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Free shipping strategies that actually help your bottom line

Operations

Free shipping strategies that actually help your bottom line

Free shipping strategies that actually help your bottom line

Updated: May 30, 2017

E-commerce consumers increasingly expect free, fast shipping with tracking updates and free returns.

Trying to keep up with these expectations set by the big brands like Amazon and Walmart can take a healthy bite out of your profit margins — but it doesn’t have to.

Instead of offering free and fast shipping on every purchase, use free shipping to incentivize a particular customer response.

Here are 3 different ways small business owners can use for free shipping to help grow their business.

1. Use free shipping to increase average order value

Research shows that 93% of shoppers will take some sort of action to qualify for free shipping, and the most frequently taken action is adding items to a cart to meet shipping requirements. By only offering free shipping with a minimum purchase value, you can encourage customers to buy a product they might otherwise leave off of their order.

One way to determine what to set as your threshold is by calculating your current average order value and setting the free shipping minimum slightly above it.

If you choose this strategy, be careful not to set your threshold too high. If your average order value is $20 and you set your free shipping minimum at $200, you’re not offering enough savings to counteract the increased spend by the customer.

2. Use free shipping to create a sense of urgency

If your business operates on slim margins, it might not be possible to offer free shipping year round. But creating a limited-time free shipping window can inspire buyers to follow through with a purchase they’ve been considering for a while.

By implementing this strategy, free shipping can provide a welcome surge in sales. Whether you set up this offer around the holidays or pick an arbitrary date, a limited time span gives you a reason to email potential customers a reminder about the items sitting in their cart, encouraging them to “buy now.”

3. Use free shipping to move a specific product

It might not make sense to provide free shipping for every product you offer. But by tying a free shipping offer to a specific brand, category, or set of items, you can help move idle inventory off your shelves.

If you really want to promote a certain product category or clear out some stale inventory, consider offering free shipping for the entire order with the purchase of any of the select items.

Measuring success

Don’t forget that you have a lot of flexibility when it comes to selecting the type of free shipping you offer. If offering free next-day or two-day shipping cuts into your revenue too much, you can offer ground transit as the free shipping offer. According to research, 83% of shoppers are willing to wait an additional two or more days to get free shipping.

As you think about how to put together your free shipping strategy, remember to keep track of a few metrics before you implement any changes and monitor them regularly to make sure the changes you make have the desired impact.  Here’s a quick checklist of metrics to consider:

  • Conversion rate: How many visitors are converting into buyers at checkout?
  • Average order value: What’s the average order value per buyer?
  • Margin per order: How much money do you make per order?
  • Return buyers: What percent of users return to buy more?

The bottom line

Free shipping is a powerful tool that can be used to drive the specific buyer behavior that ultimately affects your bottom line. If you offer this perk without any restrictions, you might be leaving money on the table that could be used to grow your business.

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Tags: Operations

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