Free shipping can easily cut into profits if not done correctly, and while many retailers struggle to offer free shipping, sellers have no choice but to yield to consumer expectations. After all, free shipping is a significant factor whether or not a shopper completes a purchase. But to keep your business profitable, you should consider reducing fulfillment costs as much as possible.
Why Free Shipping Is More Important Than Fast Shipping
Price and convenience are the two most influential drivers for online shopping. Amazon has built an empire through their Prime program, beating all competition by making unconditional free shipping the norm in ecommerce. While Prime has successfully captured so many subscribers, Amazon also loses billions of dollars in shipping costs. It is a very expensive model for sellers, but a reality that retailers accept to stay relevant.
In a recent survey, about 47% of shoppers said they would abandon a cart if they reached the checkout page and learned that free shipping wasn’t included. In another study, UPS found that the average consumer is willing to wait up to seven days to receive a package if the shipping is free. For the average shopper, free shipping is more important than fast shipping.
These expectations hurt a lot of sellers, and startup online retailers often need to be backed by venture capital in order to overcome the cost of offering free shipping. Essentially, businesses that do not reach high volumes of sales cannot afford to offer free shipping.
Retailers really need to plan things out and set limitations, such as setting an order threshold for free shipping, or only offering free shipping if certain items are included in the order. Sellers should also consider other ways to cut shipping costs.
5 Ways to Reduce Shipping Costs
Shipping fees can add up quickly and affect your bottom line. Here are some things you can do to cut the cost of free shipping.
Upsell Your Customers with Kits, Add-ons and Related Products
It is actually cheaper to ship two items than one, and if you could get your customers to add more items to their order, the cost of shipping will be cheaper for you. Shopping cart solutions should allow you to suggest add-ons and related items when people shop from your web store. You can also offer gift bundles and multi-pack kits to increase the purchase amount.
Request Discounts From Your Shipping Carriers
Retailers that ship in large volumes can take advantage of discounted shipping rates. Usually, the higher the volume, the larger the discount, but even small online sellers can get negotiated rates. Jazva is a UPS Strategic Partner and a Certified Endicia Partner, and we can help get you discounted rates with our shipping partners.
Reevaluate Your Minimum Order Amount Threshold
Is your minimum order amount threshold too low? Depending on the type of products you sell, your free shipping policy may be hurting your bottom line. If your average order value is much higher than your threshold, consider setting a higher minimum order amount. Do the math, test and adjust based on the numbers.
Offer Free Shipping, But Specify Limitations
You should also consider excluding heavier or bulkier items that are too expensive to ship. Also, offering free shipping to residents of Hawaii and Alaska, as well as US service members overseas, isn’t advisable due to the extra costs. Limiting free shipping to the continental US would be a wiser decision when planning your shipping policy.
Use Automation to Select the Best Shipping Method
Whether you’re dropshipping or shipping from multiple warehouses, the total cost of shipping will differ based on the customer’s location. Manually checking shipping rates per carrier or dropship vendor can be tedious for every order. A good shipping software like Jazva offers carrier-rate shopping and automatically selects the lowest rates when it comes to carrier, mail class, location or vendor for each of your parcels.
Shipping automation is a necessity for high volume retailers. If you want to reduce fulfillment costs, you should start exploring shipping automation solutions to optimize your business for success.