Many of us have pondered the question. And in a world where consumers are becoming increasingly habituated to receiving both free shipping and returns, it's definitely a strategy worth considering. Today we're taking a look at the pros and cons of offering free shipping, value propositions you can use to replace it, and how to decipher whether or not it's right for you.
Why Offer Free Shipping? 5 Benefits To Consider
Free shipping, as with all strategic decisions, can come with both positives and negatives.
We're going to kick off proceedings by taking a look at the benefits of offering free shipping, as well as hearing from some of our clients who currently choose to do so.
1. Customers LOVE it
At the core of free shipping is the impact it has on your customer's subconscious.
93% of customers prefer free shipping to any other type of discount.
Companies offering free shipping are preferred by customers, that much is clear. Although it's a relatively new phenomenon, it's gained traction fast, and because of this, free shipping is now something customers are conditioned to expect when shopping online.
In fact, 75% of consumers now expect free shipping, even on orders below $50. This is up from 68% in 2017.
As a result of this expectation, customers are much more likely to shop with, and repeatedly shop with, companies which offer free delivery.
Not only does the concept of free shipping reduce friction, but it plays into the companies brand image - eCommerce sites that don't charge for delivery show an understanding of their customers pain points and a willingness to try and soothe them.
This is certainly the case with our client, Bloom & Wild, who offer free shipping in order to streamline the buying process.
"A lot of our focus over the years has been on making the delivery part of the experience seamless and straightforward. It is extremely important to us that the flower delivery options at checkout are easy, and it was this focus that lead us in our decision to provide a free next day delivery option." - Kirsty Macdonald, Head Of Customer Experience at Bloom & Wild
2. Gain a competitor advantage
A company that's been known to offer amazing deals when it comes to free shipping, is ASOS.
And even though their free shipping and Premier Delivery was a bold and unprecedented statement, which could easily have led to their demise, other online fashion retailers had to follow suit in order to keep up; in order to stay competitive.
The industry you operate in is very much likely to determine the importance of whether or not you offer free delivery.
But one thing's for sure, if your competitors are offering free delivery, and you aren't, you'll fall behind - the average customer checks three sites before making a purchase.
And likewise, if they aren't, offering free delivery could be a great way for you to shake up the marketplace, gain a competitive advantage and grow a loyal customer base.
It's this competitive advantage that encourages companies to include Delivery information in their Meta Descriptions - it's a great way to stand out in the SERPs.
3. Helps you compete with High Street shops
It's not just your online competitors you need to be considering when developing a delivery strategy.
The High Street has its downfalls, but one thing it has that no eCommerce can offer is an immediate try before you buy - i.e zero-commitment purchases, and zero-consequence returns.
This reduces friction greatly, as customers have seen and tried the product in real life, increasing confidence and desire to actually own it. They're also not met with any additionaly costs which are likely to lead to cart abandonment online.
Of course, there are things that naturally pit online shopping above in-store, such as greater choice and availability, but the one thing that will really even the playing field is offering free shipping.
Offering free shipping on your eCommerce site allows customers to replicate the 'try-before-you-buy experience', reducing risk and increasing traffic and conversions.
4. Free shipping reduces basket abandonment
The most common cause of cart abandonment is extra charges at checkout, i.e shipping costs.
We talk about this a lot at Reviews.io:The average shopper is looking for a reason not to buy XYZ.
Shopping = spending money and spending money usually = guilt.
Anything you do on your site that could add to this guilt, such as extra shipping costs, will prompt customers to reconsider their purchase.
Compare this to free shipping, which gives customers no real excuse not to continue with their purchase when they hit the checkout, thus reducing friction, cart abandonment and boosting overall sales.
It's a tactic our client, Justmylook are seeing real success with.
“We chose to offer free delivery to provide the end-consumer with the best possible shopping experience. As a result, we receive fewer abandoned baskets and more happy customers!” - Luke Williams, Sales Director, Justmylook
However, there are plenty of other ways to reduce basket abandonment too.
