Free Shipping Is Not a Real Thing: 4 Considerations for choosing your Shipping Pricing Strategy
Online Shoppers want to believe they are getting a good deal, which is why offering something for free influences their online purchasing behavior.
Surveys by Walker Sands and FuturePay have found that 90% of consumers view free shipping as the top incentive that would encourage them to shop online frequently, and 86% of online shoppers abandon their shopping carts because of the shipping cost.
Think about this: How frequently have you almost completed the online purchasing process only to be alarmed by the shipping cost on the final page?
When you think of free shipping today, you most likely think of Amazon Prime. However, Amazon has defined and established the standards for online deliveries for both retailers and customers as follows:
Free shipping and two-day deliveries are available to Amazon Prime members without having to make a minimum purchase. Yet, the annual cost of Prime membership is EGP249 per person.
Finding the ideal balance between increasing conversions and keeping costs low is essential when playing the free shipping game. Just as the well-known economic old saying states, “There’s no free cup of tea,” there is also no such thing as free shipping.
Sellers who offer free shipping to online shoppers should call it a “shipping-included” price to let their customers know there are no unpleasant surprises at checkout.
As online sellers know, shipping a package from Point A to Point B can be very costly, due to the accelerated inflation rate in Egypt, alongside the increased labor and material costs.
And even for the largest of e-commerce giants like Amazon, shipping is far from free. However, they still provide free shipping to outperform their competitors, hold onto their sizable market share, acquire new customers, meet consumer expectations and encourage shoppers to buy more from them.
However, they can negotiate steeper discounted shipping rates with shipping partners because of their enormous order volume. Yet, these shipping costs are still quite expensive, though.
Small businesses cannot compete with this or do this on their own; Offering free shipping will take a harder hit on a small company’s bottom line.
Shipping costs must be covered by someone, somehow. So, What alternatives do small- to medium-sized online retailers have?
Shipping for Online Sellers: Strategies & Best Practices.
Here is what online stores should do to decide if free shipping is appropriate for their businesses.
Set realistic margins.
Your profit margins will be your top priority while providing your customers with discounted or free shipping. The question is not whether or not you should offer free shipping but whether or not you can afford it.
You cannot absorb the shipping cost for lower-priced items with a low-profit margin. If your product costs EGP50, your profit margin is 20%, and shipping costs EGP30, offering free shipping will cost you money.
Free or discounted shipping should also depend on the location of your customers. Calculate the extra sales you’ll need to make up for reduced profits per order.
Price your products properly
If you offer free shipping, there’s a good chance you will need to raise your prices to compensate for the money you’re losing. Again, you’ll need to do the math and calculate the necessary markup.
Another question is if increasing the price tag will result in losing more customers than you gain by offering free or discounted shipping.
Set a minimum order requirement
You can provide your customers with free or discounted shipping by increasing the average order value while making them feel like they are getting a good deal.
For this to be effective, the minimum amount spent to qualify for free shipping should be larger than your average order size.
According to a Shippo survey, 93% of shoppers will take action to be allowed for free shipping, with the top action as adding items to their cart.
However, you may need to make your returns policy stricter. Shoppers may try to hit a minimum order value by adding unnecessary products and returning them later.
Make shoppers pay for the shipping cost.
Many online sellers still charge the shipping cost to their customers as a line item. While there are potential repercussions for this in the form of abandoned shopping carts, at least you can be sure to cover your costs.
When it comes to online purchases, you must decide how to price your products in a way that is attractive to your customers and feasible for your business.
With so many factors while pricing your product, there is no one-size-fits-all approach to offering free or discounted shipping.
If you’re deciding how to calculate shipping costs for your products, you have to find a suitable medium.
Undercharging probably means you’re losing money, threatening your long-term sustainability. And overcharging can create unhappy customers, with the potential of losing sales.
At ShipBlu, we guarantee shipping options to match your needs & budget.