Free Shipping and how it Drives Sales
Thanks to the popularity of mega-retailers such as Amazon, free shipping has transitioned from being merely an occasional offering to the reigning industry standard. With shipping costs cited as the number one reason for cart abandonment and nearly nine out of 10 consumers reporting that free shipping would cause them to shop more frequently online, it’s clear that shipping at no cost is a necessary component for both retaining and attracting new customers.
Unfortunately, offering this feature can come at an exorbitant price, especially for smaller retailers who do not boast the volume needed to negotiate deep discounts with carriers. In an effort to meet the expectations of their customers, retailers have reported spending anywhere between 5%-20% of their total revenue on shipping, frequently absorbing the full cost of any free shipping services.
So, how can eCommerce companies meet the expectations of their customers while minimizing their losses? Here are eight examples of how successful retailers are using free shipping to drive purchases:
- JCPenny – Threshold-based shipping: JCPenney, who just beat their Q2 earnings, offers free shipping for shoppers who meet the minimum order amount of $99.This is one of the most widely used techniques to increase shopping cart value and cover shipping costs.
- Value City Furniture – Free shipping on key items only: Value City Furniture offers free direct shipping to the buyer’s home only on specific items, such as sheet sets, pillows, and smaller pieces of furniture. These lighter items are typically cheaper to ship, helping to offset the loss taken on heavier objects.
- Zappos – Free standard shipping: Zappos employs another widely used technique, offering free standard shipping on all orders. The associated fees can then be incorporated into item pricing, the tactic that most retailers who offer everyday free shipping are likely using.
- Smashbox – Paid upgrades for priority and rush options: Beauty retailer Smashbox provides complimentary standard shipping on all U.S. orders, while also giving their customers the option to pay to upgrade their order to a faster delivery speed. These charges increase depending on the order total.
- Express – Time specific promotions: Express typically employs the threshold technique, providing free shipping on orders over $125, however they recently offered free no minimum shipping sitewide for one day only. Whether for a single day, or multiple weeks, offering free shipping during limited time periods throughout the year is likely to increase order volume and bring in new customers, especially if the promotion is clearly advertised through social media and email campaigns. Multiple retailers utilize this particular tactic every December during the annually observed Free Shipping Day.
- thredUP – Offering free shipping with abandoned shopping cart emails: Online fashion resale company thredUP has designed their email campaigns to lure customers back to abandoned shopping carts. Emails automatically go out to account holders featuring reminders of what items were left behind, with a bonus discount promo code, in addition to free shipping on the order. This is an opportunity to make the shopper feel appreciated, potentially increase conversions, and build brand loyalty.
- Walmart – Yearly membership program: Walmart recently introduced their new ShippingPass, a program that allows subscribers to enjoy free unlimited 2-day shipping for the price of $49 per year. Membership also includes free returns online and in-store for that added touch of customer care.
- Neiman Marcus – Shoppers unlock free shipping through loyalty program: Members of the InCircle rewards program who spend more than $1000 annually at Neiman Marcus, Bergdorf Goodman, CUSP, Last Call, or Horchow earn complimentary 2-day shipping on online and catalog orders for the remainder of the year, rewarding them for their loyalty to the brand.
While there is no one-size-fits-all approach for free shipping, retailers can spin it to their advantage by trying out one or even a combination of the strategies above and paying close attention to buyer feedback. Free shipping offers can then serve as a gateway for drawing return business and new customers alike, piquing their interest and laying the groundwork for a quality long term relationship.