Offer free delivery: It’s the biggest incentive for customers today to shop from you
Shopping-cart abandonment is a massive problem for online retailers so taking steps to avoid that trend and converting your e-shop visitors could pay massive dividends. Taking statistics from 29 different studies, the Baymard Institute, have estimated that around 68% of online shopping carts are abandoned.
Delivery options play a pivotal role in an online shopper’s decision of where to spend their hard-earned cash.
60% of shoppers abandon shopping carts due to extra costs associated with the purchase such as delivery costs, tax and other extra charges such as the fee for returns. Maintaining a steady cost from product page to checkout increases a customer’s likelihood on following through with the purchase.
Free delivery can be an effective marketing tool that aims to benefit both the consumer and the retailer. Free delivery is a long-term play. Taking a short-term loss can be a smart sacrifice with a big-time payoff down the road if the policy generates sales, loyalty and builds brand advocates.
However, it is also worth noting that although free shipping encourages the user to convert, it does not always match where the customer is at in their buy cycle. In other words, free shipping works for some people, sometimes.
Many online sellers will argue that they do not need to offer free delivery or that offering free delivery is not financially feasible.
Some retailers just cannot get over the idea of ‘damaging’ profitability on products by offering free delivery, or they feel the level of service they can offer for ‘free’ will compromise the customer experience. But some of the perceived problems with offering free delivery may really be a result of the way we think about it.
A few years ago, a Quora contributor named James Edwards wrote;
“‘Free delivery’ in an online business is no different to ‘free entrance’ into a brick-and-mortar store. Just as a brick-and-mortar store incorporates the cost of sales assistants and store lease into their item price, so to can an online business incorporate the delivery cost into their product prices.”
Edwards’ argument is that free delivery is simply a cost of doing business. For example, few online retailers pass the cost of packing materials on to customers. Nor do they cost in the expense of website hosting, payment card processing, or a myriad of other overhead expenses.
Similarly, many online sellers are happy to offer shoppers 10, 20, or even 50% discounts on products in the form of sale prices and promotional discounts, only to be reluctant to offer free delivery. Similarly, ecommerce marketers will spend £5 per click on AdWords to get a shopper to the site, but won’t spend £5 on free delivery to optimise conversions.
How to make free delivery ‘pay’ dividends
Free shipping is a good idea. At least, it can be, as long as you do it right. The ultimate challenge for online businesses is how to affordably offer free delivery and balance the expense. There are several ways e-tailers can achieve this;
- Factor the cost of delivery into your product pricing: understand delivery costs from the moment you receive inventory and include it in your pricing models.
- Focus on up-sells and cross-sells: Encourage customers to buy two or more items and your margins will improve as more items are added to the shopping basket.
- Offer free delivery on orders over a specific amount: Many savvy shoppers will add additional items to their shopping cart to receive something for free, especially delivery.
- Free shipping on certain items: If Product Number One is a hot seller with strong inventory and a great profit margin, go ahead and swallow the free shipping cost.
- A pre-determined time period: Offering free delivery during a specific time frame is ideal for increasing sales during slow periods and creates further incentive during highly competitive seasons.
- Offer free delivery with timescales to suit in conjunction with additional delivery options: For example, the majority of business charge extra for express delivery at a cost to the consumer.
- Membership, loyalty programs, or email subscriptions: You can use free shipping for more than just a one-off sale. In order to qualify for free shipping, you can have shoppers join your loyalty program. This could be a free membership, or it could simply be signing up for a mailing list. If you’re really in a strong position, you could even have a paid membership. The best example of this is Amazon Prime where members qualify for free two-day shipping on all Prime-eligible purchases, plus other perks such as free streaming on select TV shows and videos.
- Free shipping on returns: One of the best ways to overcome buyer’s remorse is to offer free shipping on returns. It’s a huge relief to know you can easily send back that sweater you ordered which turned out to be too big. It works especially well if you are working with merchandise which has a high likelihood of buyer’s remorse or return rates (e.g., clothing, footwear, etc.).
If you do choose to offer Free Delivery
Promote it heavily! Customers love free delivery – it’s a distinguishing perk so make sure it’s prominently displayed on your website and in your customer emails.
Find out if you can take the pressure off by reducing the costs of delivery through establishing relationships with a third-party delivery service provider. At PDX, we work closely with our ecommerce partners to help develop suitable delivery arrangements.