Why offer free shipping? How to turn a profit from this popular perk

Definition: Free shipping is an increasingly-popular option for online shopping, where customers do not have to pay an additional shipping charge. Free shipping is attractive to customers who appreciate simple pricing structures, which in turn makes it a potential competitive advantage for online businesses.

Why offer free shipping?

Shipping options play a pivotal role in an online shopper's decision of where to spend their hard-earned dollars:

• By providing numerous shipping options, an online retailer can capitalize on the booming ecommerce experience to generate revenue streams through increased sales.
• Free shipping entices customers to purchase by wrapping all costs into the price of each item.
• Shopping carts are often abandoned at the checkout when customers are dissuaded by an additional shipping charge. Maintaining a steady cost from product page to checkout increases a customer's likelihood on following through with the purchase.

How to pay for free shipping

Someone has to pay for the cost of delivering goods to consumers. The ultimate challenge for online businesses is how to affordably offer free shipping and balance the expense?

• Factor shipping into operation and pricing: understand shipping costs from the moment you receive inventory and include it in financial models.
• Market free shipping: Customers love free shipping, but they need to be made well aware that it's a distinguishing perk. Mention free shipping or on every major page that gets customer visits, and be sure to include it on product pages.
• Focus on up-sells and cross-sells: Shipping gets more efficient as items are added. When merchants incur the cost, it makes up-sellsand cross-sells a margin-mover.

Online businesses can also reduce overhead through established relationships with shipping vendors. Free shipping is also a long-term play: taking a short-term loss can be a smart sacrifice with a big-time payoff down the road if the policy generates loyal customers and brand advocates.

Different ways to offer free shipping

Free shipping can be an effective marketing tool that aims to benefit both the consumer and the retailer. There are many ingenious ways to generate revenue and keep consumers returning to a particular online store. The majority of businesses choose to offer free shipping in conjunction with additional delivery options such as overnight express delivery at a cost to the consumer. Additionally, the delivery campaigns below offer ways to increase sales:

• Orders over a specific dollar amount: Many savvy shoppers will add additional items to their shopping cart to receive something for free, especially delivery
• Buy two or more items: Up-sell through the use of a free shipping campaign
• A pre-determined time period: Offering free shipping during a specific time frame is ideal for increasing sales during slow periods — or offers further incentive during highly-competitive seasons.