3 Reasons for Online Retailers NOT to offer Free Shipping

Free Shipping may be offered by a lot of online retailers these days but is it really the right thing to offer on your site? Are businesses going to be able to sustain this blanket offer or are we going to start seeing more conditions placed on the “Free Shipping” offer?

Below I outline 3 reasons why I don’t believe Free Shipping is right for most eCommerce sites and also give some quick thoughts on where I think online retailers are heading with these blanket offers.

1. Your average basket size will decrease with a Free Shipping offer
It’s natural for shoppers to seek value for money and it’s no different when paying for shipping. When shoppers are required to pay a fixed shipping cost they tend to want to get value for money, and this tends to mean buying more. If a customer doesn’t have to pay for shipping they will tend to purchase “on-demand” meaning placing multiple orders sometimes very close together or waiting till they actually need an item before purchasing it. Not only does this increase your postage and handling costs, but also means you could lose the subsequent sales to a competitor.

An alternate to offering a blanket fixed postage cost is to offer Free Shipping for orders over X dollars. If X is set at a correct value greater than your current average basket size this offer will increase your average basket size significantly enough to warrant the shipping cost to your business. My thought is that as we move forward into 2014 and beyond we will see more online retailers retracting their blanket Free Shipping offers in favour of these basket size dependent offers.

2. You lose your ability to have Free Shipping promotions
Free Shipping promotions are a great way to reengage dormant customers or incentivise first time customers. By being selective with who you offer the promotion to you can lure dormant customers back or acquire new customers while not affecting your postage revenue from customers who are happy to engage with you without this added incentive.

Free Shipping promotions also give you another reason to market to your customers and allow you to promote new features of your store. For example “Download our App and receive Free Shipping on your next order” or “Subscribe to our newsletter and receive Free Shipping on your next order”.

There are many more ways you can use Free Shipping as a promotional tool, the above only serving as some examples, and if you already have a blanket Free Shipping offer across your site you lose these tools.

3. It doesn’t make money
Based on my discussions with online retailers that offer blanket Free Shipping most acknowledge that the additional volumes generated from the offer are not paying for the postage costs they are incurring. Many justify it as a customer aquisition tool and therefore attribute the cost to marketing. Moving beyond 2014 I believe we are going to see less of these blanket offers as retailers establish themselves and no longer require Free Shipping to acquire new customers.

But remember, there’s no such thing as Free!
On a number of the larger international sites shipping may appear to be free but in reality it isn’t. Rather based on your location these sites are including shipping in the cost of the product. The added amount is usually based on the retailer’s average basket size meaning that if you as a customer place an order which is larger than the retailer’s average basket size, you actually end up paying more for shipping than you would if it wasn’t free.

So what do you think about offering Free Shipping? Is it working for you? What do you think the future is of blanket Free Shipping offers?

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3 Reasons for Online Retailers NOT to offer Free Shipping

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