Instead of giving customers something for free, you can add value using reviews. These boost trust, confidence and social proof at a time when customers are most likely to drop off, helping to counteract delivery charges.
Our client, Weird Fish, do a great job of this. Using one of our Carousel Inline Widgets, they're able to nudge customers int he right direction on the checkout page by showcasing their total review score, review count and a selection of reviews in full.
5. Free Delivery may increase basket size
Offering free shipping - especially with order value conditions - is one of the most recommended eCommerce marketing strategies out there.
And it's no wonder. Free shipping has been proven to increase basket size. UPS found 58% of customers added more items to their basket in order to qualify for free delivery, and BigCommerce report that offering free shipping can increase the average order value by 30%.
Why? Well, the psychology behind this is simple - why pay £5 for delivery, when you could get something concrete instead? Whether it be a small add-on product or an item they'd previously dissuaded themselves out of, free shipping with a threshold is a pretty persuasive marketing strategy.
Customers are willing to do surprising things to get free delivery, even if it, on the face of it, costs more.
6 Drawbacks Of Free Shipping
We've considered the positives, but as the saying goes 'nothing in life is for free.' It's time to take a look at the ways in which offering free shipping could cost your business.
1. Free shipping could affect your bottom line
The most obvious drawback of free shipping is, of course, the increased cost. Unless you carefully factor a shipping cost into every one of your product prices - hard to do when you have no idea of individual order size - you'll be hit with huge shipping costs.
Free delivery should not be an independent operation. In order to make it effective, you'll either need a great deal of capital to cover the initial costs, increased orders quantity and value, or increase your prices sitewide - a tactic which customers could be extremely sensitive to.
Whilst offering free delivery for all orders is an easy way to get customers through the door, it's contributed to the demise of many a company, including Pets.com.
2. Increases product prices
If you do take the plunge and decide to offset the costs of free shipping by increasing prices site-wide, you may see some drastic consequences.
If you're a smaller business trying to compete with a larger business offering free shipping, you're likely to be hit hard. Why? Larger business have a huge advantage: economies of scale.
This means they'll experience lower shipping costs in general, and are likely to be able to spread these costs much more thinly across their larger business and product offerings.
The result is a wider gap between small and larger business, as the former must either choose to risk making a loss and compete on price, or ask for a higher price and lose out on sales.
3. Alters customer behaviour
You don't need us to tell you that free shipping is an alluring offer. And whilst it might work to increase the number of sales you're getting, as customers think less about their purchases, it will also lead to more careless shopping.
Get rid of the delivery costs, and customers won't think twice about ordering one item this week, and another the next when they get paid. Whereas, this same customer, when faced with delivery, is likely to bulk buy in order to economise.
What does this mean for you?
Free shipping leads to more orders. And while shipping costs reduce order frequency, they're likely to result in fewer returns and a higher profit margin, as customers are not only likely to keep their goods, but will also be covering the shipping cost themselves.
4. Increases returns
One of the main dangers of offering free shipping is it converting customers who are not at the right stage in the purchase funnel. That's to say, customers who are not ready to commit to buying are coerced into purchasing products they will probably not keep, purely on the premises that there is 'no risk' i.e delivery and returns are free.
This, of course, can be extremely costly for a business, as they are responsible for picking up both the shipping and return costs of these unwanted orders.
It's essential to factor this into your decision when deciding whether or not free shipping is right for your business. If you're in an industry with extremely high returns and 'impulse buyers', it may not be the right solution for you.
5. Free delivery could harm your High Street performance
If you're operating both on and offline, you'll want to consider how offering free delivery may affect your store performance.
After all, modern-day consumers are looking for convenience. If you make your online offering too alluring - more choice, more sizes, less travel, no additional costs - then customers are likely to go straight to your online store as opposed to your physical one.
