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Does free shipping increase sales in online e-commerce businesses?

Many online retailers offer free shipping as a competitive necessity. Although free shipping is not free, there are some sales benefits to them.  

When top e-commerce stores like Amazon introduced the idea of free shipping, it was never a sensible idea for small businesses to follow suit. 

However, over the years, data has shown that shoppers love Free Shipping. A recent survey had 93% of respondents confirm that free shipping compelled them to place an order. With the popularity of Free Ship among shoppers and its impact on driving topline sales, other brands have no option but to follow suit.

Free shipping boosts sales 

The majority of shoppers love free shipping. And this is a very obvious fact that needs no scientific proof. Researchers need not ask shoppers if they'd prefer to have their product shipped for free or pay for it. 

Wait! There's something to note here: shoppers would rather pay a fee for faster shipping, especially for an emergency delivery. But if otherwise, the same delivery date, then they'd rather not pay a dime on shipping. 

According to a business insider report, 155 billion worth of e-commerce packages in the US in 2021 were shipped through free shipping.  

What your customers love may be a suitable option for your business growth. 

Lots of reports have clarified the influence of free shipping on conversion, revenue, and sales boost.  

For example, in a report from Stitch Labs, "retailers who implement free shipping tend to have their sales increase by up to 10%." 

2 Big feet, an e-commerce brand has reported a 50% increase in conversion after implementing free shipping on orders. 

Red Door Interactive confirms that free shipping has boosted e-commerce orders up to 90%. 

Increase in Average Order Value

Most of the e-commerce sales boost will occur in the form of a boost to the average order value. 

When free shipping comes with a minimum order amount of, let's say, $25, $50, $100 - shoppers will want to increase the items on their cart to meet up the free shipping requirement. 

A UPS e-commerce study found that over 52% of shoppers in the US add more items into their carts to meet up the minimum order requirement for free shipping. 

On a similar note, a case study from the previously mentioned Red Door found a 7.32% increase in order value when a client included a few shipping in their package. 

Control over the cost of free shipping

It's a common practice among online retailers who sell common products to compete on price and unknowingly fall into the "race to the bottom" pit. 

This price decline can cause a helpless situation for the merchant. You cannot control the price set by your competitor. 

But, to some extent, you can control the free shipping cost. Some actions from an online retailer may cut down shipping costs. Because of this flexibility of control, it's even possible to regain margin by controlling shipping expenses. 

Here are workable ways to control shipping expenses; 

Fulfillment service providers can help: 

Merchants can use the help of fulfillment providers to warehouse popular items to reduce the distance of package to destination and in turn, cut shipment costs after the fulfillment fee are included. 

1. Set limits across different shipping offers 

Although the goal is to provide free shipping to all of your shoppers, you may want to set limits across these offers. 

For instance, if you have your warehouse in Florida, you can offer free shipping without minimum order for orders within the state. 

Orders shipped to the neighboring states may have much lower purchasing requirements. And long-distance shipment may involve free shipping with a little higher minimum purchase. 

2. Go with carrier and service levels

Do proper research on the perfect carrier and service levels for each shipment requirement. 

We recommend USPS regional rate boxes for near locations and UPS or FedEx for distance cross-country shipments. 

3. Limit packaging size 

In today's world where shipping fees are determined by weight, you may want to trim down your package size to reduce the cost of shipping. 

Customers are "sold" with a free shipping offer.

Although we cannot completely clarify that free shipping helps keep existing customers, a lot of research has linked customer retention with free shipping offers.

An instance is in the study made by UPS which found that 54% of shoppers may want to accept an offer that involves free shipping. 

Free e-commerce shipping is not a problem as presumed 

Many e-commerce business owners believe that they don't have to provide a free shipping service, especially with its associated cost.  

They're not comfortable with the idea of investing in shipping. However, most of what we think is free e-commerce shipping problems are only a result of our perception of the entire process. 

According to a popular Quora contributor, James Edwards, " free shipping in e-commerce business is somewhat similar to free entry into a physical store. Just as these physical stores include the costs of store lease and sales rep into the price of their products, so can the e-commerce store incorporate the shipping fee into their item cost. 

Funnily, a lot of online sellers are always in a hurry to offer a discount on their products via coupon code but are reluctant to provide intelligent shipping promotions. 

The issue is a lot of people think of free shipping as an advertisement while if it’s leveraged strategically, it can improve the sales and average order value while minimizing the impact on profitability. 

Akhilesh Srivastava

Author: Akhilesh Srivastava
Founder and CEO of FenixCommerce

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