Your business budget may have to cover the cost of buying packaging supplies and equipment, as well as the actual shipping costs of goods, but could it still pay to offer your customers a free postage service?
Offering customers free shipping can really boost your conversion rates, but it will not work for all businesses, and there are definite pitfalls to avoid. Making the wrong choices can be disastrous, but the argument for being in the free shipping business can be compelling when faced with competition from market giants whose policies have led many consumers to expect shipping to be free or cost next to nothing.
The truth is that many customers will not care if your business consists of just a few people in a lock-up or thousands of workers in warehouses covering the area of a small town. Many will only buy items when free shipping is on offer. For example, eBay actively encourages its sellers to adopt free postage, claiming that this can pay its own way by giving sellers a boost in search results, greater competitiveness and a higher conversion rate.
It might seem counter-intuitive, but adding to your costs by taking on the burden of shipping could be good for your business – if you choose the right options. There are several reasons for this, including that free shipping can lead to bigger orders. A popular policy is to offer free shipping on purchases over a certain amount, offering an incentive for customers to achieve a minimum spend and helping businesses to increase margins on orders.
Before offering free shipping, however, you should know your margin per order in order to ensure that you do not end up losing money. Some experts claim that you should offer to ship for free on purchases above your business’s average order value, whilst others suggest experimenting in order to reveal the correct prices to facilitate offering free postage. You could decide to lower margins on commonplace items whilst keeping them high on the unique items that you sell.
In a world where free shipping is increasingly available, however, it is often not enough to simply remove your postal charges. Your differentiator may well be your ability to communicate your shipping policies in an open and honest way, as consumers regularly report feelings of anger at retailers and suppliers who are unclear about what will be shipped for free, what will not, and how customers can receive this offer.