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How much has "free shipping" affected your conversion?
please share
Raymond




msg:625396
 7:09 am on Dec 4, 2004 (gmt 0)

I am considering to offer "free shipping" on my site. It is a really major decision because it eats in a big chunk of my revenue.

I am not located in the U.S., but 85% of my sales are from the U.S. Currently my shipping charges is about 22% of my revenue. Our raw profit margin is about 100% to 200%. So in theory, we can afford to try "free shipping", but it will cost us as much as 60% of our profit margin.

There are many objections from my coworkers to my "free shipping" idea. Most claimed that free shipping will contribute to an even bigger problem in the future. However, the way I see it is if offering free shipping can boost our conversion by another 0.3%, we will be making more than we are now, and plus, we will be able to boost our volumn that will eventually lead us to an even higher overall profit margin.

One of my colleage also suggested that we can consider offering a very low fixed shipping charge. I am not particularly fond with this idea. It does not give as much of an incentive as the word "FREE".

I would love to hear your experience in this. Please share.

 

prairie




msg:625397
 7:15 am on Dec 4, 2004 (gmt 0)

In our case.... 4 months ago we cancelled free shipping on all orders and increased the basic shipping costs by 20% and much to our surprise sales increased by about 15% with no increase in traffic.

I think removing the free shipping toned down the commercialism of the site, which in this instance was appropriate, and got people to focus more on the usefulness of what was being presented rather than the cost.

Raymond




msg:625398
 7:21 am on Dec 4, 2004 (gmt 0)

So you canceled free shipping and on top of that increased your shipping cost and you had a 15% increase in sales?
That's quite odd.

prairie




msg:625399
 7:29 am on Dec 4, 2004 (gmt 0)

Yes, but these were relatively expensive and very specific products without any competition.

The drop in free shipping may have also helped us get rid of clients we may be better off not servicing.

robotsdobetter




msg:625400
 8:35 am on Dec 4, 2004 (gmt 0)

Shipping charges seem to be the main reason some people still don't shop online. If your company isn't making a lot yet you might want to just offer free shipping on certain products, for example -- you could offer free shipping on all products that are 50 dollars or higher.

tolachi




msg:625401
 9:11 am on Dec 4, 2004 (gmt 0)

I personally think that prairie's case is the exception to the rule here. I don't have hard numbers, but free shipping often gets mentioned as a reason why people purchased from us. One thing you could do is try it as a promotion and see how it goes. Offer free shipping for the three weeks preceding mother's day, if it works keep it permantently. If not, not much lost.

sun818




msg:625402
 11:04 am on Dec 4, 2004 (gmt 0)

If you are offering free shipping, I think any conditions need to be spelled out clearly and simply. Is it only on certain items? Above a certain sub-total? What is the shipping method? And to what areas? Will you return policy be the same for items with free shipping?

If your clientelle is price conscious, free shipping will help. But if it is a high ticket item, buyers expect to pay a reasonable fee for shipping and handling. If you can provide the buyer a s&h price before registration and without getting too far into checkout, buyers will like being able to comparison shop quickly.

Essex_boy




msg:625403
 1:36 pm on Dec 4, 2004 (gmt 0)

Interesting post.

Ive run sites where by my profit has been only 30% net which leaves a bundle between the full price and mine, enough me tinks to allow for a full priced product and free shipping.

Shipping charges do have an adverse affect, in my case.

Be interesting to see what happens.

lorax




msg:625404
 2:29 pm on Dec 4, 2004 (gmt 0)

According to a Neilson Norman Group study,
Our users liked free shipping... As one user said, "Even though it's added into the cost of the products, it just makes me feel better."

Free shipping works better for you if you have a large distribution network which leads to shorter shipping distances. Profit margins are diminished if you are located in one spot and trying to ship to a worldwide customer base. Of course the larger your profit margin, the less impact a larger shipping fee will affect your bottom line.

bsterz




msg:625405
 2:37 pm on Dec 4, 2004 (gmt 0)

One quick caveat -

If your product gets listed on product feeds there is not a way to DEDUCT shipping from the product price, so you look like a higher priced option when people are sorting by price. I realize that the shipping column says "$0" but I fear people may not look that far. In the case of one of my clients, it's a difference of $80.00.

Bill

lorax




msg:625406
 2:47 pm on Dec 4, 2004 (gmt 0)

>> so you look like a higher priced option

That's not always going to cost you a customer. I think consumers realize that there's more to an online store than just the price. There are the intangibles like trust, reliability, sincerity, responsiveness (especially to problems before AND after the sale) and a feeling of earnestness.

oldskool79




msg:625407
 3:02 pm on Dec 4, 2004 (gmt 0)

One idea that I've seen work well is to offer free shipping when multiple products are purchased. It works even better when they are complimentary products.

