How to make free shipping profitable (part 2)

Free shipping still matters in ecommerce: 80% of consumers expect free shipping when ordering a certain dollar amount of products from a retailer, and 66% of consumers expect free shipping for all online orders. This means that not offering free shipping can cost you sales (dun, dun, dun). In fact, 61% of online shoppers say they are somewhat likely to cancel their orders if free shipping is not offered. Even though free shipping isn’t really “free”, what matters is that your customers perceive shipping as being free. Read on to learn some tricks and tips on how to offer free shipping and still make money.

Read part 1 of “How to make free shipping profitable”.

80% of consumers expect free shipping when ordering a certain dollar amount of products, and 66% of consumers expect free shipping for all online orders.

Free shipping thresholds are your friend

Retailers like Amazon Prime have led to expectations of free standard shipping in many cases for online shoppers, but you can use this to your advantage. This is where a free shipping threshold comes into play. Think about the number of people who are willing to take an action like adding additional eligible items to their carts to qualify for free shipping. When you determine your threshold for free shipping, it’s important to do so carefully, making sure it’s not too high or too low by utilizing your median or average order value to calculate it. Ideally, this amount will be set just high enough above your average order value that it’s easy for your customer to add an extra item they had their eye on so they can hit that free shipping threshold and avoid cart abandonment.

You can work the free shipping threshold into the shopping experience by using reminders across your site that say “you are $XX away from free shipping!” as customers go through the buying process. The idea is that you create a win-win situation for you and your customer. The order is large enough that you don’t lose money and maintain a healthy profit margin by not charging a shipping fee, and the buyer gets an extra item or two that they’ve had their eye on (plus free shipping).

Use flat rate box sizes to your advantage

Throughout the past year and a half, UPS, USPS and FedEx have all continued to increase their shipping rates—with UPS and FedEx recently announcing yet another increase in surcharges for 2022. Flat rate shipping can be a good option for some businesses, as it makes it easier to determine what your exact shipping cost will be, although it is not the best choice for every business. Be sure to check out our guide to understanding flat rate shipping for more information on how to determine if it’s the right one for you.

Flat rate shipping can allow you to plan ahead for shipping costs, but there’s even more you can do to ensure that this method is profitable for you as a seller. You can improve your bottom line by incentivizing customers to add items to their orders that fit inside the flat rate shipping containers. Use the geometry of specific containers and the mix of items that fit in them in conjunction with the free shipping threshold you developed. You can do this by determining your average box size and looking at products that are commonly purchased together. Analyze the size of these items together to determine how much empty space you have, then adjust your offerings, upsells and free shipping thresholds to fill that space!

How to offer free shipping and still make money by outsourcing your fulfillment and shipping

Even after implementing all the advice above to save money while offering consumers the shipping options they want, getting orders to your customers in a timely manner may not be doable by yourself. Outsourcing order fulfillment to a 3PL that already has a footprint across the country or globe can be a great way to save costs. When you outsource fulfillment, it allows you to focus on running your business instead of dealing with the intricate processes involved in getting orders to your customers on time. Additionally, it offers you the ability to scale quickly and easily and means you don’t have to invest in your own distribution centers, people and infrastructure, which can be very costly. The last huge advantage to outsourcing fulfillment is that 3PLs often get discounted shipping rates with carriers because they ship such high volumes. If you are struggling to keep shipping costs under control, this could be an excellent option for you. Plus, you get access to a variety of distribution and fulfillment experts to help you make the best business decisions possible. From selecting the right shipping method to get products to your buyers to considering whether to offer free return shipping, a 3PL can be an excellent resource to help you be as effective and efficient as possible. Learn more about insourcing vs. outsourcing fulfillment.

Remember that geography has a large effect on shipping costs

The location of your fulfillment center is also extremely important. The farther a package has to travel, the more expensive it will be. Having only one fulfillment center to service the entire United States is extremely inefficient and simply doesn’t work in today’s ecommerce-driven world. Customer expectations of fast and free shipping require you to have strategically placed fulfillment centers across the country to keep your delivery cost manageable and ensure shoppers get their items in a timely manner.

Learn how to offer free shipping and still make money

At ITS, we know a thing or two about earning a profit while offering free shipping and building loyal customers. Our experienced team members, excellent shipping discounts and more than 1.5 million square feet of distribution space strategically located across the US make us a great option for outsourcing your fulfillment. Give us a call today to see how we can help!