How Small Businesses Can Offer Free Shipping AND Make Money!
Updated: Jul 25, 2023
Every eCommerce article you read tells you that you need to offer free shipping. As a small business owner, all you can think is - how can I even do that without losing money? But what if you told there was a way that you could offer free shipping and actually MAKE money.
Free shipping is not something to fear. It will improve your conversion rate. Just ask NuFace who’s orders increased by 90% when offering free shipping. So, what’s the secret? Here are 5 ways that small retailers like yourself can offer free shipping and still make a profit!
5 Ways Small Businesses Can Get Creative to Offer Free Shipping AND Make Money
1. Add a Minimum Order Value
One great tactic that small businesses use to make free shipping more profitable is setting a Minimum Order Value. You will have seen it before. It looks like this…
“Free shipping on all orders over $55!”
A lot of eCommerce stores use it. And for good reason. Setting a minimum amount buyers need to spend can up your Average Order Value (AOV).
(FYI 👉 AOV is just eCommerce speak for the average amount of dollars a customer spends each time they order).
If a customer has spent $35 and you offer free shipping on orders over $55, that’ll motivate them to add another item. More customers with a bigger basket size = higher AOV.
Additionally, limiting free shipping to fewer high value orders will reduce the negative impact of shipping costs. As a result, this will have a positive effect on your margins.
How do I set a Minimum Order Value?
Generally, a good place to begin is by adding 10-15% to whatever your AOV is at the moment.
Let’s say your current Average Order Value is $45. You may set a Minimum Order Value of $50. That’s just over 10%, but it rounds nicely! Then, you would offer free shipping on orders over $50.
You want to find a sweet spot that works for you and your buyers. If it’s too high, it may deter shoppers from buying more. Set it too low without factoring in your fulfillment costs, you start losing money. So find something that’s Goldilocks - just right!
3 tips to push customers to reach your Minimum Order Value and spend more:
Clearly display how much customers need to spend to qualify for free shipping on your cart.
When they start adding items, tell them how much more they need to spend to get free shipping. E.g. if they’ve spent $30 and your threshold is $50, have a message in your cart letting them know they only need to spend another $20 to qualify for free shipping.
Leave a message at checkout telling your customers how much they’ve saved with free shipping. Buyers love to think that they’re getting a good deal!
2. Include shipping costs in product prices
An eCommerce store owner offers their product for $20 with a $5 dollar shipping fee. Customer says no thanks. 🖐️
The seller then offers the same product for $25 with “free shipping”. Customer says heck yeah!
It’s crazy, right? But it works.
And it’s been proven that it works. Rebel CEO Bill D’Alessandro tested this with a skin cream product. First, it was offered for $30 plus $4.99 shipping. Then, the same product was offered for $35 with free shipping (including the shipping fee in the price).
Guess which option had double the conversion rate? That’s right - the one with free shipping. Even though they were really the same price!
So, by including the shipping fee in your product price, you can recoup shipping costs AND offer free shipping.
3. Offer free shipping via your least expensive shipping option
Every online seller after they’ve read blogs on free shipping…
“I have to offer both free AND fast shipping. I must be Amazon. Aghhh!!!“
Woah. Slow down. Literally…
This presents you with an opportunity. The opportunity to offer free shipping using the shipping method that costs you the least!
As a result, you can majorly reduce the impact of free shipping on your shipping expenses. Plus, if customers want free shipping, it’s likely to increase your sales.
To encourage buyers to use the cheaper, free shipping option, leave a message on your store and cart. Something like…
“Free Economy Shipping for Orders Over $50”
That way, you can entice them with the cheaper shipping option. As well as the minimum order value. Of course, that’s if you set one! You could just have a banner saying “Free Economy Shipping” in your store if you choose not to.
4. Only offer free shipping on low-cost, high-volume products
Giving free shipping on items that cost little to ship and do really well on your sales is a great way to offer free shipping and still make money.
Let’s say you have a face cream that’s super popular with your buyers. And it doesn’t cost a lot to ship. Offering free shipping on this product is really going to appeal to a lot of your customers. Plus, with the lure of free shipping, it’s probably going to sell more!
It’s a safe strategy. You’re only shipping items for free that cost and sell enough to benefit your profit margins.
5. Save tons of money on shipping costs with shipping software
Finally, one of the best ways to create margin for free shipping and make it profitable - save money on your shipping costs. How? By using shipping software like Ship.com.
In 2022, Ship.com users saved $1.9 million on shipping costs.
With Ship.com, small business owners have access to the deepest shipping UPS & USPS discounts around. That includes up to 77% off UPS. Any cheaper, it would be free. Seriously.
The platform finds sellers the cheapest shipping rates available right away. That means no more hours of searching or not knowing if you’ve got the best price.
You can also order a FREE home pick-up in just 3-clicks. Forget spending money on gas. And the software allows you to easily combine orders to create one shipping label. Throwing away your hard-earned dollars on unnecessary labels? Nuh-uh!
Plus, easy-to-use email marketing and rewards tools designed for small businesses are thrown in with the platform. So you can grow your profits and customer loyalty at the same time as saving $.
The end result? The money you’ve saved will create more margin for you to offer free shipping for your small business. To add to that, your overall shipping process will be way more efficient!
Conclusion - Free Shipping Isn’t Just for the Big Guys
So, is it possible for small retailers to offer free shipping and increase profit margins? Absolutely! But there are ways and means.
Free shipping with limits is key (think setting Minimum Order values or free shipping on low-cost, high-volume items). As is minimizing the impact of shipping costs on your free shipping.
By choosing a strategy that best suits your business, you can grow sales and see a positive impact on your profits.