Free shipping is a commonly used tool in the eCommerce arsenal to entice consumers to buy online today. But if used incorrectly, you might have a post-holiday season meltdown when you review what it actually cost you.
Post holiday season, you should review the numbers to determine if you should shorten the time period you offer free shipping or on which products. If you offered it last year and you haven’t reviewed whether it hurt or helped your bottom line, do that first.
If you’re unsure of the power of free shipping, consider that “24% of shoppers are willing to spend extra and buy more in order to qualify for free shipping,” according to a 2014 eCommerce survey by VBO.
In the meantime, we’re going to fill you in on some of the industry’s best-kept secrets on how to use free shipping to actually make money (in some cases), increase your AOV (Average Order Value) and increase your sales this holiday season.
- Require a minimum order value to get free shipping. Review your AOV for the prior year and add an additional 15 to 20% to that to become the new free shipping threshold. When your customers are about to check out and they are near but haven’t hit your free shipping threshold, let them know by showing them a message that if they hit your threshold, shipping is free. Remember, free is a very powerful word!
- If you plan to offer free shipping for an extended period, like many retailers do for the month of December, for example, increase your margins by 5% to cover the cost of free shipping. You could also review the average shipping cost of orders for the prior year, increase prices to cover the average cost and rest easy knowing it won’t cost you too much money to give consumers something they expect this time of the year.
- On a related note, offer free shipping all year long on your highest margin products. For lower margin products, require the minimum order value to drive that up to a point when you break even on average.
- If you have a wide range of product weights, offer free shipping on the lightest items, as those typically won’t be as costly to ship. But be careful here, even though an item is light, it can still come up as a hefty shipping expense if the dimensions are high. Cross reference your heavy items with those that large in dimension and those are product you don’t likely want to offer free shipping on.
- Make sure you know and differentiate free shipping based on where your customers live. Be sure to communicate that free shipping is only available to US customers, for example, if you don’t have a warehouse in the country you are shipping to.