You know customers love it, but should you offer free shipping? In this article, I’ll detail when you should offer it and when you shouldn’t. I’ll also provide suggestions on things you should consider before you offer free shipping, some interesting shipping stats, and more.
When should you offer free shipping
You’ve calculated the costs and can afford to
To answer the ultimate question ‘should you offer free shipping,’ you’ll be required to do some math.The standard free shipping delivery option often takes months to reach a customer, which is bad for customer service.
Sometimes, the supplier offers ePacket which may not be free but has a low cost. If the product is affordable, you can tack on the ePacket price and offer free shipping to your customers. In the image below ePacket costs $2.20 and the item costs $2.58/piece. You could charge $24.99 for this top which would give you enough room to spend money on advertising, pay for the cost of goods and make a profit while at an affordable price for the customer.
Before using Oberlo, I used another dropshipper where the cost of shipping was higher than the cost of goods but not sustainable. For example, the goods cost roughly $8 and international shipping cost $16. This brings the total cost of goods to $24. Then when you add in the cost to acquire a customer via ads the cost is even higher. However, the market value of a standard mug, the product I was trying to sell, is nowhere near that price. Many buy mugs from Walmart or the dollar store for under $5. It wasn’t sustainable or profitable to offer free shipping in this situation.
When free ePacket shipping is offered by supplier
If the supplier offers free ePacket shipping, you should offer free shipping to your customers. It’s unethical to charge for shipping when you’re not paying for shipping costs. If ePacket shipping costs are low and allow you to make a profit, you should offer free shipping to your customers as it would be affordable enough to include shipping in the product cost.
Many products on Oberlo are shipped with ePacket delivery. Keep in mind that ePacket is only for a select number of countries. Typically, when ePacket is free it’s for the United States with low shipping costs available for other countries like Canada, Australia, the UK and more.
Your competitors offer it
If other brands in your niche are offering free shipping, you should offer it to stay competitive. However, even if they don’t offer free shipping, you might be able to have a competitive edge over competitors if you do.
According to AdWeek, 81% of shoppers research before buying a product. They’ll also browse three stores before making that purchase. Don’t make the mistake of thinking that you don’t have any competitors, because potential customers can easily find them. Remember: everyone has access to Google.
Customers may be willing to pay more for your product if you offer free shipping and a competitor doesn’t but has a slightly lower product cost. Surprise fees can also increase abandoned carts.
Browse several ecommerce websites in your niche. If most of them offer free shipping, you’re going to have to do it too.
Let’s look at these two popular Canadian fashion brands. The two brands share a similar audience and their products are within the same price range. Both offer conditional free shipping. Suzy Shier offers free shipping on orders over $100 but offers a free blanket for online purchases. Dynamite offers free shipping on all orders over $50.
While free gifts are always nice, the offer presented doesn’t appeal to everyone. Most people shopping for apparel would be interested in buying earrings or shoes but a blanket can be a bit of a stretch. Take into the account that the blanket is worth $25, the cost of free shipping is still higher at Suzy Shier than at Dynamite. Someone wanting to buy a gift for a friend would likely shop at Dynamite to buy a gift rather than Suzy Shier to avoid the shipping costs.
You want to increase your number of orders
Offering free shipping betters your odds of building a bigger customer base and having a higher volume of orders. With conditional shipping, you may be more likely to have a higher average order value (AOV). However, you can also increase your AOV with free shipping by having upsells or ‘free gift with purchase of two’ offers.
When you offer free shipping, your product and price need to be exactly what the customer is looking for to make the purchase. If your product seems attractive to a customer and it’s at a fair price, you’ll be more likely to get a sale.
When dropshipping, you can also benefit from increased profits. Since many of the the products on Oberlo have affordable product costs and shipping rates, you’re in an advantageous position to generate a higher revenue and profit than if you were dropshipping from elsewhere.
