Is Free Shipping Really Free?

by LJM Group

The Pain of Paying

Of course customers have come to expect free shipping,  of course there’s a price to pay for it, and of course it falls on the retailer. It’s a concept that plagues large online retailers but can actually be  extremely detrimental to smaller e-commerce companies, especially DIYers who sell through Etsy.

Carriers continue to increase their shipping rates annually and Amazon continually sets precedents, raising the bar by offering faster free shipping. These game changers have led to all other e-tailers following suit at the risk of losing sales. For example, because of new search algorithms, Etsy gives priority placement to sellers who guarantee free shipping, causing those who were once top Etsy sellers to be removed from the first page of the search results for charging even a nominal fee for shipping. As a result, sellers must now make a crucial choice to offer free shipping or not – both potentially causing revenue to drop drastically.

In a 2018 survey by Internet Retailer, shipping charges were cited as the most common reason shoppers abandon their carts. Large online retailers have capabilities to make people think they are receiving free shipping. They’ll offer free shipping when a certain dollar amount is spent. This tactic works. Many consumers would rather buy more items or buy a more expensive one than pay a delivery charge. The concept of “free delivery” is so valuable to consumers that it outweighs discounts. Though a 20 percent discount may equal the cost of shipping, the word “free” triggers a more positive and enticing reaction from a consumer.

The main reason small businesses have a difficult time keeping up with heavyweights is sheer volume. The amount of product a small business moves in a year, could be the  smallest fraction of what Amazon sells in a day. It’s basic economics – the more that’s shipped, the less it costs. The larger online retailers simply pay less per package to ship. This equation also holds true for returns as well. Shipping is a two-way street, and customers expect free shipping both ways.

Though you may not be in a position to offer unconditional free shipping, there are several other ways to go about promoting free shipping without affecting your bottom line. By implementing LJM’s custom solutions that go beyond Carrier Contract Negotiations  and Parcel Invoice Auditing Services, you can lower the cost you’re actually paying to ship goods. The cost to ship could be low enough that you may only need to increase the cost of your goods by a nominal amount to cover the cost of the shipping, and ultimately offer “free shipping” too.

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