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How to Make Free Delivery Profitable

How to Make Free Delivery Profitable


When you see the word “FREE”, your attention is automatically diverted into that direction, even if it is some product that does even concern you. People are attracted to high discounts and free shipping charges. If your e-commerce site wants to evoke more interest in your customers, you would probably relieve your customers of the delivery charges. But is it profitable for your company? Let’s find out!

Most immediate consequence of introducing free shipping is that it will boost orders and sales. The company tends to acquire new customers from time to time, increasing competition for other e-commerce sites which don’t provide with flexible delivery facilities. According to studies and surveys, most people don’t checkout their shopping carts, when they realize they have to pay delivery charges or handling fees. About 40% of the online shoppers abandon their shopping carts if free delivery isn’t provided. But, free shipping may not work for all business; that is if a business is offering to absorb 100% shipping and handling charges on all purchases, you may end up losing more than gaining on your real sales. Other than the decrease in the overall profit margins, reversing free shipping is difficult once it is implemented.

Before you go in for this offer, you should first make a rough estimate of your profits if you implement free shipping. Not always does an increase in order volume mean an increase in profits. So you need to analyze your numbers and make proper calculations, keeping certain factors in mind- profit margins, type of products, how are your customers located, and the average order value.

You can provide free shipping in a variety of ways, according to your estimates of your profits. Instead of going for free shipping on everything, you may want to have a minimum threshold. Have a minimum order value, something like ‘Make an order of about $20 to avail free delivery charges’. This way you are encouraging larger orders and reducing the risks. You can also offer free shipping on certain items or during a certain time of the year. You can select certain products which have a higher margin, so that you don’t lose out the profits. If not this, you can offer free shipping on products during festive or holiday season when the competition is at the peak, with different e-commerce sites offering different offers and discount on products. Consumers prefer a free shipping offer more than a discount on the products. Also if your company is located in New York, you can provide free shipping for the local customers, while charging for all other customers or offer free shipping to a local store (around their respective locations) so that the customers can up their order from that store. This way you are saving up the shipping charges and the customer doesn’t really have to spend much on delivery as well.

If nothing really works, you can try another way- bake in the shipping charges into the product price. Well, this isn’t really free delivery, but your customers don’t know that yet! Your customers will eventually figure it out, but this may lead to initial increased sales.

To find your way, you need to try and test all possibilities, before you settle in for one. Free shipping will boost your profits if you adjust the thresholds and use some restrictions, just right.

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