If this aligns well with your goals, brilliant. But if you want to keep a thriving store presence, you may need to give it a USP - i.e allowing customers to try before they buy, free of charge.
6. Bad for the environment
Are you environmentally conscious? As an online brand, it can be hard to be eco-friendly, especially when each and every one of your orders must be shipped out.
As we've seen, offering free delivery not only increases orders but is also likely to increase order frequency. More orders mean more resources - after all, all those orders need packaging and fuel to get them safely to your customers.
Whether this is inline with your own ethics or those of your customers is impertinent. What does matter is the effect it's likely to have on your brand image. If you're a business championing environmentally friendly materials or similar, frivolous shipping is likely to be frowned upon.
Should You Offer Free Delivery?
Now we've considered both the pros and the cons of offering free delivery, it's time for the big question: should you offer free delivery to your customers?
The size of your business, competitor activity and the type of goods you offer will play a large part in determining the delivery strategy that's right for you.
Consider your funds
It may be called 'free' delivery, but it's gonna cost ya. Someone has to pick up the tab for the new perk you're offering, and unless you're factoring this into sitewide prices, chances are that person will be you.
Whilst - if you're lucky - an increase in orders and order value might be enough to cover this difference, it's better to be safe than sorry.
That's why it's imperative to consider the capital you have available. Risk-taking is often touted as imperative to success, but it's never wrong to take precautions.
After all, free delivery can burn through cash faster than a fire in a straw barn, so proceed with caution.
Return Logic have a free calculator you can try to give you a better idea as to whether offering free delivery would have more pros or cons for your business.
Competitor Analysis
As an eCommerce business, you should always be keeping an eye on your competitor's activity.
Any change they make - be it a line of text on their homepage, a new product category or the implementation of a different delivery strategy - you should be aware of. It's then up to you to consider your options and choose whether it's necessary to shake up your own operations in order to stay competitive.
It's essential not to act impulsively when it comes to delivery strategies. Your competitor's decisions to offer free delivery doesn't guarantee success. They could experience all sorts of problems, such as increased returns and eroded profits.
There may be other solutions, such as offering a temporary promotion in order to compete - a much easier strategy to put on hold that free delivery. Or, you could make your own proposition more alluring by adding reviews to your site.
Customers value quality over savings, so if you can gain a far superior review total and score than your competitors, this may sway consumer's decision, regardless of price.
Of course, it could also be your company that chooses to make the leap first. Being the first in your industry to offer free delivery could see a considerable boost of not only orders from existing customers but new ones too, as people move over to you from their previous preferred business that charges for shipping.
Whatever you decide to do with regards to free delivery, the effect it will have on the competitive landscape should always be at the forefront of your mind.
Consider your brand & audience
Let's put money aside for a second.
When you first started creating your brand, what vision did you have in mind?
If the idea was always to create something exclusive and highly-desirable at the top end of the market, free delivery goes against that.
If you're selling products at a premium price, your customers shouldn't be averse to paying the costs for shipping.
However, if your focus is on fast-fashion or 'cheap and cheerful products', then offering free delivery is an obvious strategy. These customers are likely to be extremely price sensitive - as opposed to prioritising brand/quality - and therefore every penny will count.
In Summary
Offering free delivery has huge risks.
Once you've offered such a huge perk, going back is almost impossible, so it's essential to consider all your options and make sure it's right for your business before making any drastic decisions.
Whether you decide to offer free delivery or not, we'd always recommend including other compelling marketing tactics, such as reviews.
A testimonial touting your leather skirt as 'the best investment I've ever made' is likely to have way more weight that free delivery. Verified testimonials provide social proof at a time when it's most needed to give your customers the final nudge they need to click that checkout button.
Want in? Get in touch with a Reviews.io today to find out how reviews can reinforce your delivery strategy to boost conversions and reduce drop-off. Sign up for our 14-day free trial today to test out our platform.