You’ve adjusted product costs to accommodate free shipping
If you need to pay for ePacket shipping, you can easily include the shipping cost into your product cost to avoid affecting your margins. By incorporating the shipping cost into your product cost, you’ll still be able to generate a profit while paying for advertising costs and any other associated fees.
With Oberlo, you can easily bundle the prices (cost of goods + shipping fees) into one retail price without giving the customer sticker shock. Sticker shock is essentially when a customer is shocked by a high price or a drastically increased price.
When shouldn’t you offer free shipping
You’re trying to increase AOV so you need to set a threshold
You shouldn’t offer free shipping when your focus is on increasing the average order value (AOV) in your ecommerce store. For example, if the products you sell are very affordable for customers, you might want to encourage people to buy more products so you can have a higher profit.
You’ll still give customers free shipping but there’s a catch. The customer must spend a certain amount of money before they can access free shipping. You’ll need to experiment to see what works best for your store. However, common thresholds include $25, $35, $50 and $100.
Keep in mind that you should also test to see if you make more profit with one of the conditional free shipping offers or with free shipping on all products.
When you have low product margins
If you’re dropshipping with Oberlo, you shouldn’t have a problem with low product margins unless you’re charging too little for products.
However, if you’re dropshipping with an American dropshipping company, you may run into the issue where your margins aren’t sustainable. In this case, offering free shipping to your customers can put your business in debt. Even if you were to increase your product prices to be able to offer free shipping, customers may find your product cost too high and not buy altogether.
Many print-on-demand dropshipping businesses make it nearly impossible for a store to offer free shipping to their customer. Store owners would need to offer a conditional free shipping but the cost of goods may already be too high for a customer.
You want to use it as a promotional tool
You shouldn’t offer free shipping to your customers if you plan on using it as a promotional tool. For example, if you offer free shipping year round you can’t tell customers ‘free shipping this weekend only’ to lure them in.
Another case where you might use free shipping as a promotional tool is if you have a loyalty rewards program where only loyal customers get free shipping. Amazon does this with Amazon Prime allowing customers to get free same day shipping if they sign up for their membership.
When customers get used to getting free shipping year round they need to be lured in to buy products for another reason such as a buy one get one free sale or a steep discount on a product collection.
When the shipping costs are too high
Another time when you shouldn’t offer free shipping is when the shipping costs are too high. Fortunately, with suppliers who use ePacket, the shipping costs are typically only a couple of dollars. However, many entrepreneurs or dropshippers may have high shipping costs that make it impossible to offer free shipping. Sometimes, even offering conditional free shipping is difficult. For example, if a store offers ‘free shipping on orders over $100’ often times it’s due to expensive shipping costs.
Shipping costs are also typically high when they’re delivered in a short timeframe. For example, when products are delivered within 7 days they’re often express which increases the cost. With ePacket, it takes up to 30 days for a product to arrive which drastically lowers the shipping cost.
If a business were to guarantee shipping within a week, their shipping costs would be too high to sustain the business.
You offer free returns instead
Some store owners may choose to offer free returns instead of free shipping. Free returns would likely cost less than free shipping as the number of returns is always going to be lower than the number of purchases.
However, offering free returns is especially appealing to those who buy apparel and other fashion related items. The biggest disadvantage to buying clothes online is you won’t know how it’ll fit or look on you.
According to CNBC, offering customers free returns can help boost sales by 357%. The article continues by mentioning that customers are also more likely to spend on a store that offers free returns. So instead of investing in free shipping, some store owners may choose to offer free returns to their customers.
Things to Consider Before You Offer Free Shipping
- Are you charging enough for your products? You need to run the numbers to ensure your product price is sustainable for your business. If shipping costs aren’t free is your business able to afford them with your profit.
- Will you still be able to make a profit after all costs are considered? There are several financial factors to take into account when offering free shipping. Does your product price give you the freedom to hire a team, pay business expenses, pay the cost of goods, pay taxes, cover the cost of advertising and free shipping. After all those costs are paid is your business still making money.
