Shipping proves to be a complicated and significant challenge for e-commerce businesses as retailers are a competitive bunch. Small online retailers must sometimes face large competitors who have the financial means to afford to make losses on some orders in order to increase market share, such as offering free shipping on every purchase. Forrester Research reports that 61% of online shoppers consistently cite free shipping as a motivation factor in why they purchase on a given website.
Free shipping is widely accepted to be a conversion driver, but with positive impact on sales comes an adverse impact on margin. When you cannot pass shipping charges onto customers, those charges can slash margins and leave very little room for profit. While there isn’t a “one solution fits all” approach to free shipping, here are some tips on alternatives to offering free shipping:
Threshold-based Shipping Promotions
Set a minimum purchase amount so only shoppers who meet the amount can qualify for free shipping.
This minimum amount is often slightly above the average transaction of your site, e.g. if the average order is $60, try offering free shipping on orders over $75 to increase your average order size per transaction.
Free Return/Exchange Policy
Instead of offering free shipping, come up with a free return/exchange policy. When shoppers feel confident about their purchase, they’ll be less averse to paying for shipping. According to 'A Customer Experience Study 2013' by comScore for UPS, 82% of consumers said they would complete the purchase if they could return the item to a store or have free return shipping.
Free In-store Pickup
This is becoming a popular approach for businesses, where customers buy online and pick it up at a store near them. For businesses who don’t have a brick-and-mortar location, take Zalora for example, they partner up with convenience store 7-eleven to manage their distribution. First of, it offers convenience, secondly shipping costs are eliminated and lastly customers can get their purchases timely without worrying about parcels being lost during transit.
Free Shipping Program Based on Loyalty and Membership
Some online retailers have free shipping program where free shipping is offered to customers who are members, this is to provide loyal shoppers the privilege of shopping without shipping charges. You can have the option to charge a flat annual membership fee or require shoppers to meet a certain purchase amount to qualify.
Free shipping program can help to build both loyalty and market share.
Flat-rate shipping help online stores reduce shipping cost while improving shoppers’ buying experience. Prices are decided by the retailer so it can be set as low as you are willing to go.
Limit the number of purchases per customer. Forever21.com sets a maximum purchase amount limit of $1,000 or a maximum purchase item limit of 20 items per order, whichever comes first. When you limit the number of items that a customer can purchase, it sets off scarcity signals in their minds. The response to scarcity is hoarding, meaning you not only score higher conversions but you may also gain bigger orders.
Can you think of any other alternatives to free shipping that e-commerce retailers can offer to make online shopping even more enticing? I’d love to hear your thoughts.