As a competitiveness requirement, many internet merchants provide free delivery. While free delivery is not cheap, it does have certain sales advantages.
When major e-commerce sites like Amazon implemented free delivery, it was never a good idea for smaller companies to follow the same path.
Nevertheless, evidence has proven that shoppers enjoy Free Shipping throughout the years. According to a recent poll, 93% of respondents said that free delivery prompted them to complete a purchase. Considering Free Ship's attractiveness among customers as well as its influence on increasing topline revenue, other firms have little choice but to follow suit.
Now..
Should I give out free shipping?
This has been a question for e-commerce entrepreneurs from the beginning of time.
Shipping costs are a changing objective for retailers. Can your profitability cover your shipping charges? And which things should you charge shipping for?
Clients, on the other hand, see shipping as a necessary element of conducting business on the internet, which is partly why they dislike going all the way to the check and discovering that delivery is additional. Consumers not only desire free delivery, but have come to anticipate it as a result of firms like Amazon establishing it as usual.
When you examine the facts, it's difficult to deny that free delivery can have an influence on a sale. According to a Forbes poll, 50 % of respondents shun companies who do not provide free delivery, and 77 % have abandoned a transaction entirely owing to bad shipping alternatives.
However, while free delivery is a certain strategy to improve conversions, it is not lucrative. Without the proper plan in place, free delivery might really be detrimental to your bottom line.
In this post, we'll look about how online retailers may provide free delivery without jeopardizing the bottom line.
Is it preferable to provide free shipping?
Free delivery is a marketing strategy that eliminates shipping costs for approved sales. That is the most basic definition.
Nonetheless, there are other possibilities to consider, like free shipping:
There are no restrictions or qualifications required.
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When a certain quantity of money is attained.
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Only for members of a group or community.
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For certain items.
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Promotions that run for a limited time.
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Directly sent to a physical store.
And there are other combinations that eCommerce specialists might conceive of. Customers prefer this eCommerce strategy because of the physiological benefits it provides.
The Psychology of Everything In Free Shipping
To be effective, free shipping must be implemented at the appropriate moment in the shopping cycle. Every online consumer is located at one of the following points:
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Realization: Understanding that they must satisfy an emotion or a desire by purchasing something.
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Curiosity: To find out how your product fits their needs.
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Knowledge: Discovering more about the advantages and peculiarities of your item.
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Decisions: After weighing their alternatives, customers decide on their favorite product to meet their needs.
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Buy: Completing the transaction and becoming a repeat client.
The fifth stage of the cycle, 'Buy,' is where free delivery offers value for a buyer. Once they've chosen to buy, use the phrase 'free' to remove the fear of danger. However, if they aren't there yet and aren't completely sold on your offer, free delivery will do little to persuade them. This is why:
If a potential consumer is still in the awareness stage, they are still determining what their requirement is. Free delivery will not entice customers if they are undecided if they want to shop or not. They are still weighing their alternatives if they are in the curiosity or knowledge stages. They will not purchase anything they are dubious of simply because it includes free shipping. That would be irresponsible.
If customers are at the choice stage, they can opt to buy the right product available at the time, irrespective of whether or not it includes free delivery. This will increase their trust in their decision. The fact that free delivery is available is an extra advantage that makes them happy. Customers may be required to go throughout each phase of the process and be in the market to buy. And there is no greater moment of the year for them to get into the shopping mood than during the Christmas season.
How Do You Profit From Free Shipping?
Yes, given the appropriate conditions, it may be profitable. Because shoppers adore it, you can be certain that it will enhance conversion rates. However, because you must pay for it, it might reduce your profit margins.
Do the arithmetic and conduct basic tests to ensure you're getting the most out of free shipping deals.
You might begin by performing a simple A/B test to see how much free delivery will cost you.
Choose a sample of clients to whom you will offer free delivery. Then, compare your control and test groups on the latest changes:
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Change in average order value: the amount spent on average by a shopper when they purchase something.
