IanDid you know that shipping rates, even minimal shipping rates, contribute to the customer abandoning his cart in the last minute, before proceeding to pay for the goods? Does that mean that, as an online seller, you should offer free shipping to your customers? It is a USP factor indeed. The downside is that free shipping cuts into your profit margins.
How does a seller strike a balance between a free shipping offer and decent margins? That’s the million dollar question. Here is how you can get to keep your USP factor AND stay afloat:
Offer free shipping with a minimum order amount.
This is a tried and tested strategy that works well in a lot of sites. Offer free shipping ONLY with a minimum order amount or minimum number of items. This serves two purposes. You stand to recover shipping cost against a greater purchase and hence a greater profit margin. Secondly, it pushes the customer to shop until he/she reaches the minimum purchase amount for which free shipping is applicable. Let us say, you offer free shipping on a minimum purchase value of $20. If a customer has shopped for $16, he picks up something more just to avail the free shipping offer.
Build shipping cost into your retail price.
Let us say you sell handcrafted art pieces and online. You get to define the price here since it is not Kleenex or an equivalent that is sold at MRP everywhere. So, when you define the price of your goods, build shipping cost into the price you quote. Now, with a free shipping offer, you get to retain your USP and also recover your shipping cost. While free shipping can be suitable for small items, it could be problematic for large products like furniture and TV sets.
Offer customer membership programs
If you are a bigger player and you expect returning customers, it is prudent to offer a customer loyalty program for a minimal price. An annual paid membership that makes customers eligible for free shipping and the promise that their orders will reach them within 48 hours has seen a surge in sales in online seller statistics. This also ensures that your customer does not shop with a competitor. He has paid a premium to be entitled to express services and it is imprudent on his part to switch to a competitor. Amazon offers Amazon Prime membership and has seen good results.
Be shipping savvy
An offer of free shipping comes with several adjustments here and there. A very important factor that brings down overall shipping cost is by being diligent in collecting shipping returns. Shipping carriers like UPS and FedEx offer refunds on shipping price IF they do not deliver the shipment within the promised time. Statistics claim that 5% of shipments are late. So, that translates to a few dollars saved in the form of shipping refunds. Automate the process or outsource collection of shipping returns for better efficiency.
Be picky in offering free shipping
Offer free shipping only during holiday seasons when sales are generally high. This also brings in new customers. You can also try offering free shipping with certain products only. Free shipping can be offered without much thought to you best sellers and high-profit-margin goods.
