Free vs. Fast shipping – which one is better for your business?

There are many factors beyond product features and price that may cause shoppers to hit the buy button. Shipping is a big part of that equation, but what kind of options are more likely to increase your sales?

Well, given the Amazon Prime effect, many consumers now expect two-day shipping or even one-day shipping. Falling short of these expectations negative affect brand perception. According to a 2018 Dotcom ecommerce Study of more than 500 online shoppers, 30% said faster shipping increases brand trust, while 90% said they value free shipping. Should you offer fast or free shipping? The answer can be a bit complicated though.

Despite their importance in ecommerce, these factors can hurt business margins. Offering both options may not always be feasible, especially for new brands. Successful implementation depends on balancing what customers value and your business goals.

Offering Faster Shipping Without damaging Your Business

Statista Research found 26% of online shoppers cited slow shipping as the main reason behind cart abandonment in 2017, up 4% from 2016. Over 70 percent of online shoppers surveyed in Dotcom Distribution’s 2018 Ecommerce study said delayed arrival of an online order would likely influence future purchase decision from that seller. It’s clear that failing to meet or exceed rising consumers expectations results in lost business.

Introducing faster shipping options into your price structure allows you to offer premium methods but also keeps costs the same. This is done by adding a fraction of them onto the sale price.

While faster shipping methods are more expensive, you can control costs by providing options. For example, offer base shipping but allow customers to select another preferred method at their expense. Many shopping cart platforms enable setup of real-time shipping options and rates, sharing live shipping quotes based on items selected. This approach not only lets you cover the shipping costs or nearly so, but the level of control and transparency builds customer trust and loyalty.

Communication and transparency is key!

Yes! Be open to your buyers and let them know in advance how much shipping will cost. Also, be sure to let your customers know why shipping might take longer or why it might be more expensive than expected. Also, customers appreciate measures taken to improve their safety and experience, and the value of that may compensate for slower shipping.

Lessening the Impact of Free Shipping

Free shipping plays a powerful role in generating a positive image and attracting customers. The 2017 UPS Pulse of the Online Shopper™ Study found that shipping fees were among the top factors people considered when purchasing items online. But waiving that fee without considering its financial impact on your business is unwise.

A common practice for waiving delivery fees is establishing an order threshold. This allows brands to use free shipping as a marketing tool while incentivizing extra spending. As such, determine a minimum amount that is favorable to customers while increasing the average order value enough to compensate for shipping costs.

Other strategies?

A similar strategy involves asking shoppers to subscribe to a newsletter, follow social media pages, leave reviews or refer a friend in exchange for discounted shipping fees. Because these tasks are simple, shoppers may gladly oblige to save money, aiding your marketing efforts.

You can also try membership programs. These can provide customers with exclusive benefits including free shipping. Generating consistent subscription fees can balance out delivery costs while incentivizing customers to purchase more to maximize the benefits. Loyalty programs also encourage additional purchasing in exchange for perks like free or discounted shipping.

Just as incorporating shipping into your price structure can enable faster shipping, it can also help you offer free shipping. In Dotcom Distribution’s 2017 and 2018 ecommerce studies, free shipping was the incentive most likely to result in future purchases. So, while higher prices are a turn-off, free shipping can make up for it.

To sum up

Fast delivery and discounted or free shipping are two of the biggest factors that build customer trust and retention. The key to delivering the best experience while reaping the maximum benefit is finding the best fit for both your brand strategy and budget. So our recommendation is to offer both a free and a premium shipping option, but beware of added expenses that hit the bottom line. Choose wisely.