Offering Free Shipping: Pros and Cons for Small Businesses

To offer free shipping, or not to offer free shipping. That is the question that many retailers face! In 2019, it's not just the domain Amazon Prime; small businesses can also take advantage of this perk.

With the busy holiday shipping season fast approaching, order fulfillment and shipping are at the forefront of every business’s mind. Often, many end up turning to free shipping as a promotional strategy, hoping to entice more buyers and give their brand an edge. This is especially popular as a way for business owners to prepare their eCommerce stores for the holiday season.

But are promotions like free shipping really worth it for businesses? It may seem like a great marketing tool to catch buyers’ attention and boost sales. But like any promotional strategy, it has a number of drawbacks that need to be considered.

So, what are merchants like you to do? Read this guide, of course!

Let's take a closer look at both the advantages and disadvantages of free shipping. We will explore a number of strategies that you should consider if you decide to opt for it this holiday season.

Let’s take a look at these pros and cons. They will help you decide if offering free shipping is right for your business!

The Advantages of Offering Free Shipping

There are many reasons to consider free shipping, especially as the holiday season approaches. Here are just a few of them!

Free shipping can be a great way to entice buyers. In fact, it plays a very important role in online retail. According to a 2016 Walker Sands Future of Retail Study, 90 percent of consumers saw free shipping as their top incentive to shop online! Who would turn down something that’s free, after all?

Similarly, offering it can be used to boost sales and revenue. In 2014, Stitch Labs published a study that revealed that free shipping can potentially boost revenue as much as 10 percent.

Not charging customers for shipping can also boost your average order value. Having a minimum order value to qualify for orders, is a simple yet effective way to encourage customers to spend more.

A 2014 case study from Red Door Interactive revealed that NuFACE, one of their clients, saw a 7.32 percent increase in their average order value by offering free shipping. Likewise, a 2015 study from UPS and comScore found that 60 percent of buyers in the U.S. have added products to their shopping carts to reach the free shipping threshold.

Offering shipping free of charge can also help to increase customer satisfaction. It boosts also customer loyalty because prospective shoppers will see your brand in a much more positive, consumer-friendly light. In the long run, it can help to turn occasional customers into repeat buyers and even advocates of your brand.

In sum, free shipping strategies can make your store competitive in your industry with others that also offer the perk, and give you an edge over retailers who don’t offer this.

Free shipping can help to boost sales outside of the holiday season when business slows down. Retargeting old customers with this promotion can be a simple yet effective way to boost sales and revenue!

Finally, offering to ship free of charge can be a great angle for your marketing efforts. Advertising your promotion on your social media channels, blog and email newsletters can potentially drive a lot of traffic and increased sales in short order.

The Disadvantages of Offering Free Shipping

While there’s much to love about free shipping, there are some drawbacks that should be noted. Be sure you’re aware of them before implementing them in your store!

The primary downside is that it does impact profit margins. Extra fees are used to cushion any shipping and handling costs. In the long-term, losing this cushion can have a negative impact on your business’s bottom line.

To compensate for the cost of shipping, retailers are often forced to increase product prices. This, in turn, could turn cost-sensitive shoppers away and negate the positive sales gains that come from offering free shipping.

On top of this, online shoppers can be forced to endure longer delivery times. This is because businesses are forced to turn to economy shipping options to cut shipping rates and protect their profit margins. This, ultimately, can lead to lower customer satisfaction.

Most of the time, free shipping means that businesses will need to incur other expenses. Special IT programming may be required to offer free shipping on some websites. Marketing and advertising your promotion is yet another additional cost to consider. Especially if you’re running paid ads on search engines and social media platforms.

Product returns and exchanges should also be taken into account. Doing them free of charge for customers can mean losing money if they occur frequently!

Free Shipping Strategies to Consider

Interested in offering free shipping to your customers, but feeling cautious about it? Consider these strategies if you decide to follow through with this promotional strategy!

Set a high minimum purchase amount for customers to qualify for free shipping. Doing so can protect your profit and boost your average order value considerably.

Consider only offering free shipping promotions on select items. This is a great way to “test the waters” when it comes to free shipping promotions. This will help you decide if it's worth rolling out to your entire product line. It will reduce shipping costs on your end, but still offer a great incentive to customers.

It can be a good idea to only offer shipping free of charge at select times of the year, such as the holiday season. This gives prospective shoppers that extra incentive to buy from your online store during high-volume periods. Because of increased revenue during the holidays, it can be worth absorbing this cost temporarily.

Offering Free Shipping: Consider It Carefully

The bottom line is that free shipping often comes down to your business’s own bottom line. In many instances, such as during the holiday season, it gives you an edge over competing brands. In other cases, however, it could hurt your company’s profit margin considerably. There's also the risk of having a negative impact on customer satisfaction.

The best way to go forward is to weigh your options carefully, consider the pros and cons, and ultimately decide if offering free shipping makes sense for your business!

This is a guest post by Steve Longo, the Content Writer for Easyship, the all-in-one shipping platform for global eCommerce that offers 250+ shipping solutions with discounts up to 70% for online merchants around the world.