When you buy something from an online store, you come across various shipping options. Some work for you, some don’t. It’s up to businesses to offer customers their preferred shipping methods without impacting their revenue. But this is easier said than done.
When it comes to shipping, you’ll come across these four options the most:
- Flat rate shipping: Customer is charged a flat rate across the board, regardless of the size of their cart
- Real-time carrier charges: A transparent way to decide shipping costs by integrating the shipping company’s real-time charges
- Free shipping: As the name says, customers don’t have to pay anything for having the products shipped to their homes. Arguably the most popular options for customers
- Discounted shipping: A modified version of free shipping where customers will have to hit a certain amount in their cart to enjoy free or discounted shipping charges
An NRF study has found that 75% of customers expect free shipping on their products. While the phenomenon of free shipping is fairly new, it didn’t take long to gain momentum. You might be thinking ‘should I offer free shipping’? The pros and cons will offer you clarity.
Pros of free shipping:
1. Customers love free shipping
Customers love free shipping because it saves them money. That’s the bottom line. On top of that, customers get a sense of security when they don’t have to shell out extra fees to cover the cost of shipping. It appears to be simple, fast, and cost-effective – everything a customer can ask for.
2. Reduces shopping cart abandonment
Shopping cart abandonment is one of the biggest issues e-commerce owners face every day. A Baymard study puts the average cart abandonment rate at 70% which is not a good sight for business owners. Cutthroat competition, high expectations, and confusing checkout processes such as high shipping charges contribute to this number. Free shipping definitely helps nudge customers to hit “Purchase” who get cold feet at checkout.
3. Improves brand image
Free shipping helps both in retention and organic word of mouth. If you have competitive prices and free shipping, the customers will be happy, and they’ll keep coming back. This way, you’ll be able to form a loyal customer base and potential advocates of your products.
4. Puts you ahead of the competition
Free shipping is a disruptive method. Small businesses that are finding it hard to make a mark in an oversaturated market can offer free shipping to differentiate and put themselves ahead of the competition.
Cons of free shipping:
Free shipping sounds good, but it does have a few drawbacks.
1. Permanently changes customer behaviors
Once you start offering free shipping, there’s no turning back. When customers get a taste of free shipping, they want to keep at it, making it an unsustainable model for businesses that operate on narrow profit margins. So you must make sure your margins can support free shipping long-term because your customers will expect it.
2. Increases return frequency
Since the checkout process becomes entirely seamless, customers order more products, more frequently. Free shipping doesn’t offer customers time to evaluate their buyer’s journey, leading to an increased number of wrong purchases and subsequent returns. Needless to say, with each return, your business takes a blow.
3. Increases product price
Free shipping – in reality – doesn’t exist. Be it the customers, the business owners, or the shipping company, someone has to carry the shipping charges. To keep your bottom line healthy, you’ll need to increase the prices of the products you sell.
4. Prone to shipping cost changes
When you carry the shipping cost on the behalf of your customers, you have to depend on the volatile nature of shipping charges. This will complicate your shipping strategy and impact your revenue.
If you cannot afford free shipping, discounted shipping might be a safe bet. Here are the pros and cons to help you decide:
Pros of discounted shipping:
1. Increases revenue per customer
Discounted shipping offers a discounted rate beyond a certain cart amount. For instance, if a customer hits a $100 cart, they will get a shipping discount. To save money, customers will look to increase their cart value, which will ultimately increase the revenue generated per customer.
2. Helps you upsell and cross-sell
Discounted shipping is a good way to upsell and cross-sell products. Upsell is the process of recommending higher-end products that might help customers meet a cart value. Cross-sell is a list of suggestions that complement the product in the cart. Both methods encourage qualified purchases at a higher value.
Cons of discounted shipping:
In the battle between free vs. discounted shipping, the cons make the real difference.
1. Less lucrative than free shipping
Discounted shipping is not as lucrative as free shipping. Free shipping has a psychological advantage since people appreciate the simplified and apparently transparent price structure. In comparison, the stress of hitting a cart value to get a better deal can intimidate some customers.
2. Adds extra steps in the checkout process
Discounted shipping offers multiple checkpoints in the purchasing process which makes it a lengthier and complex option in comparison to free shipping. Research supports the fact that simple checkout processes work best.
Should I offer free shipping?
Free shipping has its perks but in order to make it successful, you need to have a well-established shipping strategy. If increasing product prices alone can’t sustain this model, you’ll need to consider the investment and whether it will pay off in the long run. You need to check your competitors’ shipping strategy, your customers buying patterns, and at which price segment does your brand associate with them.
Free shipping is a risky decision from a business point of view, so you need to make sure you have all the details ironed out before making the jump.
IntelliQuick Delivery: the shipping solution for your business
Whatever your shipping strategy be, you need a capable and experienced shipping partner to deliver products fast and safely to the remotest locations. IntelliQuick Delivery has a robust infrastructure in the Southwest and coupled with modern technology and competitive pricing, offers the solutions modern e-commerce owners need.
To know how we can help you, get in touch with us today!