How To Offer Free-Shipping Without Compromising Profit Margins?

The word “Free Shipping” can send your customer in a frenzy. Shipping cost adds to the overall price of your product and prevents potential customers from making a purchase. Around 74 percent of customers abandon their cart due to high shipping costs.

Many businesses offer free shipping in order to attract more customers. But the offer doesn’t work the same way for all businesses. You can go broke in the attempt to please customers, which defeats the purpose of this marketing tool.

Before offering free shipping, consider all aspects that will affect your bottom-line.

Should you offer free shipping?

Free shipping isn’t always a viable selling policy. Big businesses like Zappos can offer and sustain the impact of free shipping with their high profit margins, but small businesses incur losses and are forced out of business.

Consider all aspects of free shipping. Here is a list of things you need to keep in mind.

Profit marginspicture6

Profit margins will differ for different products and industries. Profit margin of designer wear will be higher than the margins of a company selling Tupperware.

Offering free-shipping for products that have lower margins can be costly for the company. However, you can introduce discount offers and bulk buying tactics to provide economical options to your customers.

Nature of product

Apart from margins, the type, size, and weight of your product play a huge role when it comes to free shipping. The cost of shipping a washing machine will be higher than shipping cost of a dress.

Large and heavy products have higher shipping cost, which prevents businesses from offering free shipping on these items.

Number of items in the cart

Offering lower or free shipping for delivering a single product is expensive for businesses. That’s why many online forums encourage their customers to increase the value of their shopping cart by offering discounts or free shipping.

Freight rate can be offset by increasing the number of items in the shopping cart. Online retailers set a specific threshold that consumers must reach in order to avail free shipping. For example, customers can avail free shipping on orders over $60.

How far away is your customer?

Free shipping is easier and affordable, if customers are geographically near your warehouse. Absorbing the cost of international shipping can be quite expensive for businesses which is why many businesses limit free shipping according to their geographic location.

Ways to offer free-shipping

  1. You can offer free shipping on all orders if you’re selling small, lightweight products in limited geographic location.
  2. Offer free-shipping on a minimum threshold of order value. This will encourage customers to buy more and reduce shipping risk.
  3. Offer free shipping on limited items (preferably items with higher margins or bulk-items). This allows you to absorb the shipping cost, and encourage sale of high-end, expensive products.
  4. Instead of offering free shipping throughout the year, offer it on holidays or for limited periods. This way, you can generate anticipation amongst consumers and beat competition is high-demands months.
  5. A loyalty or membership program can be started to encourage repeat purchase in exchange of free-shipping.

Consumers want multiple options when it comes to shipping and delivery of products. They want choice in carriers, delivery time, pickup location, payment methods, and tracking services. 2 out of 3 online consumers opt for economical shipping solution provided by the business. Make sure your business uses multi-carrier shipping solution to offer different carrier options and economical freight rate.

Software providers like, ProcessWeaver can streamline your shipping process with their ecommerce shipping software. This will provide you access to multiple carriers, tracking services, comparable freight rates, and improved operational efficiencies. Call 888.932.8373 to request a demo.

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