The True Effect of Free Shipping on Online Sales

Man Finger Pressing Orange Free Shipping Button on Modernized Keyboard. 3D Illustration.

Offering free shipping is a necessity to boost online sales. Shall we repeat that? Offering free shipping is a necessity to boost online sales and still make a profit—if you do it correctly.

Wait, Don’t Panic!

There’s no need to panic over the expense of free shipping. Here’s why. There are lots of creative ways to offer free shipping and still get the profitable results you want and need to make the program work. For instance, you don’t need to offer it on every item you sell. You can set parameters and limits, then test which shipping options work best or generate the largest margins.

5 Reasons Free Shipping Works for Increased Sales

  • Some studies indicate that over a third of online customers who abandon the items they’ve put in their shopping carts do so because there is no free shipping or shipping costs are too high. If you want to lower the cart-abandonment rate, offering free shipping practically eliminates it.
  • Other studies show that customers add more products to their carts to reach a free-shipping order total. Offering shipping options, like free shipping on orders over $100, works quite well for some retailers. Customers actually buy more products from you to get free shipping.
  • Retailers report that offering free shipping on only select products increases sales of those products and brings in a slew of new customers. Try offering free shipping on one or two products, just to test the result and conversion rates. The shipping costs won’t set you back too much and you’ll know quickly if sales increase or not.
  • Search around for carrier offers that help minimize shipping costs on certain products. You don’t need to commit to using one delivery company for every product. Sort your product-shipping by carrier cost and item. For example, USPS offers flat-rate zone shipping that can generate savings on shipping the same item to the same location with a different carrier.
  • You can vary your shipping costs—you don’t need to make the same free-shipping offer to every customer. You can offer free shipping, with no minimum purchase required, to customers who live close to your warehouse. Intrastate shipping costs usually cost less. The surrounding five-state area, for example, would have a minimum-purchase requirement while outside of the five states, the minimum order for free shipping would be a bit higher.

Free Shipping Buys You Time

Another interesting insight is that 50% of customers are willing to wait up to a week for their order if they receive free shipping. Of course, time-sensitive products are not considered in this survey since either next-day delivery or store pick-up are the only options for these kinds of products.

But, what this tidbit of information demonstrates is that your free shipping offer does not have to be priority, overnight delivery. Most customers are content with allowing a week for shipping and that reduces shipping costs to you, dramatically.

Free Shipping Is a Business Expense

Even though new and established retailers may think they’re going to lose money with it, studies and anecdotal evidence show this is just not true when you offer free shipping the right way. It always increases sales and revenue.

When you think about how a brick-and-mortar store calculates how much it can sell something for, it takes everything into account: the rent or mortgage, salaries and wages, and insurance, as examples. Online retailers need to incorporate the cost of free shipping into their product prices. Like paying rent for mall space, free shipping is simply a cost of doing business.

Retailers: Don’t Fear Losing Money With Free Shipping

Free shipping can significantly increase sales that more than make up for the expense. Offering it in one of the strategic ways noted above, can help you figure out what works to increase sales and new customers. Adjust and keep testing the minimum-purchase threshold until you achieve profitability, use the maximum shipping time your customers tolerate to keep shipping expenses low and watch sales increase when abandoned cart rates drop.