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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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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%.
Jupiter Research, June 2003 - 89 percent of respondents said free shipping is the top site-comparison value for them.
i've found that "free shipping" works well, and works best if "free shipping" is prominent all over the site.
Link to a story about amazon and free shipping.
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.
Not to mention the simplicity benefits.
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.
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!
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 :)
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.
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.