Throughout the long history of retail shopping, buying on the Internet is a relatively new phenomenon. It has increased over the last decade or so, allowing traditional brick-and-mortar retailers to offer their wares to a larger audience. Online shopping also allows an individual to access a large variety of products quickly, right from their own computer. It’s easy, and there is a virtual smorgasbord of products from which one can choose.
So, how do retailers sweeten the deal and get themselves noticed? Offering free shipping is, in some cases, more appealing to shoppers than cutting the price of a product by more than the shipping cost.
Effective Marketing Strategy
As a marketing tactic, offering free shipping is a good way to attract consumers. The drive, then, is for the managers of online stores to encourage consumers to buy in sufficient quantities to offset the costs of free shipping. Some companies do this by waiving shipping fees only when a customer exceeds a certain spending threshold. For example, Amazon experimented with threshold shopping when it first established a free shipping offer for orders of $99 or more. Over the course of several years they gradually lowered it from $99 to $49, and again to $25. Amazon did well with sales until they reached the lowest threshold. At that point, consumers purchased fewer products, on average, per order. As a result, Amazon has created Amazon Prime, which allows express free shipping on all orders for an annual fee of $79.
But Not for Every Company
Not every online retailer is able to offer free shipping as a regular feature of their site. For large companies with higher profit margins, free shipping may not affect the bottom line that much. The ability to offer free shipping may be an appealing way to draw in consumers, but there are certain considerations a business must take before deciding that free shipping will work.
First, they must consider their profit margin and the types of products they will likely be shipping most. Certain products may be larger or heavier, resulting in higher shipping costs to absorb. Business owners also must consider the average size of the orders as well as the location of their clientele. If a company regularly ships internationally, then offering free shipping probably won’t be part of a cost-effective business plan.
Use Free Shipping as a Promotion
One way smaller companies can take advantage of free shipping marketing while maintaining profits may be to make the offer during high-traffic holidays. For example, it’s common for online shoppers to not make a purchase unless free shipping is offered. An online retailer may have success drawing in new customers with free shipping during a busy holiday season, and then use other marketing techniques such as email offers to retain that customer throughout the year.
Another way for companies to offset the costs associated with free shipping is to get creative with the way they make the offer. In other words, the no-strings-attached approach of some larger retailers might not work for smaller companies. For example, smaller companies may offer free shipping to only their most loyal customers, or create a flat-rate system that encourages shoppers to buy in larger quantities. In effect, companies must be resourceful when attempting to recoup losses on free shipping while directing customers to their site in an ever-growing, crowded marketplace.
Byline
Frederick Barnes writes on trucking, transportation, shipping, automobiles, car mechanics, air travel, interstate commerce, general business and other matters. Readers who’d like to learn more about refrigerated shipping (useful for diamond transport) should click here to view resources from an established company in this niche.
Image credit goes to Rob Rypma.