- Welcome to The Journey.
Today we're gonna talk about how to offer free shipping
without hurting your bottom line.
Price changes, promotions, partnerships.
These are just a few of the ways that you might be able
to offer free shipping without actually harming
your bottom line.
Which is why we're all here today.
- And unfortunately, there really is no one size
fits all approach when it comes to free shipping.
What works for one merchant may completely destroy
the profit margins of another.
And in some cases, offering your customers free shipping
is just not viable.
But it's worth doing the math to see
how you can offer free shipping as a strategy
to really grow your sales.
- And you're probably asking yourself,
okay, should I offer free shipping?
I got to say it's hard to argue the significance
that shipping can have on an e-commerce sale.
So there was a study done recently.
Nealey sent my way compiling 41 independent studies.
And they found out that almost 70%.
Yes, 70% of shopping baskets were abandoned online
due to unexpected costs.
In many cases, these unexpected costs include shipping fees.
So however, unless a repeat purchase drive a large portion
of your sales,
offering free shipping might not be profitable.
So it's not worth offering free shipping
unless you can make the offer profitable.
- And before even worrying about whether you can make
free shipping profitable.
You need to test how much making the offer
will actually lift the conversion rate in the first place.
If offering free shipping won't raise conversion,
why go through all the trouble.
First you should A/B test your conversion rate
with and without the free shipping offer.
To get good results, here are a couple of methods
to conducting a free shipping test.
First offer free shipping on select items only
and look for a bump in sales on those products.
If you gonna offer free shipping on a very similar product
without free shipping,
it will give you the best insights into how free shipping
impacted your sales.
You can also offer free shipping during a promotional event.
Just make sure to make the promotion long enough
to give you a good test.
A short promotion period might give you a boost in sales
due to the promotion artificially inflating the number
of the sales from the free shipping offer.
- Now assuming you've done your homework
and you've proven your hypothesis is correct.
You will have the data that you need to make
the best decision regarding free shipping.
Well first off you can add it into your base price.
So, think about it.
We live in an on demand economy where you can order
countless products with an app on your phone.
I know I do.
And then, they're delivered in two hours or less
like Amazon, Walmart. Target and other online retailers.
They have made free shipping the norm.
- And they're really able to do this by adding shipping
into the actual product cost.
So for example, if you sell a $50 item
and the average shipping cost is $7,
you just charge $57 for the product and offer free shipping.
Even though the price is the same,
the psychology of seeing the phrase free shipping
makes the buyer and me feel like they've gotten
something extra.
And are more likely to go ahead with the transaction.
- Now another option for you.
You could use a third party shipping service.
So, what does that look like?
Well, in this case, you might be able to pay a company
to basically handle the shipping and packing the orders
all on your behalf.
And there are two popular ways that you can do this.
So first off there's traditional drop-shipping.
And with this service,
you send your inventory over to the third-party warehouse.
The drop-shipper handles all the order fulfillment
on your behalf.
So, yes this saves you time
and it saves you the effort on shipping.
And while this is not free,
drop-shippers might have access
to discounted shipping rates.
Again, you can build this cost into the sales price
to maintain the same profit margin
when you offer free shipping.
- You can also use a third-party program.
Probably the most popular is Fulfillment by Amazon or FBA.
where you ship your product to Amazon warehouse
and offer product sales with free prime shipping
when selling on amazon.com.
And like other option, Amazon charges fees that can be built
into your products prices.
And it's important to understand that these fees
can add up fast.
But there is risk in building your entire business
on another company's platform.
If you'd like a video dedicated on how to use drop-shipping
for your business, let us know in the comments below.
- And give your customers some options.
They love that.
Customers like to have some control over costs.
And one way to offer that is with shipping.
To give your customers the option to decide
how they want to receive their product.
And you can offer basic shipping for free
or you can let the customer pay more
for that expedited shipping.
They need it now.
- And like other options,
you really wanna price in the cost of basic shipping
to maintain your margins.
But you can give the customers faster access to products
when they want or need them.
And if you sell something people regularly need
at the last minute, such as like holiday time for example.
Those expedited shipping options might be worthwhile
to some of those shoppers.
- Next you wanna evaluate your shipping vendors.
Now, while you're in the process of pricing out the plan
to offer free shipping.
Just make sure to check with all shipping vendors
to find ways to save money.
So let's go through a few.
For example, you might get the best deal with USPS.
But if you don't know if FedEx or UPS may be cheaper
for your products,
you want to do the research, right.
- And don't forget about other shippers like DHL or OnTrac
and bulk discounts from online
and even self-service shipping tools.
While there are three primary vendors using product shipments
in the United States.
Don't feel restricted to that short list.
- Let's talk about minimum order for free shipping.
I fall for this every time when I'm shopping.
But basically setting a minimum order price
for free shipping,
it's going to help you manage risk
in a free shipping program.
As low value products they won't qualify for free shipping
on their own.
And so this is how many large retailers
handle shipping policies.
- For example, many online stores offer free shipping
for orders of $35 or more.
And others might offer free shipping using different
minimum order sizes to reflect the shipping cost relative
to the products costs.
If you have a standard margin on your sales,
you can quickly calculate the minimum order price
that you need to maintain healthy profits
while giving you your customers and offer for free shipping.
- Now, testing different offers is definitely key
to find out which shipping method is going to be most
profitable for you and your business.
So see if you can find like that ideal combination
of higher conversion rate and profits that give you
a profit boost.
As well as some new additionally acquired customers.
- And it's very likely that most,
if not all of your competitors are utilizing
this due to the growing popularity of online retail.
- So if this is something that you're wanting to incorporate
at your business and for your online store,
do the math.
It's totally worth it.
So you understand your costs and then you can choose
the right price.
And you'll get the right sales strategy
and protect your bottom line.
And give customers the free shipping that they want.
All right, that's a wrap.
You just learned how to offer free shipping
without hurting your bottom line.
Be sure to like this video and leave a comment below.
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This is The Journey and we'll see you next time.