Free Shipping for E-commerce — Pros and Cons

According to American marketers, for 59% of online shoppers, the shipping price influences the decision to buy, and 44% refuse to buy anything at all because of the high shipping price. Statistics say that most baskets are thrown at the stage of payment when the cost of goods is also plus delivery. Having reached this point when the shipping rate is viewed, the buyer begins to doubt whether he really needs this product. If the delivery is free, then doubts are unlikely to arise. But to deliver the goods free of charge can afford not all. And although this option is the most attractive to the buyer, even major market players charge for the delivery of money.

The cost of delivery is affected by two important factors. The first is the cost of delivery. We know exactly how much the last mile in each city costs us. The second is the market. We see how much it costs to deliver similar goods to our main competitors in the category (for example, furniture or large household appliances) and stand “no higher than the market.

In general, different situations are possible in the course of delivery price formation:

  1. a) the cost of delivery in price and margin is enough – the best situation;
  2. b) the cost of delivery separately and then it almost covers our cost of delivery – also good;
  3. c) different “last mile subsidy” situations, where we have to reduce the cost of delivery “to market” in order not to lose sales

Delivery cost strategies are only three: free, pro bono, and unconditional. And each has its own advantages and disadvantages.

Free delivery

The most beloved by buyers and the most unprofitable, at first glance, for the seller option. But since the love of free shipping is inescapable for humanity, free shipping significantly increases sales. 

According to statistics, 84% of visitors to online stores will choose to buy a site with free delivery. 

Of course, sometimes, it happens that the cost of the order is lower than the delivery price, but the total sales volume allows the company to easily survive such cases.

Everything depends on the income of the store, if the margin allows, it is not necessary to scare away the customers with an additional markup for delivery. Although it sometimes happens that one stool will be ordered, bringing it to the buyer is more expensive than it is itself. Of course, it is a shame to pay for such an order from your pocket, but it is brand loyalty.

A strategy of free delivery for everyone can be a profitable company specializing in selling small and light goods and for a business with a lot of re-sales, such as food, cooked food, water. Since there is no need to spend money on attracting new customers, it can be redistributed to the existing ones.

Conditional free delivery

Strategy 1: 

Most often, free delivery has some conditions and restrictions. One of them is the minimum order price. As a rule, people tend to get the goods to the right amount to get free delivery. This is where psychology works: for the same price, I will get more goods. And the cost of purchased additional goods is often higher than the delivery price. If the minimum purchase price is $20, in the basket of goods for $12, and delivery costs $5, then most prefer to buy something else at $8.

In order to correctly calculate the amount of breakeven, it is necessary to analyze income and expenses.

Strategy 2: 

Free delivery “for selected goods” is suitable if you need to get rid of excess stale goods, such as T-shirts, not the most popular color or shoes of a non-working size. You can offer free shipping when you buy a few items, which will encourage customers to leave more money in your store. You can limit the free time delivery per share.

Strategy 3: 

Another option for free delivery is “just for…” Club cardholders or those who pay for the purchase in a certain way (only in cash or only with the card of a certain bank). Delivery costs, in this case, are compensated by some benefit for the seller.

When paying online, an online store kills two birds at once: it instantly receives “live” money on its account and is insured against non-repayment of goods.

Strategy 4: 

Many local companies limit free delivery to one city or several districts. This is due to the fact that the geography of delivery significantly affects its cost. Time is known to be money. One courier can deliver several orders in one area in an hour, but a trip to the neighboring city, where the notorious stool was ordered from, will take half a day. In monetary terms, these deliveries will cost very differently.