When it comes to free shipping for small business, there is often that question if free shipping is a good idea or not. We have data-driven answers to this question. We understand that it might be difficult to distinguish oneself in an industry where there are a lot of competitors. Consumers are always on the lookout for the lowest price and greatest value, which is why it’s tough to stand out from the crowd. As a business owner, you must balance providing competitive prices while still maintaining a positive profit margin.
When it comes to drawing attention and converting consumers into paying clients, the small things matter most. While many business owners are familiar with the significance of branding, marketing, and advertising in increasing sales, many underestimate the actual value of providing free delivery.
You might be shocked to learn that 55% of abandoned carts are due to high shipping expenses. So, is it true that offering free delivery will result in sales? Well, it’s not quite that simple.
Read on to discover more about the benefits and drawbacks of providing free delivery, as well as how to make it work for your firm without becoming bankrupt.
What’s So Great About Free Shipping For Small Business?
One of the most appealing aspects of purchasing online is that it is quite simple to compare prices. Amazon, Jet, and even Google want to show you the best rated goods at the greatest savings with the lowest (or no) delivery fees. With so much rivalry out there, online retailers need to figure out how to convert guests into paying consumers and keep them coming back.
That’s where free delivery comes in.
Shoppers appreciate free shipping, and it is frequently the deciding factor between one site and another. Shippers are not gratis to the consumer, but they are not cheap for merchants either, and those fees might mount up quickly. That is why you see so many websites providing free delivery if you spend a certain amount of money – the sale of those add-on items helps the firm recover the costs associated with shipping the purchase.
Consider the following recent study, which revealed that 58 percent of customers will add extras to their shopping cart in order to qualify for free delivery at a specific price point. Not only will customers spend 9.4% more when they must fulfill a free-shipping minimum, but they’ll also spend 9.4% more once they’ve met it. So, even though you’re still responsible for the cost of shipping yourself, you may make greater money by employing free shipping cleverly.
The Psychology Behind Free Shipping
“Does free shipping really work?” is the question every e-commerce company owner wants to know. The consumer benefits are self-evident, but how can you make it work for your company without sacrificing too much of your margins? Understanding the psychology behind free shipping is the first step toward answering this issue.
It should be noted that free delivery is becoming increasingly common. Consumers are less likely to consider it as an alternative and more inclined to regard it as a necessary service. From huge online retailers like Zappos and Wayfair to department stores and small businesses, everyone has started providing free delivery. For many firms, free shipping is only accessible to customers who have fulfilled a spending requirement, but for others, all purchases are free.
What’s the psychology behind a free shipping offer? It all boils down to a consumer’s perceived value of shipping. Prior to making a purchase, a customer performs rapid subconscious math, weighing the costs and benefits of acquiring the product. When shipping costs are prohibitively expensive for an item that may be purchased at a nearby shop, the math doesn’t work and the cart is abandoned.
Another benefit of free delivery is that it influences consumer behavioral patterns more than the shipping effort itself. According to Dan Ariely, a professor of psychology and behavioral economics at Duke University, people alter their behavior when something free appears. In his book “Predictably Irrational,” Dan Ariely provides a real-world example of the power of free in action. The number of orders on Amazon’s European sites increased dramatically when it began offering free delivery on some markets. In France, though, things were different. That’s because the shipping fee in France was slashed by a factor of ten, from $30 to just $1.
How Free Shipping For Small Business Is Typically Used
Free delivery is readily available, but companies employ this approach in a variety of ways. Here are some of the most common free shipping methods:
- Free shipping on all orders – no qualifications or restrictions.
- Free shipping for members or subscribers only.
- Free shipping on orders that meet a minimum threshold.
- Free shipping on qualifying items.
- Free shipping to a brick-and-mortar store for pickup.
- Free shipping for buying during a certain window.
Because every e-commerce company is unique, the free shipping policy you choose will be unique to your business. You’ll need to figure out how to keep your consumers pleased while still generating sales and reimbursing the costs of offering the program.
What Are the Benefits for Your Company?
Although the concept of free delivery is excellent, it isn’t fully foolproof. There will undoubtedly be situations when a client isn’t interested in adding additional items to their cart in order to qualify for the discount. There are times when the extra income from add-ons isn’t enough to cover the cost of delivery. Also, and most importantly, free delivery may fail if the customer is not in the appropriate buying cycle phase.
When a consumer becomes aware of a demand that must be met, the purchasing process begins. The next step is for the customer to consider methods (products) to fulfill the need and evaluate the benefits and drawbacks of various alternatives. Finally, the customer picks a specific product and makes a purchase after reviewing all available alternatives. The stage in which customers receive free delivery is crucial because it determines when and how quickly purchases will be delivered. If the consumer isn’t ready to buy, free shipping may not be enough to persuade them to do so.
On the other hand, free delivery does have some advantages. Here’s a short rundown of the benefits that free shipping may provide to an e-commerce company:
- Increase in sales – We’ve already seen how providing free delivery increases sales, but how does it accomplish this? For one thing, offering free shipping reduces cart abandonment – it pushes would-be consumers over the brink to make a purchase. It may also distinguish your company from the competition and boost perceived value.
- Increase in ARPU – When you offer free delivery, it can have a big impact on your total revenue. Especially if you set a minimum spending requirement, average revenue per user (ARPU) is significantly influenced by free shipping polices. Free shipping is effectively an upsell strategy that allows you to expand the size of an average client’s purchase in a way.
- Increase in loyalty – Giving free delivery makes your consumers delighted, and a pleased consumer is more likely to purchase from you again. It’s easy to see how offering free shipping as part of a loyalty or membership program benefits repeat purchases. Take a look at what Amazon Prime has accomplished for customer loyalty in the Amazon marketplace.
Shipment costs are a tool that e-commerce businesses may employ to enhance conversion rates and keep consumers coming back, but it isn’t a perfect system. Continue reading to learn how to make it work for you.