If you want your business to get ahead in the competitive eCommerce landscape, you might want to offer free shipping. Perhaps you have considered offering free shipping in the past, and decided against it because of the big hit to your bottom line. Today, we are going to look at how to offer free shipping without hurting profits. Follow along to learn ideas, solutions and opportunities to thrive when offering free shipping.
Offer free shipping by adding it to your base price
While some sellers add a credit card fee on card sales, most businesses accept credit card processing as a cost of doing business. Those transaction fees of 2 percent to 3 percent of each sale are unavoidable to online businesses. In 2018 and beyond, businesses need to think of shipping costs in the same way. We live in an on-demand economy where you can order countless products with an app on your phone and have them delivered in two hours or less. Amazon, Google Express, and other online retailers make free shipping the norm.
That is exactly what every other business that offers free shipping does. For example, if you sell a product for $50 and the average shipping cost is $7, you can just charge $57 for the product and offer free shipping.
Use a third-party shipping service
Many eCommerce businesses choose to use a third-party for shipping. In this case, you might be able to pay a company a flat fee to handle shipping and packing orders on your behalf. There are two popular ways to sell with a third party today:
1. Traditional drop-shipping service
With a drop-shipper, you send your inventory to a third-party warehouse. The drop-shipper handles all order fulfillment on your behalf, saving you time and effort on shipping. While this isn’t free, drop-shippers might have access to discounted shipping rates. Again, you can build this cost into your sales price to maintain the same profit margins when you offer free shipping.
2. Third-party platform
The most popular is Fulfillment by Amazon, or FBA, where you ship your product to an Amazon warehouse and can offer product sales with free Prime shipping when selling on Amazon.com. Like other options, Amazon charges fees that can be built into your product’s price.
Give your customers shipping options
Customers like control over costs, and one way to offer that with shipping is to give your customer the option to decide how to receive their product. You can offer basic shipping included, or let the customer pay more for premium or expedited shipping.
Like the above options, you’ll want to price in the cost of basic shipping to maintain margins. But you can then give customers faster access to products when they want or need them. If you sell something people regularly need at the last minute, those expedited shipping options can be quite valuable and useful!
Evaluate your shipping vendors
While you are in the process of pricing out a plan to offer free shipping, make sure to check with all shipping vendors to find ways to save money. You might get the best deal with the United States Postal Service (USPS), but you don’t know if FedEx or UPS may be cheaper for your products until you do your research.
Don’t forget about other shippers like DHL, OnTrac, and bulk discounts from shipping tools like Shipstation. While there are three primary vendors used in product shipments in the United States, don’t feel restricted to this short list.
Popular underwear subscription service MeUndies uses DHL, for example, and OnTrac handles more than a few Amazon Prime orders. These are just a couple of examples of the many businesses using alternate shippers to save on costs.
Minimum order for free shipping
Setting a minimum order price for free shipping helps you manage risk in a free shipping program, as low value products won’t qualify for free shipping on their own. This is how many large retailers handle shipping policies.
For example, many online stores offer free shipping for orders of $35 or more. Others might offer free shipping using different minimum order sizes to reflect the cost of shipping relative to the cost of the product.
If you have a standard margin on your sales, you can quickly calculate the minimum order price you need to maintain healthy profits while giving your customers an offer for free shipping.
Test it out with free shipping promotions
If you are hesitant to change prices or offer free shipping, test it out with a few promotional items or for a short period of time to compare the results. After a good test, you will have the data you need to make the best decision regarding free shipping.
To get good results, here are two methods to conduct a free shipping test:
Offer free shipping on select items only, and look for a bump in sales on those products. If you can 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.
Offer free shipping in 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 sales from the free shipping offer.
Don’t let shipping sink your product
While you might resist offering free shipping, keep in mind that virtually all of your competitors are doing it. It’s one of the main ways to succeed in eCommerce today. Take some time to do the math and fully understand your costs, so you can build that into the sales price and protect your bottom line while giving customers the free shipping they want.
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