Free shipping is often touted as a surefire way to get more sales, but rolling shipping costs into the product price can also take a big bite out of a profit margin. During the rush of holiday sales, we wondered how many of our readers offer free shipping and if you think it is a worthwhile ecommerce strategy.
We polled Practical eCommerce readers during December 2010 to gather your thoughts on free shipping. The "free shipping" survey asked four questions, with a comment section for each response. Readers who completed the survey, and then provided us with their names and email addresses, were automatically entered in a contest to win a $25 Amazon gift certificate. The December contest winner, chosen by a random number generator, was Justin Hughen of MyOwnTuxedo.
Describe Your Company's Free Shipping Policy
Respondents were asked to describe their companies’ policies on free shipping. Nearly half (41.9 percent) said they will ship products for free when minimum purchase levels have been reached. Only 8.1 percent said they offer free shipping only on certain selected products.
22.1 percent said they never offer free shipping and 18.6 said they always do. Nearly one out of ten (9.3 percent) checked “Other.”
Twenty-nine respondents left comments about their free shipping policies. Some were adamant that free shipping is never free, with one calling it “a gimmick” and another saying “there is no such thing.” Another said, “Companies who offer ‘free shipping’ have to add a percentage of shipping into each product they sell, as UPS does not work for ‘free.’ If consumers believe they are truly getting shipping for free, they have been misled.”
Comments that were positive to the free shipping model included several who rely on it during certain holiday periods. “Four days over Thanksgiving weekend and a four-day weekend around Valentine's Day,” said one. Another said, “We offer free shipping through November and December (holiday time). [The rest of] the year, free shipping over $75; but we are revisiting this for 2011.”
Some companies said they offer to ship for free only during special promotions, and others said they offer it only if the weight of the product is under a certain threshold. Minimum purchase levels ranged from a low of $19.95 to as high as $150.
Do Free Shipping Offers Increase Your Company’s Profits?
When we asked if free shipping offers increase profits, the responses were divided between those who answered unequivocally “Yes” (46.5 percent), and those who said “No” (32.6 percent) or ticked “Other” (20.9 percent).
On reviewing the comments for this question, it seems that many of the negatives and “Other” replies were due to several companies’ policies against free shipping, as well as numerous companies that are not sure if the strategy has been effective. One said, “Not sure. I think it does not increase sales but it does prevent lost sales.” Another said, “Very hard to be sure, just a gut feeling.”
One respondent who is positive that free shipping is not effective posted this comment, “No impact on sales whatsoever. Disappointing given the number of marketing type sites that promote the practice as an effective sales tool.”
Several other respondents had a more upbeat view of free shipping, with one stating, “More sales with free shipping,” and another who said, “I believe it brings us business we wouldn't otherwise have.” One polltaker said, ”In a recent customer poll, having free shipping ranked high among other advantages.”
How Does Your Company Fulfill and Ship Its Orders?
Responses about fulfillment indicated that three-quarters (75.6 percent) of polled companies are filling orders in-house with company personnel. One respondent in the self-fulfillment category described himself as “A one-man merchant online seller.”
Only 15.1 percent of those polled said they always outsource fulfillment to a third party.
Comments from the remaining 9.3 percent who checked “Other” indicated a combination of in-house and third-party fulfillment. “Half in-house and half drop-ship,” said one. Another said, “The majority is fulfilled by Amazon.com while we do some shipping from our own warehouse as well.”
What Is Your Company’s Average Sale Amount?
Almost all of the companies that responded to the poll (88.4 percent) said their average sale amount is more than $20. Only 9.3 percent said their sales average is between $10 and $20, and just 2.3 percent checked “Other.”
Comments on this question had the average sales price landing between $50 and $175. One seller said it was too difficult to answer as his sales could range from $4 to $40,000.
As one survey respondent noted, “the jury is out” on free shipping as an effective ecommerce model. While many companies find free shipping offers to be a helpful sales strategy, others are not yet (or may never be) convinced.