Should You Offer Free Shipping?
If there’s an area where every single online seller seems to struggle, it’s trying to figure out what to charge for shipping and delivery. It’s such a challenge because there’s a very fine line between a solution that eats into your profits as little as possible and one that doesn’t completely turn customers off at checkout.
I tell nearly every client I work with that they absolutely should be offering some form of free shipping. It can be a hard pill to swallow but if you consider that more than 80% of U.S. shoppers say that shipping cost (combined with shipping speed) is one of the biggest factors that influence whether they’re going to buy at all.
That’s right. Your products could be amazing and the fact that you’re charging too much for delivery that takes too long is what’s tanking your sales.
So, what is it about things like free shipping that make us all feel like we just got away with sticking it to the man? Why don’t we like transparency when it comes to shipping costs? As an online seller, what are the pros and cons of offering free shipping? How do you offer free shipping without seeing red?
As a store owner, should you even consider offering free shipping?!
Keep reading for answers to all these questions + 6 strategies to explore if you’re thinking of offering free shipping in your online store.
First, Why We All Love Free Shipping
There’s probably no better way to explain it than via meme:
So true, right? To the average shopper, there’s just something magical about free shipping. This is probably because for most shoppers, we assigned a higher value to the cost of shipping than it actual is. (Or, transversely, perhaps we’ve undervalued the cost of whatever it is we’re buying.) Whatever it is, we like the word free. Seeing a free shipping offer is like an aphrodisiac to any online shopper - enticing us to buy things we honestly may not have otherwise.
When viewed from this standpoint, offering free shipping is really no different than running any other sale or promotion. It's a marketing tactic deployed based on the assumption that people wouldn’t buy without it. The shipping cost is just the amount of money we’re willing to spend to get the sale. (Hold this thought. We’re going to circle back to it in a minute.)
Why We Love Transparency (Except for When It Comes to Shipping Costs)
It’s funny when you look at trends in one area of business and how they compare/contrast to trends in other areas. Case in point: brands that have publicly embraced “transparency” as one of their core values are seemingly everywhere these days. There’s something raw and authentic-seeming about a company that will just lay it all out there and tell you everything: how much their CEO makes, where they source materials, how things work behind the scenes.
Instagram and social media has helped as all feel like we know the people and happenings behind the brands we shop from - and this can be a major marketing tactic.
There’s just one area it seems no one wants to see the real truth of: shipping.
I’m sure there is some psychological pricing word for this but it seems to boil down to the fact that most of us just don’t want to know how the sausage is made. We kind of just want to know the total cost and be offered some sort of guaranteed delivery date and we don’t really care how the places we buy from make that happen.
It used to be that “shipping & handling” was seen as just a necessary evil of shopping online. If you wanted something that was sold somewhere not local to you, it made sense that you’d have to pay to ship it. But we’re all too savvy & spoiled for that now. Basically, we want free 2-day shipping to apply to everything we buy ever. So the total cost matters more to us than the breakdown. We’d rather pay $30 for something and get it shipped for “free” than buy a $25 product with a $5 shipping cost.
Free Shipping Pros
Free shipping is super simple for buyers to understand
Free shipping has become an expectation for many shoppers
Free shipping can reduce cart abandonment rates
Free shipping can increase conversion rates
Free shipping can reduce customer service costs for returns (if things ship for free there’s no reimbursement of shipping costs)
Free Shipping Cons
Free shipping isn’t actually “free”
More orders don’t necessarily mean more profits
It can be hard to forecast and budget for the unknown
There may be cheaper ways to “advertise” depending on your product(s) or target demographic
Bottom Line
So, what’s the bottom line? Should you or shouldn’t you offer free shipping?
I say that if you’re a high volume shipper with products that are relatively small, lightweight, and/or similarly sized (i.e. not a lot of variation in product dims and weight) it would probably work well for you. On the other hand, if you sell products with a lot of variability in size, weight, or destination or have too low of volume to be able to average out the highs and lows, there may be better solutions (see some ideas below such as only offering free shipping on specific products, or only if a certain order minimum is met, etc.).
The last thing to consider (and I hinted at this above) is that this really boils down to a difference in mindset (and accounting). If you would like to do a promotion for free shipping or you think that offering it might help you increase the number of sales in the short term, the cost of shipping is essentially a marketing expense.
If offering free shipping is a long-term strategy or something that you just consider “the cost of doing business” then it would be considered a direct cost and classified as a Cost of Goods Sold. (BTW, just because you include it as part of your COGS doesn’t mean you can’t market it as a perk you offer on your website.)
The reason I mention this is because all too often I talk with merchants who only think of shipping costs as an expense. They then turn around and spend thousands on things like Google ads or promoted social posts. If they thought of free shipping as a marketing tool and invested in it the same way, I can almost guarantee they’d see a better ROI than any of that ad spend.
How to Offer Free Shipping And Not Lose Your Shirt
If you decide to offer free shipping, or just want to try it out for a while to see how it affects your conversion rates and the bottom line here are some tips to keep in mind:
If your product isn’t a highly commoditized one, just bake shipping costs into your product prices and just raise prices. (This is my #1 piece of advice for a reason!)
Make limitations on the shipping method that will be “free” i.e. only ground shipping is free but overnight or 2-day is an upcharge. Interestingly, people are willing to pay for express shipping so long as it is their choice to do so and they know that they had an opportunity for free (slower) shipping. In this way, any express shipping orders are a bonus since you’ve already included the cost of “free” shipping in their prices.
Offer free shipping only to certain geographic locations (sorry Alaska, Hawaii, Canada and others!)
Set a “minimum order” requirement to qualify for free shipping. This is a great way to boost average cart values as people are very often willing to spend a little more on product so long as shipping is free.
Offer free shipping only as a short term promotion for a limited period of time. This can be a good way to try it out and see how your customers respond to it.
Add free shipping as a membership perk or to reward your most loyal/repeat customers. This can give you some recurring/passive income in the form of membership payments that can then be used to offset shipping costs.
Bonus! If you decide you don’t want to offer free shipping, try these other “free” alternatives which can be just as enticing: free in-store pickup or local delivery, or free returns/exchanges.
My last piece of advice is to pick a strategy and stick with it - at least for a while. Customers will appreciate that they know what to expect when shopping with you and you’ll have enough time to gather data to determine whether your initiative was successful. You can always tweak down the road as needed. That being said, I do think that offering free shipping in some form is useful for nearly every online seller so I hope you give it a try!
