The word free has an effect on purchasing behavior, customers do love free shipping. In fact, 90% of customers see free shipping as the top reason for them to buy online more often. Therefore, a great deal of retailers/ wholesalers think they have to sell goods by offering free shipping in today’s market.
Although essential for consumers, free shipping is also seen as an expense to businesses. And for some businesses, it is–free shipping is not an easy option for any company, but for many, it is an opportunity that pays for itself in many ways. There are some questions and considerations that eCommerce stores can consider before accepting free shipping on mass, but there is no one correct answer.
In this article, we have provided helpful guidance on the advantages and drawbacks of free shipping, which help business owners determine if it is right for your eCommerce business.
Benefits of Free Shipping
Boost Average Order Value
For so many consumers looking for “free shipping,” it is no wonder that more consumers turn to businesses providing it, thereby increasing the profitability and profits for many eCommerce stores.
It is understood that free shipping puts shoppers in a better mood which can lead them to spend more. In an online shopper survey, Bloomberg found that if free shipping is included, 93% of online shoppers are motivated to purchase more items. In another Nerd eCommerce report, it was found that when free shipping is included, Shoppers spend 30% more per order.
Improve Loyalty to Customers
There is no doubt that free shipping can increase sales and improves average order value; hence most businesses often consider free shipping a short term strategy. But when used effectively, free or discounted shipping can significantly boost customer loyalty and have a long term impact on your businesses. Since 65% of consumers have claimed that free shipping is an important consideration when choosing an online store, it is easy to see how it lures customers.
Customer loyalty is one of the most sought after parameters and an important parameter that determines any business success. Shipping rates often impact consumer loyalty by improving customer service.
Reduces abandoned cart
Abandoned carts are perhaps one of the most common things eCommerce merchants talk about. Shipping costs are one of the biggest contributors to this problem as consumers frequently feel blindsided, irritated or ripped off as they see the shipping costs added on. In fact, 52% of abandoned carts are due to shipping costs unsatisfied by customers. Free shipping is a simple and efficient way to solve this issue as it addresses one of the consumers’ main worries when shopping online.
Drawbacks of Free Shipping
Impact on Customer service
Although consumers agree that free shipping is a necessity when making a buying decision, customer service is also something they covet and free shipping can have an impact. Don’t offer it on any order. When clients buy an item worth $5 and you have to pay for shipping it, there are chances that your business will lose money.
Most eCommerce retailers consider that less costly routes have to be selected to accommodate free shipping, which contributes to delayed arrivals and longer delivery times. Nonetheless, consumers still expect prompt service as 95% of online shopper expects a free shipping offer to deliver the product within 3 to 7 days, so businesses and consumers may have to compromise on what they believe is more relevant.
Refunds and Returns
When you sell a free shipping product, and a customer demands a refund, you will be obliged to refund the entire cost. That is because it was free delivery. You will lose money while delivering to the customer, and probably at the expense of return shipping.
If you want to pay for shipping or to have free shipping, the biggest factor may be the return shipping fees.
If you had a shipping fee, though, then you would be refunding the cost, less shipping. The customer may be responsible for return shipment according to the reason for the return.
Your loss on the sale, of course, depends on the reason for the refund and on the policies of your stores. Many sellers opt to refund the entire amount in order to prevent any negative reviews or analysis.
Effects on Total Profit
If you’re selling at home or overseas, you won’t get a good picture of how much you can expect to gain before the product sells by free shipping. That’s about how much you’re paying for delivery varies widely depending on where the customer is. If you have a foreign customer then you will possibly spend more on shipping.
An advantage is that sellers near you will be more likely to purchase from you because their shipping costs will be lower than purchasing from a national seller.
You will always know what your profit is for any given commodity, with a shipping fee. Sellers who need to be able to predict their income or cash flow for product purchases should find this beneficial.
Does it offer free shipping in your eCommerce store? Let us know whether or why you don’t use it in comments.
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