For a lot of online retailers, offering a free delivery service is simply not an option. If the highest price that a product can be sold at barely makes a profit in the first place, absorbing the costs of postage without making an overall loss is just not possible. And, in offering the lowest possible price to customers, the best practice is already being carried out anyway. But for those with profit margins that could stand to absorb some extra outgoings in the name of providing a competitive service, it loosely comes down to making a choice between investing profits in hope that it will greatly improve conversion rates or, sticking with existing customers and attempting to improve conversion rates in another way.
The Pros- How could offering free delivery benefit my shop?
Paying for delivery is often be the difference between a customer completing a purchase or abandoning cart.
More return visits
Most customers do not want to pay for delivery twice, free delivery will mean that customers can make several purchases from your store without having to worry about paying to have each item delivered.
When customers feel like they are getting a better deal, the chances that they will purchase more items during the transaction increases (this can be even more successful when a minimum order value is set for free delivery).
Compete with other shops
A way to set your store apart from the competition.
Sell more small items
Free delivery for small items has benefits for both retailer and consumers (it costs less to post small items and customers are less willing to pay delivery charges for one small item- free delivery will encourage those customers to make small purchases).
The Cons- What would prevent me from offering free delivery?
It eats into profit margins, and there’s a chance that it will not increase sales.
You will miss out on charging customers that would purchase goods regardless of free delivery.
It isn’t suitable for every retailer.
Once offered, it would reflect badly on the business to revoke it.
Can I afford it?
Simply put, to determine if your shop can afford to offer free delivery you need to take into account your profit margins and/ or marketing budget. Which of these you consider is largely dependent on the size of your business.
Take a look at the profit margin for each product. Which ones make enough money to cover the delivery charges whilst still making a profit? Would any products run at a loss? Could these products be covered by healthy profit margins from other items? If you’re fortunate enough to have money for a marketing budget, offering free delivery could be billed as a part of your marketing campaign.
How should I go about it?
Offer it as a trial
The only way to get an accurate reflection of what differences a free delivery service will make to your business is to try it out. Offer free delivery on a temporary basis, for a few months to see how it affects conversion rates. Implementing the trial for a few months (three to four) will provide you with a more comprehensive overview of how customer behaviour is affected over a long period of time. Remember to tell customers that the free delivery offer is a temporary service to avoid complaints about the service being taken away when the trial is over.
*It’s also key to remember that a temporary free delivery trial may end up with inflated numbers because a temporary offer will create a sense of urgency.
Set a minimum order total that customers must a hit to achieve free delivery. This will ensure that you don’t incur delivery costs on orders that don’t amount to a lot of profit and can encourage customers to spend that little bit extra in store to get free delivery. An example of a way to carry this out effectively would be to consider the average basket total for customers visiting your shop- if the average amount spent is £17, make the minimum order for free delivery £25.
Absorb the cost in other delivery options
If you offer various shipping options, try increasing the amount of those by a very small amount to absorb some of the money lost through the free delivery option. For example- if the price for next day delivery is £4.50, increase it to £5. Be aware that customers may notice this, and although an acceptable change to make to your shop to allow you to offer an option for free delivery it runs the risk of objection.
Offer free returns
Instead of free delivery, consider offering free return shipping. It’s another way to attract customers with a freebie but won’t apply to every purchase made. It will improve the experience of returning an item to your store and has the chance to convert the returner into a repeat customer in the future. Free return shipping will also eliminate customer concerns about having to pay to return the item on top of paying delivery fees if the item isn’t suitable.
Do you offer a free delivery option? Have you tried using one? Share your experiences in the comments section.