Practical Ecommerce

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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  1. Original Table Lamps December 22, 2009 Reply

    We’ve done free shipping on our table lamps from the outset, factoring the cost into each product.

    Sometimes we make money on shipping, sometimes we lose (e.g. shipping to Highland Scotland) but it tends to even out over time.

    Our small product range, simplistic blog based cart and checkout through PayPal forced us to do free shipping to reduce complexity – I’m glad we did!

  2. Robert Farago December 22, 2009 Reply

    Is there any data on "free" overnight shipping? And what about people who DON’T use e-commerce? Could they be lured in by secure, free overnight shipping. I bet so.

  3. rick1557 December 22, 2009 Reply

    Free shipping is interesting when it comes to comparison shopping. Prices listed lower enjoy higher rankings and draw more attention because of it. More clicks mean a better chance of the sale, especially if the overall price paid is not more then those bundling in.


  4. Ray Shan December 22, 2009 Reply

    The comScore press release was a good read with more data, but I wish we have more granular free data, e.g. differentiated by price points and demographics (gender), etc.

    Ray Shan