- How will you use free shipping as a marketing tool? Think of your long-term marketing strategy. Do you want to use free shipping year round or during certain times of the year such as holidays and sales. Determine your goals: increasing average order value, increasing number of orders, increasing number of return customers, increasing profit, etc.
Should You Offer Free Shipping – Statistics and Resources
- According to Red Door, when they offered a free shipping threshold, such as ‘free shipping on orders over $75’ they were able to increase orders by 90%.
- According to Marketing Land, they found that 9 out of 10 customers were incentivized to do their shopping online when offered free shipping. They also found that about a third of of online shoppers were making purchases weekly.
- Thanks to ShivarWeb, you can now use this handy Free Shipping & Profit Calculator to help you determine whether or not your store should offer free shipping.
- According to David Bell, people find a free shipping offer that saves them $6.99 more appealing to them than a product discount of $10 despite saving more money with the latter option.
What do top brands do for shipping?
Now that you have some insight on whether or not you should offer free shipping, let’s take a look at what other brands do when it comes to shipping. Do top brands offer free shipping, conditional shipping or paid shipping?
Walmart offers conditional shipping. Customers only qualify for free shipping if they spend $50 or more. They likely do this to increase the average order value since many items on Walmart’s online store are very affordable.
Best Buy offers free shipping for special events. For the holiday season, they offer free shipping on all orders. Since many of the items on their online store are expensive they likely have high margins and can afford to offer free shipping. They may also do this to boost sales during the holiday season and return to paid shipping the rest of the year, using it as a marketing tool.
ASOS offers conditional free shipping. International customers who spend £22.56 or more can enjoy free shipping. This likely helps reduce shipping costs as shipping internationally usually costs more than shipping within your own country when you carry inventory.
Ralph Lauren offers free shipping when customers use a discount code. Also, they take it up a notch by offering free gift boxes during the holiday season to customers which is a nice little bonus.
Disney offers promotional free shipping to customers. With a special discount code, customers can occasionally get free shipping on any product. They use it as a marketing tool.
How to know whether you should offer free shipping, a free shipping threshold or paid shipping
The best way to answer the question ‘Should you offer free shipping?’ is to test it on your store. Until you look at data from your store’s customers, you won’t really know whether or not to offer free shipping.
Unfortunately, you can’t run a multivariate or A/B split test for shipping on Shopify. However, the easiest way to find out if free shipping or conditional free shipping works best on your store is to try one condition for a couple weeks and compare it to another condition shortly after.
For example, you offer free shipping on all products and run an experiment until you reach 100 customers. Once you hit 100 customers, you can run a second test where you offer free shipping on orders over $35 (or whatever number makes the most sense for your store) and you collect the data from those 100 customers.
Most multivariate or A/B tests can be easily done in Google Analytics but performing this sort of test on Shopify can’t be easily done so a manual test would have to be done.
How to Setup Free Shipping in Shopify
If you decide to provide your customers with free shipping, you’ll need to follow the steps below on your Shopify store.
First, you’ll want to view Settings in your Shopify backend and look for the Shipping section.
After clicking to the next page, you’ll need to add your business’ address since you’ll have different suppliers with different addresses.
If you’re going to offer free international shipping, here are a few steps to follow:
Under Domestic and Rest of the World, you’ll want to select ‘Priced Based Rates’
Under Add Rate, you’ll need to add a name and set your price threshold. For example, for free shipping with purchase over $150 you’d add a minimum price of ‘150.00.’
If you’re giving your customers ‘free shipping’ you’ll add ‘Free Shipping’ under name and select the box under rate with a rate amount of $0.00.
Want to learn more?
- How I launched my eCommerce store in less than 30 minutes (with products)
- [VIDEO] What Is ePacket Delivery?
- 10 Online Stores to Use as Inspiration for Your First Store
- How To Select Dropshipping Suppliers
Should you offer free shipping on your store? Let us know what has worked best for you in the comments below!