If you run an ecommerce business of any kind, chances are you’ve already at least considered offering free shipping to your customers. Big multi-national companies like Amazon offer this service as standard across pretty much all of their 200-million plus products, and this has made it necessary for everyone to thoughtfully consider their shipping options, even though in the end you may decide free shipping is not right, or cost-effective enough, for your business. The success of your ecommerce business requires a careful consideration and calculation of your shipping choices – and there’s no one size fits all solution. So here’s a guide to what you need to consider when thinking about offering free shipping.
Look Before You Leap
One big mistake small businesses make is to jump into free shipping just because it seems like everyone is doing it, or for fear that customers will go elsewhere if you don’t. But before you take the leap, it’s vital that you look around and consider whether this is really going to help or hinder your overall operation. The most basic of these considerations is taking stock of your current shipping costs and knowing exactly how much it’s going to cost your business to implement a free shipping policy. Once you know what your overall shipping expenses are, you can also use this as leverage to ensure you’re getting the best possible price from your shipping company, and if you’re able to negotiate to include premium services such as same-day shipping at a reduced cost. Once you’ve established exact shipping costs it’s time to look closely at the products you’re selling and the amount of each product’s sales. Since shipping is determined by weight, lightweight items will be inexpensive to ship, thus making free shipping an appealing option – also great as often these items are low-cost, and customers may resent paying shipping costs as well. If you ship items in a range of sizes, calculate the average weight per order and decide if you can afford free shipping across your entire store and still make a profit. Also, if the price of your items includes a high profit margin, free shipping may be doable if you can maintain an acceptable gross profit percentage overall.
Understand the Competition
If your main competitors offer free shipping, then you may have to do the same to be genuinely competitive, especially if the items being sold by both parties are similarly priced. On the other hand, if your competitors are not offering free shipping, you could use the attraction of free shipping to draw new customers away from your competitors with it. All in all, knowing what your competition is doing will help you to make better, informed decisions on how to move forward.