Written by Starshipit
Everyone loves getting stuff for free. When it comes to shipping, it’s no exception.
Shoppers like free shipping because they irrationally hate having to pay for certain services like fast and efficient shipping, even if they value them a lot, says Ravi Dhar, the director of Yale’s Center for Customer Insights.
This attitude proves the “pain of paying” economic principle which is a psychological barrier that prevents shoppers from completing a purchase. For example, you might decide that you desperately need a new dress. You browse your favourite online store and fall in love with The One. You add it to your card and head to checkout, then discover that you have to pay for shipping so decide that, actually, you don’t really need it after all.
Free shipping reduces those pain points at checkout because if customers know they’re not going to be confronted by another charge when they’ve already had to pay for a product, they’re more likely to complete their order.
Free shipping also increases brand loyalty. If your business offers free shipping but a competitor doesn’t, shoppers are more likely to shop with you – as long as your service is also great.
So how does a retailer go about offering free shipping – and who pays for it if the customer isn’t?
Spoiler alert: if your customer isn’t going to pay for shipping, someone has to – and it won’t be the courier company.
Dhar says that shoppers are generally happier to pay more overall for the products they’re buying than pay for an additional shipping charge. They don’t care so much about the total bill; they don’t like the feeling of being swindled by additional costs.
General free shipping practice is that shipping costs are absorbed into the overall cost of the products that are for sale. A retailer might have to foot the bill for part of it, but in reality a customer pays for a lot, if not all, of the cost of shipping even if they don’t see it added onto the total value of their order at checkout.
In order to remain competitive and profitable, though, it’s essential that you don’t take on the majority of the cost of shipping. Here are some ways to offer free shipping in a way that drives profitability:
Customers are increasingly expecting free shipping, so if your store offers if you need to tell them about it – particularly if your competitors don’t. Mention free shipping on the home page of your website, product pages and checkout. Include it in every email you send. Create banners on your social pages that promote it. The more your customers know about free shipping, the more likely they’ll shop with you.
Shipping becomes more efficient if an order includes multiple products too. Take the opportunity to upsell and cross-sell to encourage customers to add more to their cart and save on shipping.
The cost of shipping might be largely absorbed by the customer, or possibly covered by the retailer themselves, but getting a good deal with a courier is a great way to keep the real cost of shipping down too.
Some retailers often assume that an aggregator is the best way to go for sourcing the cheapest shipping rates available. In reality, an aggregator will lump your business in a one-size-fits-all category without finding out what makes your business tick or what problems you want to solve. An aggregator also clips the ticket on the way through, so you could be paying more than you need to for shipping.
Working with an enabler like Starshipit rather than an aggregator puts the power of negotiation back into the hands of the retailer. Instead of being served up rigid rates, an enabler empowers retailers to negotiate the best rates for them, directly with the couriers. Because of Starshipit’s strong relationships with the couriers, we can connect retailers with actual human beings so they can negotiate the best deals based on their unique volume of sends and sizes of parcels. This personalised approach means that the courier gets to know your business on a personal level, which equals better customer service – and better rates.
Another way to look at shipping from a ‘get people to buy more’ angle is to offer flat fees. Flat fees encourage shoppers to buy as much as they like; knowing that they’ll only have to pay for the one shipping charge.
£1 shipping works in the same way as free shipping. It’s a very low pain point for customers to complete their purchase. In fact, it’s really just a nominal figure to acknowledge that shipping is an essential part of the online shopping process.
Other flat fees, for example £5, also remove that invisible shipping-related mental restriction. Yes, a customer still has to pay £5 shipping but under a flat fee model a they can buy as much as they want to without having to pay more for shipping. This is useful for up-selling or cross-selling, or for high-volume periods like Christmas where customers might buy lots of things and retailers might want to make as much profit as possible.
Managing free shipping, rates and orders can be complicated. Wish you could make fulfilment easier? Sign up for a free 30-day trial with Starshipit (no credit card details required) to find out how fulfilment automation and better relationships with couriers could help improve your bottom line.