AOV (Average Order Value)=Total Revenue / Number of orders
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Improvement in conversion rate: the percent of consumers who make a purchase. CR=(Total Visitors / Conversions) * 100%
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Gross margin changes: the amount of revenue generated for each product sold. GM=Online Selling Price - Production & Shipping Costs
Calculate AOV, CR, or GM for each of the 2 categories. When you have these data, calculate the variance in each value among the two groups. This will allow you to calculate the profit % change:
% Profit Change=[(Change in CR * Change in AOV * (1 + Change in GM)) - 1]
The profit percent change will be negative. This offers you an estimate of how much extra money you'll have to pay if you offer free delivery.
You must understand how to convert that negative value into the positive value and an increase in earnings. Here are some methods for accomplishing this:
Build An Engaging App For Free
Only Ground Shipping is eligible for free shipping
Ground shipment is a low-cost method of delivering things to a consumer. This strategy takes longer than others, but it's worth a shot if you have consumers who are ready to wait for free delivery. You may significantly lower your spending in this manner.
Establish a Minimum Order Value
When you specify a minimum requirement, you may do the following:
Increase your average value of orders when customers add items to their baskets to achieve the threshold.
Reduce delivery costs by lowering the number of orders when clients buy in bulk.
To determine your threshold, begin by including 10%-15% to the AOV. If your current AOV is $60, increasing 10% to 15% will raise it to $66 to $69.
After you've added your %, repeat the aforementioned A/B test and examine your new findings. Profit change as a percentage should be positive. This implies that even giving free delivery earns you money.
The final phase in this strategy is to press the offer as hard as possible.
As they add things, let your consumers understand how close you are to the threshold. Before they've hit the limit, inform customers of the free delivery offer. Inform them how much money they saved throughout the checkout process.
Provide a Low Fixed Shipping Fee
Allow your customers to pay a nice flat charge regardless of the amount of orders they place. This method is excellent because:
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Customers who shop online are more likely to purchase more things since they receive free shipping.
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If customers place low-margin orders, they can cover much or even all of the standard cost of delivery.
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As customers place more orders, the total gross margin increases.
Only provide free shipping on some items.
You may save money by doing the following:
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Removing low-margin items from the free delivery promotion.
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Restricting free shipment to goods with large volume and low freight costs.
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Taking hefty products with high delivery prices out of your free shipping offerings.
Add the cost of shipping to the product price.
This focuses on the psychology of pricing perception. Consider the following two possibilities:
$50 plus $5 shipping
$55 plus free shipping
A consumer is more inclined to choose the option having free shipping than that of the alternative with an additional payment. This is effective if you're selling things that shoppers won't discover on many other websites.
Change the pricing of products below the threshold to incorporate delivery charges in your product prices. Subtract a portion of the expected shipping cost.
Assume you have a free delivery offer on orders of $50 or more. Add 30% of the delivery cost to the price of the product if it is regularly priced at $15. As a result, the new price is $19.50.
When can I provide free shipping?
Provide It
You should provide this incentives if you can:
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You've assessed the cost and determined that you can finance it without jeopardizing your bottom line.
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It's something your rivals are doing. You must stay competitive, despite the fact that others do not, offering it may provide you with an advantage. The majority of customers (81%) are likely to explore three internet stores before making a purchase.
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Your supply chain includes free or low-cost delivery.
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Your aim is to increase your order volume.
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You've successfully incorporated free delivery into the item price.
Do Not Provide It.
If you provide free delivery, avoid doing so if:
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You're attempting to raise your average value of orders without establishing a threshold.
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You're employing the strategy as a short promotional tool, although you generally make it available all year. Nevertheless, you may use it to advertise a loyalty rewards program. Offer free delivery all year to customers that bring in recurring business.
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Your goods margin is so low that giving free delivery would jeopardize them.
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You either have high shipping expenses or promise speedy shipment, which invariably raises costs.
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Instead of free delivery, you may offer free returns. Because just a tiny percentage of customers return things, free returns cost you less. Free returns are especially enticing to people working in the fashion business. This is because customers cannot always discern if the clothes they purchase will fit them properly.
Final Thoughts
Does offering free delivery increase sales? The takeaway here is that the influence of free will not be lost anytime in the near future.
Has it been misused several times? Yes. Are people becoming more distrustful of it? Yes. However, it is still effective.
Perhaps you're thinking about how you might include an appealing choice of words like "free" into your Shopify store without needing to make a slew of alterations and edits. Try Swipecart to help you increase your sales now.!
