Can Your Company Compete With Fast, Free Online Shipping?

The online shipping bar is constantly being raised when it comes to cost and speed. You may want to consider offering free online shipping to keep up.
February 01, 2017

As retail increasingly moves from brick-and-mortar stores to e-commerce, customers expectations have risen. They want their orders fast, with free shipping. Now that the technology for ultra-high-speed delivery systems exists, it may be a matter of time before same-day delivery is replaced by same-hour delivery for online shipping.

While the infrastructure hasn't yet been developed for ultra-high-speed delivery, fast and free online shipping has arrived. This development could affect your retail internet business model, notes Craig Cleveland, director of business development for Jane, an online boutique marketplace featuring women's and children's clothing and home décor.

“Consumers have become 'Amazon spoiled,' and as a result now expect to receive free or cheap shipping in two to three days—this is the standard against which online businesses are now competing," Cleveland says. “As more and more courier services enter the marketplace looking to lower shipping costs, same-day delivery will become the new standard."

Customers Want Free and Fast Shipping

When customers have a choice between free online shipping and paying for freight, they may opt for the former. How you deal with expectations regarding free shipping and speedier service can be tied to how well you do with online sales.

As more and more courier services enter the marketplace looking to lower shipping costs, same-day delivery will become the new standard.

—Craig Cleveland, director of business development, Jane

“Differentiating your business from other online sellers requires unique product and a better overall customer experience," says Cleveland. “Our policies and procedures at Jane allow us to maintain a preferred customer experience. That customer experience is key to customer retention."

While his site charges for shipping, Cleveland believes that the secret to delivering a superior customer online experience is a seamless and fast shipping experience. “By developing and maintaining integrations with shipping partners and their advanced technology, Jane has been able to empower its sellers with the necessary tools to create a consistent shipping experience."

Should You Consider Free Shipping?

The costs associated with free and fast shipping could have the potential for pricing your online business out of the market or of making margins so thin that you can't compete. At the same time, these tactics could help increase sales.

Try taking these tips into consideration when deciding whether or not you should offer free online shipping.

Compare conversion with and without free shipping. There may not be a point in using free shipping if it doesn't improve conversion rates. Do a comparison between the two for a designated time to see if offering free online shipping improves your conversions. You could do the comparison between products, site-wide or both.

Consider free shipping at a certain threshold. Offering free online shipping can help increase conversions. It may also help encourage visitors to spend more money on your site. But can you afford to offer free shipping? This can be accomplished by determining your site's average order value. You can then offer free shipping for orders equaling that amount or higher. You may want to test three to five shipping thresholds to see which results in the most increased spending among shoppers.

Offer free online shipping on select items. See if sales improve by offering free shipping only on certain products. You could select the products based on their popularity or exclusivity and see how sales compare with and without free shipping.

Test price increases. Consider compensating for the loss of revenue from free shipping by increasing prices. Monitor sales of products you increase in price.

If you find that free shipping isn't a profitable choice, you may be better off focusing on faster shipping and a user-friendly experience. To streamline shipping practices so that the customer experience is seamless and as fast as possible, you could try the following:

  • Offer a fast delivery option in addition to standard delivery. Customers may not often use the faster option, but it may be comforting for them to know it's available.
  • Incorporate and advertise a maximum one-day handling time. Clients often want to know that you're getting to work preparing and packaging their product.
  • Ship products within 24 business hours of order receipt. Any longer may be too long for customers to wait.
  • Use a carrier that offers tracking and share those details with customers.
  • Respond promptly to any customer issues or complaints. It's important that your shoppers know that you hear them and that you care.
  • Consider offering free returns. A money-back guarantee that includes shipping charges may help customers take a chance on your products.
  • Deliver a great product. It may not matter how fast or inexpensive your online shipping charges are. The bottom line is that your product is what customers are buying. And what will be with them long after the bill is paid.

Read more articles on e-commerce.

Photo: iStock