Free Shipping Equals More Revenue

Shipping is a cost that people don’t like to pay. Unfortunately from an ecommerce standpoint it is something that has to be dealt with. The retailers don’t want to have to pay it because it will cut into their profit margins. I respect that, everyone has to work within their own margins. But especially in this economy we all know that a sale is tough to come by. Everyone is taking a hit right now, if you have someone telling you that they aren’t, they’re probably lying to you. Just about the only thing that is increasing right now in the U.S. is the size of our government. If you are looking to increase your sales conversions and revenues online, free shipping might just be the way to go for you.

As we’ve talked about before, in order to be successful with online sales, you have to create an “in store” real life environment on your website. People are still adjusting to this whole ecommerce thing. While the numbers continually increase every year for the amount of people who shop online, it still isn’t as regular of an occurrence for people to shop online, as they would in their local hardware store.

Think of it like this; In a store a customer can get the satisfaction of having their product instantly, but they have to pay a sales tax. Online a customer has to wait a few days or longer to receive the product, and they don’t get the satisfaction of really seeing the product before they decide to buy it. Also online, the consumer doesn’t have to pay a sales tax (in most cases) if they decide to buy online. By adding in the cost of shipping, you are essentially adding a sales tax to your online items and you’re already at a disadvantage because your customers have to wait a few days for their products. If you eliminate the sales tax you are elminating that ugly cost that the consumer already doesn’t want to pay. Your conversion rates are going to go up by a couple percent or even more. As a result you’ll get more sales and higher revenue numbers.

We tested the theory on one of our websites with a 72 hours Free shipping sale on everything except already on sale items. Our average sale dropped a bit (the price of standard shipping), but our conversion rates went up by 1.5% and our total number of sales increased by around 50 extra sales a day. For those of you who don’t think that’s a big deal, do the math for yourself.

Calculate it for yourself

Average Sale Amount x Average number of orders

vs

(Average Sale amount – Cost of shipping) x (Average number of orders + 50 extra orders)

The numbers add up quickly. You’re getting more product out to more people, and creating the chance for a lot more long standing relationships with these customers. You’ve just gotten rid of the biggest roadblock to online sales by dropping your shipping price. Take a look at Zappos they got rid of the cost of shipping for their customers and they were so successful that the online giant Amazon bought them out. If you don’t believe it will work test it with a sale, I promise you you will see these results.

Everyone has to work within their own margins, but for whatever reason people really hate paying the price of shipping. If you can’t just flat out cut the cost of shipping on every sale, consider raising the price of all of your inventory online by 1 or 2 percent. Find margins that work for you and make it happen. It is entirely worth it.