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Free Shipping Builds Profits

Dec 1, 2012

With 2012 winding down it is time to finalize plans for next year, and online sellers must not overlook the vital role that shipping plays in driving sales online. At some point during the buying cycle all shoppers ask, "How much does shipping cost?" and "How fast is the item shipped?" The answers to these questions play an important role in buying decisions, especially when all other comparison factors are consistent. In other words, a buyer is more likely to purchase an identical product from one online store over another if the shipping time is faster and the rate to ship is lower. With this in mind, it should be noted that free shipping in general is one of the most sought after online discounts. It cannot be overstated, free shipping works, especially during the holidays. Believe it or not, people actually conduct online searches using keyword phrases that include "free shipping" very early in the buying cycle. For these customers, choosing where to shop for a product starts at the initial point of engagement with a brand, and that is the ad or search listing they discover.

The graph below represents the trend for searches performed on or including the keywords "free shipping" since 2005. It is clear that shoppers are consistently searching for this discount, however, notice the dramatic jump in volume around the end of the year, precisely during the holiday season.

Source: Google Trends.

When this trend is looked at in more detail, it shows that searches which include the phrase "free shipping" begin to pick up during the months of October, November and December, with the peak being reached in December.

Winning Shipping Promotions

In a study on buyer behavior and shipping, numerous shipping methods across multiple markets were tested to determine which combination provided the most immediate benefit to sales. The six shipping promotions tested were:
1) Flat rate shipping on anything ordered, one price for unlimited items.
2) Flat rate shipping combined with optional rush / overnight shipping.
3) Free shipping on orders that exceeded a predetermined amount.
4) Free shipping on all orders.
5) Free shipping combined with optional rush / overnight shipping.
6) Real-time shipping quotes from various carriers.
Each offer was implemented and rotated over several weeks across various sites. Diverse data painted a consistent picture of which combination played the biggest part in generating sales, no matter the industry or product being sold. The winning combination proved to be the third method tested, free shipping on orders over a predetermined amount. In fact, offering free Priority Mail shipping on orders over a predetermined amount produced better results, likely due to the increased rush factor in the word "priority".

Offering free shipping, while at the same time increasing the price of products to cover that shipping cost, still resulted in an increase in sales. This shows the power free shipping has in a buyer's decision-making process. Furthermore, testing revealed that, in some cases, online buyers overlook the price of an item initially to get free shipping. In industries with more common products, consumers may be more price sensitive when making buying decisions, however, the overall consensus is that free shipping has an impact on sales.

While free shipping alone is nice for the customer, free shipping for orders over a predetermined amount achieves two things for a seller. First, it increases the number of overall sales, and second, it grows the Average Order Value, when planned properly. Both of these points cause bottom line growth for a company while satisfying customer wants and needs. All customers want their products shipped fast and free, so it makes sense to craft online advertising and landing pages that cover these points for maximum effect. For example, an ad that closes with "Fast, Free Shipping. Shop Now!" is far more powerful than one that lists no shipping at all. This type of ad includes a strong call to action and states two important benefits that the customer receives in shopping with one store over another. Testing has proven that lines like these in advertising, combined with landing pages that further enforce the idea tend to increase sales. Try "Get it Fast. Get it Free!" on a landing page and see what happens.

By offering the product and promotions buyers want, online retailers can win business over their competitors. Shipping plays a major role in helping potential customers make their final buying decisions, so when planning for the coming year, retailers should setup shipping offers that will not only meet their customer's expectations, but will drive bottom line sales in the process.

Eric Leuenberger is an ecommerce expert, founder of Ecommerce Amplifier and owner of Voom Ventures, LLC, whose products and services help store owners and operators increase traffic, maximize ROI, decrease expenses and increase revenue. He can be contacted online at www.voomventures.com or by phone at 1-866-602-2673.

Topic: Business Strategies

Related Articles: Free Shipping  Shipping  Shipping Promotions 

Article ID: 1675

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