Management & Finance

Chart of the Week: The Value of Free Shipping

Consumers want it and merchants are increasingly offering free shipping.

But, of course, shipping is not truly free. An ecommerce merchant has to pay for it. He or she has to decide whether it’s worth it to factor shipping into the cost of doing business.

This week’s “Chart of the Week” may help in that decision-making process.

Internet tracking firm comScore recently analyzed online holiday transactions. As expected, the analysis revealed that free shipping remains a critical driver of 2009 holiday shopping. But deeper in the data is, perhaps, a more telling finding for ecommerce merchants deliberating whether it’s financially feasible to offer free shipping. The analysis shows that the average order value for transactions including free shipping is significantly higher than the average order value for transactions not including free shipping.

Keep in mind, the chart below only shows the value of free shipping in terms of current transactions. It can be reasonably argued that the online merchant offering free shipping also has a greater chance of earning repeat business from a satisfied customer base.

Kevin Patrick Allen

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