For example, on your blue widget page, offer the customer free shipping if they also order the blue widget carrying case.

Customers who may not have ordered the extra product will do so just to get the free shipping...and they will feel like they are getting a 'special deal' and not just the same thing everyone else gets.

Alternatively, you could offer free shipping to customers who sign up for your mailing list.

If I go to a site that offers free shipping across the board it loses it's appeal. It seems to be more valuable when you have to meet certain criteria to get it.

otnot




msg:625408
 3:09 pm on Dec 4, 2004 (gmt 0)

I compete against a company that offers free shipping. Yes there are consumers out there that bite hook line and sinker for free shipping. But the majority of consumers realize that you don't get something for nothing. I know for a fact that we are selling just as many units as my competitor.(inside info) I think that conversions come from a feeling of trust, when the time comes to pull out the credit card and enter the number. Your site must give them this feeling or the transaction will not take place. I had two sites, one with free shipping and the other without, selling the same items. The conversion rate wasn't much different. In fact I had more problems with the free shipping customers than the paying customers. I have since dropped the free shipping. I don't like to be fooled with gimmicks and once fooled I won't be fooled again.

bsterz




msg:625409
 3:10 pm on Dec 4, 2004 (gmt 0)

lorax - I guess I see where you're coming from, but we wouldn't want the perceived higher price to be an accident (happening as a result of a shipping policy that was created without the knowledge of the implications), if a shops strategy is to be higher to show competence, they should do it deliberately, not accidentally in a product feed.

With that said - I'm not so sure I agree with the "higher price implies better service" mantra..but other shoppers may, so I'll definitely keep it under advisement.

As an interesting side note:
A while back, I had added "Free Shipping" to the titles of my froogle product feed, and got a whole slew of product declined by the editors. I emailed them explaining my problem, and they said something like "I see your problem, and we'll allow you to add that text to your descriptions". I thought that was kinda cool.

b

lorax




msg:625410
 3:50 pm on Dec 4, 2004 (gmt 0)

>> higher price implies better service mantra

Ack! I'm not trying to sell you that mantra. I know full well it's not true. :)

What I am saying is that if your store is earnest in it's intentions - i.e. you talk quality products and customer service, AND you deliver on that talk -- you will gain a reputation that will justify slightly the higher prices.

To me, a great reputation is the clincher in a decision making process. I don't mind the price being a bit higher if I think I can trust the store. And if they treat me right the first time - then they've earned my repeat business.

ScottM




msg:625411
 4:10 pm on Dec 4, 2004 (gmt 0)

Free shipping is a real problem when the wrong item is ordered or the customer wants to return the product in my industry.

Another problem is that although the website plainly and clearly states "Free Shipping" we inevitably get the customer asking what the shipping cost is.

I think after the Christmas rush we are going to remove the free shipping and go with a modest shipping fee and see if the conversions differ.

JeremyL




msg:625412
 4:18 pm on Dec 4, 2004 (gmt 0)

I personally will buy from a company that offers free shipping over one that doesn't in most cases.

tolachi




msg:625413
 5:23 pm on Dec 4, 2004 (gmt 0)

If your clientelle is price conscious, free shipping will help. But if it is a high ticket item, buyers expect to pay a reasonable fee for shipping and handling.

I think it still helps in any market where there are competing products, even if they aren't identical to what you are selling.

I'm not trying to sell free shipping as a replacement for building trust or anything else, I think it should be the icing on the cake for the customer. Your product is higher quality, cheaper, your company appears more trustworthy, and the shipping is free... It may take some doing to pull off but it is definitely a winning combo.

bsterz




msg:625414
 5:37 pm on Dec 4, 2004 (gmt 0)

Another thing is - I try to look at the motivation of the client..

If they are doing it out of laziness, and don't want to come up with weights, dimensions, etc..we may be heading down a dangerous path. This type of client generally will overprice the shipping to cover all situations..

I have been slowly learning to shy away from those clients as they often have a way of wasting my efforts to bring them traffic through their lack of effort in delivery and competetiveness..

If the client truly wants to grab every possible sale and is looking into free shipping as another vehicle, then it's definitely worth looking into.

b

tolachi




msg:625415
 5:58 pm on Dec 4, 2004 (gmt 0)

Not suprisingly this topic has been covered extensively before. Check out these threads for some good commentary:

[webmasterworld.com...]

Orion5:

I remember listening to the NPR in the morning (early August 2003). They stated that Amazon announced that for the summer quarter of 2003 they offered free shipping. Apparently, their revenues jumped 40%.

RossH:

Jupiter Research, June 2003 - 89 percent of respondents said free shipping is the top site-comparison value for them.

[webmasterworld.com...]

Crazy_Fool:

i've found that "free shipping" works well, and works best if "free shipping" is prominent all over the site.

[webmasterworld.com...]
Link to a story about amazon and free shipping.

