Free shipping can increase your sales—and it doesn’t have to hurt your bottom line. There are two types of free shipping offers: free shipping under certain circumstances (conditional free shipping) and across-the-board free shipping (unconditional free shipping).
We’ll take a look at free shipping strategies for each type and show you how to offer free shipping without going broke—no matter your margins or order volume. Plus, we’ll look at competitive alternatives to free shipping and ways to lower shipping costs across the board.
Should you offer free shipping for your small business?
The short answer is yes. While free shipping used to be a luxury convenience, it has now become an expectation for shoppers. And, with big-name competitors like Amazon selling millions of items with free shipping, you could lose customers if you don’t.
- 62% of respondents to a Shippo survey won’t shop with a retailer that doesn’t offer some form of free shipping
- When given a choice, three-fourths of consumers choose free shipping over fast shipping
Offering Conditional Free Shipping
Conditional free shipping is a strategy where you offer free shipping to customers who meet specific conditions (such as minimum order requirements). It allows you to provide attractive shipping offers while ensuring each order remains profitable.
While offering free shipping on everything sounds great from a marketing perspective, it’s rarely a viable idea for small businesses. If your store extends free shipping to all orders across the board, you could end up losing money on small purchases or low-margin items. Conditional free shipping solves that problem.
Some types of conditional free shipping also help your store promote certain money-making metrics—like basket size and average order volume. This makes it a good choice for growing small businesses, especially if you need to balance shipping expenses and staying competitive.
Offering Unconditional Free Shipping
Customers love simplicity, and the all-inclusive perk of unconditional free shipping can serve as a major sales driver. This especially applies in the age of Amazon and other big-name retailers, which offer free shipping on millions of items.
If your customers could instead go to Amazon for the same products, you’ll likely need to offer site-wide, unlimited free shipping just to stay competitive. There are two main ways to do it:
1. Build shipping costs into your prices
This method leverages the power of the word “free” to drive sales. The cost of shipping is added into each item’s price point—increasing product prices so that the customer covers the shipping without having to think about it.
The truth is that customers often prioritize access to free shipping over the standard price of an item. The perceived value of free shipping is often much greater than economical—or even discounted—pricing, thanks to the nature of shoppers to value free things.
Similarly, the perceived value of an item itself is highly influenced by how much it costs. Expensive goods are widely regarded as “better,” so simply tweaking the price of a product can increase customer attraction.
Combining both of these perspectives, buyers are more inclined to go for a $50 item with free shipping than the same item for $40 with $10 shipping.
Adjust your pricing storewide based on average order value, average number of items per order, and average shipping cost. Then advertise the enticing convenience of always-free shipping on every order. But keep in mind that customers are likely to shop around, so this strategy only works if your products aren’t available at cheaper prices on Amazon, Walmart, or elsewhere.
2. Build Shipping Costs Into Your Margins
To make this model work, you must have high profit margins and closely control your fulfillment and shipping costs (send Mrs. Shippie a message and we can walk you through how to determine how to do this.)
But if you’re lucky enough to combine healthy margins with low shipping costs, unconditional free shipping can be a painless fit. Small, pricey goods that ship in manageable, lightweight boxes—such as jewelry, watches, collectibles, fashion accessories, cosmetics, and supplements—tend to fall into this category.
The same applies to goods manufactured in-house and sold at a high retail markup, as well as previously owned merchandise.
The key to this method is to monitor sales closely once free shipping is offered. Chances are, you’ll see an increase in order volume that offsets the bite out of your margins. If you don’t see a positive trend, consider using a different free shipping model.