The world of online retail is extremely competitive. One of the ways to gain an edge is through shipping. Many businesses do this by incentivizing buyers to purchase their items with free shipping. There are two main approaches:
- Free shipping with no minimum
- Threshold free shipping
In this post we will review the pros and cons of each.
Free Shipping (No Minimum)
The most common way to provide free shipping is to incorporate the cost of shipping into the price of your items or to make allowances for shipping in your budget. Doing this means you avoid eating the cost of shipping and your customer knows the final price they’ll be paying up front.
- Customers are less likely to abandon their carts
- Using a low-cost shipping service like Chit Chats means you can keep your prices low without losing out on profit
- Increases the listed price of your product
- Difficult to ensure that your pricing will cover all instances of shipping (e.g. some orders may be more expensive to ship than others)
Threshold Free Shipping
Threshold free shipping is when a customer must reach a certain threshold before they can receive free shipping on their order. This can either be a minimum total value spent on the order or a minimum number of products purchased.
- Creates incentive for customers to buy more of your items at one time
- Shipping more products together reduces your own shipping costs and is better for the environment
- Customers may not be willing to spend more just for free shipping
- Customers may perceive the threshold as deceptive and have lower confidence in your pricing
Which method is best?
When it comes down to it, there are some questions you have to ask yourself before deciding to use free shipping vs threshold free shipping. These questions largely relate to the kinds of products you are selling and the brand you are building.
- Is my product something customers could use more than one of?
- Will bundling my shipments get me a significant discount on shipping?
- Will having a higher list price affect my sales?
- Is my click rate high but my conversion rate for sales low?
- What’s my average order value? What would be an appropriate threshold?
If you haven’t considered what kind of shipping you’re offering, there are many resources to help you get started. For instance, check out this helpful formula if you are stuck on how to calculate a suitable threshold to offer for free shipping.
As with anything, it will probably take you some time, research, trial and error before you find the method that works best for you. Don’t forget that you can use our handy shipping calculator to get quick estimates on postage rates.