be looked at in terms of economics of the value, and perceived value of your products against the value of guaranteeing the sale.