[webmasterworld.com...]
A good 3 page thread on free shipping vs lower prices.

The search for occurences of "free shipping" in www.webmasterworld.com on google [google.com] for what is apparently 317 more pages of free shipping wisdom.

Buddha




msg:625416
 6:57 pm on Dec 4, 2004 (gmt 0)

We offer free standar shipping over $100 and a lot of competitors do also.

I think it brings in more business and is worth the slightly lower margin for extra conversion.

akmac




msg:625417
 7:04 pm on Dec 4, 2004 (gmt 0)

It's hard to imagine a practical situation in which free shipping wouldn't be considered a benefit/selling point. We switched to free shipping a year ago and haven't looked back. Of course, shipping in our niche is generally less than 3% of the sale so it doesn't make sense NOT to offer it.

Not to mention the simplicity benefits.

lorax




msg:625418
 7:05 pm on Dec 4, 2004 (gmt 0)

>> I think after the Christmas rush we are going to remove the free shipping and go with a modest shipping fee

That's an interesting twist. Free shipping around the holidays only.

saoi_jp




msg:625419
 7:22 pm on Dec 4, 2004 (gmt 0)

As a consumer I feel that "free shipping" can increase purchases if there's a limit, clearly stated and well-calculated. I will purchase another DVD if the $20 will save me $12 in shipping because that's like getting a DVD for $8.

But when I see "free shipping" all over the site, I feel a bit like we all do when we see a banner saying "congratulations customer 1400 today, you WIN". I'm wary. I'd rather see "Free shipping (this week only)" or "Free shipping (extended to Jan 8)" or "free shipping (orders of 2 items or more)". Stricter policies do not look too good to be true; they look too good to pass up.

Tonearm




msg:625420
 8:22 pm on Dec 4, 2004 (gmt 0)

It seems like free shipping encourages the customer to buy just one item. Most shipping charges end up decreasing *per item* the more items are ordered, which must encourage the customer to order more than just one item. This works out because shipping costs tend to work the same way.

reuben101




msg:625421
 8:37 pm on Dec 4, 2004 (gmt 0)


I've caught myself adding to orders to reach a free shipping price point on several occasions. Might be a good idea to split the difference with your co-workers and set a threshold where free shipping kicks in. I'd set it about 2%-5% over your average total order.

As with all things internet, your variables are very unlikely to match anyone elses so it will take some trial and error. Let us know how it goes!

fjpapaleo




msg:625422
 9:27 pm on Dec 4, 2004 (gmt 0)

No offense but.............it's a little ludicrous to expect any type of general response or concensus on this issue. There are way too many variables to consider when making that decision depending on the products you sell. We've dealt with it a long time.

Do you have multiple warehousing available or fulfillment centers to ship out of? Shipping to NY from PA is one thing. What happens when you have to ship to CA?

Are your profit margins the same across the board for all your products and do you have the room to include free shipping? Or are you going to simply raise the price to include the shipping costs? If you have to raise the price across the board to offer free shipping, you could be hurting yourself.

Are all your items UPS'able or do some ship by freight carrier? You can get creamed shipping common carrier to some locations. Internet shoppers aren't stupid. The lady living up in the mountains in Colorado would love to have her washing machine delivered for free. Good luck getting it to her.

In short, we offer free shipping on select items. The ones that fit our parameters. Of course people like getting free shipping but they generally know they're not getting something for nothing. We can usually beat our competitors if a customer orders multiple items because it simply doesn't cost much more to ship three washing machines than it does one. Where our competitors have the shipping built into the price of each item, we don't. Hence, it works out cheaper to buy through us.

p.s. no, we don't sell washing machines :)

bsterz




msg:625423
 9:34 pm on Dec 4, 2004 (gmt 0)

fjpapaleo - true - one of my clients has free SHIPPING but not free FREIGHT. Based on weight, we make the determination if there will be a freight charge..but you're right, it does get a bit tricky..

sun818




msg:625424
 9:52 pm on Dec 4, 2004 (gmt 0)

Free shipping works best when you sell products of similar weight and dimensions. If you intend on padding on your selling price with free shipping, the cost can be distributed evenly. Either the seller or the buyer will lose if the weight ranges vary too greatly.

I will say that if you want better "conversion" working on ranking better for your keywords. Even though I raised prices, I am selling more than ever. Leads me to think that visibility and providing an opportunity for the buyer to purchase from you is more important than any incentives like free shipping.

Jane_Doe




msg:625425
 10:05 pm on Dec 4, 2004 (gmt 0)

>>>> Shipping charges seem to be the main reason some people still don't shop online.

A couple of my relatives, who are both retired and on fixed incomes, just love free shipping offers. They specifically mentioned a while back that shipping chargs were what prevented them from buying more goods online.

This 48 message thread spans 2 pages: 48 ( [1] 2 > >
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