In the ever-evolving world of e-commerce, almost every platform has raised the delivery expectations all across the globe. That’s the reason; every online consumer expects the online orders to arrive within days instead of weeks or months, without any extra charges (Free Delivery/shipping). Moreover, free shipping is not just a key factor in providing customers an exceptional shopping experience but also a crucial factor for customers while making a purchase decision.
Multiple studies have revealed that poor shipping strategies are one of the causes of cart abandonment. Customers want their purchases delivered quickly as soon as possible and they even expect free shipping when shopping online. This means e-commerce businesses must ensure quick shipment if they have to stay ahead of the competition. Taking longer than 3 to 4 days and charging high shipping rates, might cause a loss in the large quantity of loyal customers.
But keeping all these facts apart, for any business the circumstances are different. Sometimes offering free shipping might not be fruitful for businesses. In this blog, we are going to discuss why a free and reliable shipping strategy is key to ensuring customer satisfaction and turning customers into brand enthusiasts, and why sometimes free shipping is not a suitable option for e-commerce businesses.
Factors to consider while Offering Free Shipping
There are several factors that an e-commerce store should consider before implementing free shipping strategies for business. Below is a list of advantages and disadvantages of offering free shipping, so that one can decide if free shipping is right for your e-commerce business or not.
Advantages
- Enhance repeat purchases
Businesses have seen, whenever they have delivered shipment on time to their customers they have found those customers doing shopping again from their stores. If a customer needs an order in emergency and you can deliver it in a day or two then you can have a significant boost in the number of returning customers. This ultimately encourages your brand loyalty which enhances your sales and revenue.
- Increases Average Order Value
In e-commerce, offering a minimum spending limit for free shipping will be directly proportional to the increased average order value. This is because people have to add more items to their shopping cart to meet the minimum limit set by the admin. This is something you can play with your customer’s psyche that considers it as better value for their money.
Using this method, businesses can secure their loyal customers and force them to spend more on a store than they were supposed to spend initially.
- Reduces Cart Abandonment
An online business cannot afford to lose their customers on the very last steps of their shopping and that is the shipping and payment steps. Multiple customers abandon their orders if they have to spend much time and money on these steps and they lose their motivation to buy online.
Cart abandonment is a process where customers add items to their carts but leave the website without completing their order. The main reason for this abandonment is the shipping cost which they think is not suitable for their selected products.
To reduce this abandonment, e-commerce stores must provide multiple options to force their customers to complete their orders. Businesses can offer free shipping, set a price limit for free shipping, or they can even provide some low-cost delivery options.
Disadvantages
- Effect on Profit Margins of a Business (Cost implications)
Being an e-commerce business holder, you know that the most prominent cost for merchants is the loss of profit margin due to shipping expenses. Over the past few years, the cost of shipping has increased significantly.
If you are offering free shipping to your customers then it either means absorbing the shipping order cost by your own and ultimately decreasing your profit margins. On the other hand, you might be increasing product prices to cover the shipping cost. In most of the cases, the second option works well.
Free shipping could be tricky if you sell a small catalog having low-cost/margin products.
- Causes Sustainability Issues
Sustainability issues come into account and are a huge concern when it comes to free shipping. Due to the carbon emissions and waste created while shipping in higher volumes, customers may not find your store environment-friendly.
- Creates Logistical Issues
E-commerce businesses must prepare themselves with the logistical capabilities to offer free shipping to their customers.
When Free Shipping is not feasible for a business
Certain factors need to be considered while deciding to offer free shipping to your customers:
● Economically not Feasible
One of the main reasons customers abandon their shopping carts is high shipping fees. Customers can pay a reasonable amount for their desired products, but high the shipping charges against that order can turn them off.
For companies, offering free shipping does not make sense always due to economic situations. Sometimes, the cost of shipping may prevail over the benefits of offering free shipping.
Some low-cost products may also have low margins in profit that makes it challenging for store owners to offer free shipping. These low-profit margins products may include apparel, disposable food and beverage products, books, etc.
- Product is heavy
In general, the bulky items exceeding the carrier’s weight or size limitations could be expensive to ship. That also requires many specialized shipping options that could be more expensive than the average shipping making it challenging to offer free shipping.
Moreover, heavy products may be more vulnerable to damage during shipping, resulting in a large number of returns or exchanges.
- When the situation is not realistic
Offering free shipping to customer may not be possible especially for small businesses. The shipping cost cannot be absorbed because of lower profit margins. Being a small business selling inexpensive items, one cannot be able to offer free shipping.
Also, small businesses may not have the resources to negotiate with customers for lower shipping rates to streamline their shipment process.
Small websites can compete with large competitors in many ways that may include offering competitive prices, providing good customer service, or offering free shipping on certain amount.
Conclusion
In conclusion, offering free shipping may not be ideal in multiple situations for some businesses. When the product is too heavy, the shipping cost could be high. The decision of offering free shipping depends on certain factors, including costs and profit margins.
Considering these factors, businesses can make informed decisions for their business and ensure that the shipping strategy must be aligned with their business goals
Allow your customers to have an exact idea of the shipping costs if you are not providing free shipping to your customers. This could not lose their trust and ultimately you may not your loyal customers.