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Increase Conversions by 43% with Free Shipping

Posted on March 29, 2010 by dannyd

One of the things that I often struggle with is the shipping policy on sites that I run or manage. Shipping can make or break the conversion rate of a site and is the leading cause of confusion and shopping cart abandonment online. If your shipping policy is too complicated to promote on the home page banner of your website, then you have a bad shipping policy. My recommendation is always offer free shipping when you can, and if that is not doable, then a flat-rate standard fee. When you do this, and you promote it on your site in the correct way, your sales conversions will sore.

In a recent study on shipping from Compete.com on e-commerce behavior, respondents favored free shipping as the primary driver for doing business online. In fact, they favored free shipping 2/1 over free returns. This doesn’t surpise me at all. All of the e-commerce sites I own have free shipping.

How do you offer free shipping and stay competitive on price? I have 2 ways of answering this and it all depends on whether or not you have a unique product or a sku that many other websites have.

Unique Products - If you have a unique product that no one else has or is hard to find, then you should simply build shipping into the cost of the product. Find an average shipping cost (you will win on some and lose on others) and build it right into the price of the product. If you sold Widgets that no one else has, as an example, and shipping is $500, then put that price right into your product. You may think I am crazy here, but I have a lot of data to back this up. I have a website that sells Outdoor Furniture. The standard retail on our product is $2000. We have a really good product, only a few other stores have it, so I can get away with a little more. The minute I took the $350 average ship price, added it to the price of the product (which now retails for $2350) my conversion went from .025% to .04%. That might not seem like much, but when you are dealing with a $2350 product, that is literally $80,000 more sales a month.

Sku-based products - this methodology gets a lot more complicated when you sell a non-unique product that a lot of other websites offer. Do you compete on the price level, offer free shipping, or possibly, is it a combo of the two? It really all depends. Here are some scenarios that I would use in different circumstances:

1. You offer a product that is $100. Standard shipping is $20. Everyone else offers the product at $100 plus shipping. I would sell the product for $110 and offer free shipping. You will make up in conversion (more sales) for the $10 loss in margin.

2. You offer a product that is $30. It is really heavy, and shipping costs $30. This can get really complicated. You are dealing with a couple of problems here. No one wants to pay shipping costs that equals the product cost. Most likely they will leave your site and try and find in locally.  It is the psychology of it, nothing to really do with the price. This might be the one time I would not offer free shipping, but something that is close to as good. Flat rate shipping. If the average shipment costs $30, then I would offer flat rate $15 shipping and splash it all over my website. If you do this, you need to imply that this is a great deal, a huge promo, and it is going to end soon.

The moral of the story is try to get creative when offering shipping. Understand the “win some / lose some concept” but as long as your bottom line at the end of the month shows you are making more money, then let that be the driver.

Consumers don’t want a complicated shipping scenario. If you cannot tell them what your shipping is in a single sentence, then your conversion rate will suffer. Guaranteed.

Offer Free Shipping, Increase Conversions, Easy as that.

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