Using Shipping as a Strategy

Should your company offer Free Shipping?

Selling online is hard  and you’re probably already selling the item at dirt cheap that giving away free shipping would be near to impossible. But if you look at ‘free shipping’ in a different way, you might agree that free shipping actually works in your favor. When a customer sees free shipping, they are enticed to buy and they would pick your item over the next because of the free shipping. (It gets into the psychology of the human mind where we’re programmed to jump on anything that’s ‘free’.)

Here’s a scenario by Shopatron, an ecommerce software company  that explains how free shipping can bring in more sales:

Strategy 1: Standard Shipping

Product price: $100

Margin: 50% ($50)

Sales volume: 100 units

Supplier shipping cost: $0 ($6 paid by customer)

Total Margin Dollars: $5,000

Strategy 2: Free Shipping

Product price: $100

Margin: 50% ($50)

Sales volume: 130 units (30% lift thanks to Free Shipping offer)

Supplier shipping cost: $6 (free to customer)

Total Margin Dollars: $5,720 (after subtracting $780 for shipping costs)

As stated above and proved by the scenario, free shipping helps lure the customer to the checkout and thereby results in a higher profit margin for your company.


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