When the holiday shopping season arrives, thousands of online sellers and retailers will offer free shipping to entice buyers to shop from them and not someone else. It’s not surprising.
In a recent article, Luke Knowles gave us plenty of good reasons why sellers should offer free shipping. Those reasons include more sales, fewer abandoned shopping carts, staying competitive and gaining more repeat buyers. When you take that information, and consider that a 2011 comScore survey found that 61 percent of shoppers are somewhat likely to cancel their orders if merchants don’t offer free shipping, it could make you think free shipping is the way to go during the holidays.
However, a good number of sellers don’t agree with this reasoning. Some have tried free shipping and decided it’s just not for them, as we note in a recent guest blog we wrote for the Auctiva Blog. Others have told us that, plain and simple, the cost of providing free shipping is too much for a small online seller to absorb.
Having brought you one side of the issue with Knowles’ article, now we’ll look at some of the free shipping concerns sellers have shared with us, as we know many of you will soon consider if you should offer it this holiday season. We also share ways some online sellers make up for the cost of free shipping, should you decide to give it a shot.
Common free shipping concerns
“You may assume it’s always better for buyers to see ‘free shipping,’ but if the price goes up too high, you might turn off buyers”1. Free shipping isn’t free
Rebecca Miller, an eBay seller of more than 13 years, says one of the big complaints among online sellers regarding free shipping is that it’s not free at all. Someone must pay for the postage, whether it be the seller, both the seller and the buyer (if part of the shipping cost is rolled into the item price and the seller covers the rest), or the buyer (if the entire shipping cost is rolled into the item price).
The latter two options alleviate some of the seller’s cost, but the last option—folding the entire shipping cost into the item price—can be tricky, Miller notes. Sellers have to do their research and see what others are charging for similar items if they decide to do this.
“On the surface, you may assume it’s always better for buyers to see ‘free shipping,’ but if the price goes up too high, you might turn off buyers,” she adds.
Sellers have to stay competitive, and for this reason, free shipping could cost them, one way or another.
2. Sellers already absorb shipping costs
One merchant says that sellers already absorb the cost of shipping supplies, so offering free shipping is another hit to the pocketbook.
“You have to buy tape and, unless you are lucky enough to have access to recycled materials like bubble wrap, popcorn and odd-size boxes, proper packing is expensive,” the seller notes in response to Is Free Shipping Worth the Cost?. “Picking up recycled packing materials requires time and gas. I could never figure out how a small seller could offer free shipping without losing money.”
Another merchant adds that the concept of free shipping is great, but when you add in listing and transaction fees, your profit margin quickly shrinks.
“We moved all our eBay listings to free shipping last year and almost went bankrupt”“[It] can easily lead to the merchant losing money on every sale, especially when eBay and PayPal fees are considered,” that seller writes. “Unless you are blessed with huge margins, then one must be very cautious at offering free shipping.”
3. Free shipping is a drain on profits
Mike Sharp, who commented on our blog post, says he offers free shipping on his Web store—but not on eBay.
“We moved all our eBay listings to free shipping last year and almost went bankrupt,” he reports.
Janice Mayo, another eBay seller, says she offers free shipping on a few of her eBay listings, but only as a way to get people to her store because she knows she’ll take a hit on those listings. “I consider it as an advertising expense,” she continues.
Mayo notes that once she weighs in all the eBay fees sellers get “hit with,” it’s difficult to make a profit with free shipping, unless she ups the price of her products. For that reason, she only offers free shipping sometimes.
4. Higher rate of returns
One merchant worries that free shipping might encourage more buyers to return items, since they only pay the cost of the item. Instead, charging for shipping may help deter buyers from returning items, the seller suggests.
“We sell shoes, and it costs about $9 to ship to California,” the merchant notes. “If they return those shoes, sure they’re paying for the shipping back to us, but if we offer free shipping we eat that original cost!” And they lose the cost of the item.
For some, free shipping does boost sales
“Anything that makes it easier for the buyer also makes it easier for a buyer to purchase from me, rather than someone else”Still, other sellers have told us they offer free shipping whenever possible. Kevin Timothy notes that his 2011 holiday sales reached a record high, “and I believe it had a lot to do with offering free shipping,” he says.
“During the year we tend to keep the ratio mixed, offering it mainly on high-dollar items,” he explains. “There is no set formula for us; it really depends on how bad we need the sale. Generally, though, I’m in in favor of offering it. It does help.”
Free shipping success tips
Commenters on our guest blog shared some of the ways they offset the cost of free shipping, and we thought we’d pass these along. One poster notes he offers free shipping and increases the price of his items to cover the cost.
“The buyer is still paying for the cost of shipping, but anything that makes it easier for the buyer—and offering free shipping does create a buyer-friendly transaction—also makes it easier for a buyer to purchase from me, rather than someone else,” he adds.
Sally Mittuch, the founder and managing director of Natural Spa Supplies, takes another approach: She offers free shipping on orders with a minimum value of 35 pounds.
“This means regular customers can plan their purchase to obtain free shipping, whereas new customers, who often fall beneath this threshold, pay the fixed shipping rate of 2.99 pounds, but become aware that they can obtain free shipping in the future if they like the goods and want to buy in larger quantities next time, or even share orders with friends and family,” she reports.
She says that, overall, her business gains from giving buyers the option to get free shipping.
Have you tried offering free shipping? What results did you see? Will you offer it during the holidays?
