The Cost of “Free Shipping” for Retailers

Free ShippingFree shipping: it’s an expected offering for many of today’s customers, who are unwilling to feel as though they’re paying more for an item than they would pay in stores. There’s just one problem: shipping isn’t really free, and it is retailers who are forced to contend with those prices. What’s the real cost of free shipping to retailers? What kind of impact does it have on the bottom line–and is it really worth it to offer it?

Fees are Going Up

The fees associated with shipping have always been a problem–and that problem isn’t going to go away any time soon. General Rate Increases (GRI) usually take place on a yearly basis for shipping companies, and there’s no sign in the foreseeable future that this will stop. For small businesses and other retailers who end up bearing the price of those increases, shipping increases can create significant hardship for the business.

Once Offered, Always Offered

When you offer a service for your customers, they’re going to be either frustrated or absolutely furious when that offer goes away–which means it’s important to consider future needs before opting to offer free shipping for your orders. “Customers who would be willing to make a purchase in spite of a shipping charge might quickly become frustrated when their free shipping goes away, leaving them scurrying to another retailer who will meet their demands,” according to Alex Canet at ShippingTree.

The Benefits of “Free” Shipping

While free shipping may come with some financial downsides, it also offers several key advantages. Before opting out, make sure you consider whether or not these advantages would be beneficial for your business.

  • Free shipping helps interested customers in your business. In fact, it’s been reported in some surveys that as many as 93% of respondents said that free shipping was one of the most important attributes an online business can offer when they’re deciding where to purchase an item and can encourage them to buy more.
  • Free shipping encourages impulse purchases. Instead of waiting around until they have enough to reach a reasonable threshold, customers will go ahead and pick up that item they’ve been eyeing.
  • Offering free shipping over a certain amount can encourage customers to spend more in an effort to meet that amount.
  • Customers are willing to spend a little more on your products when you offer free shipping. A slightly higher price is, in their minds, offset by that free shipping offer.

Making the Most of Free Shipping

If you’re offering free shipping to your customers, make sure that it’s benefiting your business! By following these strategies, you can make free shipping offers benefit your business.

Check your shipping cost threshold. Make sure that you aren’t shipping out items that are more expensive to ship than they actually cost. If necessary, set a spending limit for free shipping–especially if you’re a small business for whom shipping costs add up fast. It’s important, however, to make sure that limit isn’t high enough to turn potential customers away!

Examine your packaging. Make sure your shipping team is knowledgeable about how to package items in the least expensive way possible, which may mean using more standard carton supplies, generic and lower cost options without branding, or opting for padded envelopes where possible.

Work with carriers. If you use the same carrier on a regular basis, you may be able to negotiate savings on some shipping tiers–especially the ones you use the most frequently. By examining your shipping profile and characteristics, you can target the most frequently utilized size and weight packages and potential leverage that into further discounts. For example, if you have lower cost ground shipments that have the same general sizes such as beauty, make-up, and supplements, you can negotiate specific rates with carriers geared towards these shipments.

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