How Offering Free Shipping Can Increase Conversion Rate (and Your Profit)

How to improve Ecommerce Conversion Rate

There are many methods of increasing conversion rates in ecommerce. One of the most effective ways is to provide your customers with free shipping.

Free shipping means that the customer doesn’t have to pay any additional charges when buying something in your store. It’s one of the most effective conversion rate optimisation strategies, and it can help you increase sales by up to 50%.

Below, we’ll discuss the benefits of free shipping and how to offer free shipping.

The benefits of offering free shipping

Not only is it an attractive perk for customers, but it also increases gross profit margins for you.

Looking at some consumer insights, studies from Bigcommerce have shown that 84% of respondents had made an online purchase from a retailer specifically because of a free shipping offer. Furthermore, half of the respondents said they will not even shop with a retailer unless free shipping is available. These are potential customers you might be missing out on. Additionally, CXL shows that when it comes to free shipping, 61% of consumers are “somewhat likely” to cancel their purchase if it isn’t given.

Operating expenses go down when you give people a reason to make purchases with higher basket value. Still, the gross profit margin can go up depending on your strategy, whether customers purchase higher-priced items or more to reach that ‘free shipping’ threshold. Neil Patel breaks down the details of different ‘free shipping’ strategies to test.

Here are some reasons why offering free shipping is one of the conversion rate optimisation best practices.

1. Increased conversions

Free shipping can increase the number of purchases that customers will make on your site, as they’ll be more likely to purchase multiple items when they’re not worried about how much it will cost for each item to be shipped.

According to a study by UPS and ComScore, customers who ordered products online purchased on average $200 more when they had access to free shipping. Additionally, when 2 Big Feet, an ecommerce company, set a shipping minimum of $100, orders increased by 50%.

2. Create a better Customer Experience

Free shipping leads to higher customer satisfaction rates for your store because you provide customers with a sense of convenience. When customers are confident they can purchase products and not worry about extra costs, it improves their experience.

Customers are more likely to buy when they know that shipping charges will not add significantly on top of their purchase price. 63% of online consumers rank free shipping as the most crucial aspect when buying from online retailers. If you have an ecommerce store, it’s essential to offer your customers the convenience of free shipping.

3. Compete and increase profit

By offering free shipping, you’re able to keep ahead of the competition by providing an incentive for customers that they might not get anywhere else. Understanding your competitors and other online retailers conversion rate optimisation techniques are important to succeed. It’s critical to offer some sort of incentive when it comes to shipping, according to data from Digital Commerce 360.

Free delivery is available through 74% of the top 1,000 online retailers in North America.

An example of how free shipping has increased conversions is the global ecommerce giant Amazon. After raising their free shipping threshold to $35, the company saw an increase in profit margin and customer satisfaction.

How should I offer free shipping?

Some businesses might worry they can’t offer free shipping to their customers because of the gross profit margin. But, there are ways that you can still do it without losing money on transactions.

Each business is different, so it’s important to take the time to think about these different conversion rate optimisation techniques and see which one will fit your business.

Short-term strategies

1. Apply an introductory period where all orders receive free shipping for a specific amount of time, and then charging an additional percentage after that.
2. Offering a promotional code for a certain percentage of their order which can be redeemed once per customer.
3. Offering free shipping on select items, such as those that are seasonal or clearance.
4. Customers residing in a particular city or region can receive free shipping for any product they order.

Long-term strategies

1. All orders over $100

You might ask, how am I able to offer free shipping on orders over a certain amount of money? It’s easier than you may think! Provide free shipping on all orders over $100 and charge your customers for any additional costs.

It will increase the total revenue you make from your operating expenses while still giving customers an incentive to purchase more items. In this case, you’ll want to lower your product prices (depending on how much it will affect profits) so that they’re just above $100 to maximise the number of orders you’ll get.

You can change your set order value depending on what your average spend is on your ecommerce store. This type of free shipping often results in higher return rates.

2. Higher retail price

Offer free shipping on all products and have a higher retail price for your items. Also known as ‘Free Shipping Included’. You can either raise prices to make up for the cost or pay out of pocket and absorb those costs to offer this customer perk. The best way to implement this is to provide these products on a site with higher profit margins.

3. Free shipping for everything

Offer free shipping on all products, and then charge an extra fee for handling.

It is the most complicated option, but it also can be the most profitable in some cases. You’ll want to calculate how much you’re spending on shipping charges and any other costs related to fulfilling orders and then charge your customers an extra fee for handling, e.g. 15% of the order. A good option if you’re looking to spend more money on shipping but don’t want to be out-of-pocket.

To ensure your customer experience is exceptional, you’ll also want to ensure no hidden costs associated with your shipping offer. For example, if you’re offering free shipping on all orders over $100 but then charge an extra fee for handling, the cost of that handling will still be included in your product’s price.

How do I know free shipping is right for my business?

You’ll need to figure out the profit margin on your products, as well as how much you’re spending on shipping. But don’t hesitate to give it a try because even if it doesn’t work for your business, there’s no harm in testing these conversion rate optimisation strategies.

Here are some questions that will help you determine whether or not free shipping is right for your business:

• Do you have a profit margin of at least 25%?
• Do all products in your store have the same profit margins and shipping costs?
• What is your product price range, and what does it usually cost to ship one item?

If you know the answer to all of these questions, you may be able to develop a free shipping strategy to work for your business.

Free shipping is a cost-effective way to offer your customers an incentive to increase profit margins and customer satisfaction. It’s one of the best ways to stand out among ecommerce competitors, so don’t forget about this strategy when you’re trying to grow your business!