Should You Offer Free Shipping?
79% of US consumers state that free shipping would increase their likelihood to shop online. (Walker Sands) Every customer loves free shipping, but that doesn’t mean every dropship business is able to or should offer it. Let’s explore when you should be offering free shipping and when you shouldn’t. This article will cover a few considerations to take into account before offering free shipping as well.
When you should offer free shipping
Your cost of goods makes it affordable
A bit of math will be necessary when trying to answer the question ‘ should I offer free shipping.’ Three things to consider are the cost of goods, advertising costs, and your retail price. The cost of goods entails the wholesale cost and shipping cost of the product itself. In the example below, your cost of goods would be $10.86 based on the $5.72 wholesale cost and the $5.14 domestic shipping cost. You could charge a customer the recommended $15 retail price and still maintain about a 40% profit margin with free shipping. Be careful though, as you’ll still need to leave room for acquisition costs if you promote this product through paid advertising.
Notice that with a $15.44 international shipping price, free shipping for this product alone would cause you to lose money if a customer from Canada or Japan decided to make a purchase. Increasing the price could alleviate this problem, but be sure to keep your selling price close to market value.
Your supplier offers free shipping
If your dropship supplier offers free shipping, you should extend the offer to your customers. Some view charging for shipping when you aren’t paying for shipping costs as unethical, but it can add additional profit to your sales.
Some suppliers on AnimalDrop will offer free shipping. Keep in mind that this may be restricted to domestic orders. Be sure to take note of what destinations are available for free shipping in the app.
You want to increase order volume
It’s no surprise that offering free shipping will give you a better chance of making sales and increasing order volume. Free shipping for every product may not be realistic for your business, so consider conditional free shipping instead. This will allow for a higher average order value (AOV).
Conditional free shipping is when a certain threshold must be met for free shipping. It can be the customer’s total cart value (Ex. free shipping for orders over $50) or based on products a customer adds to their cart (Ex. add product X and earn free shipping).
Free shipping combined with product quality and competitive retail pricing will provide the greatest chance to make sales and increase order volume. This is why AnimalDrop is a great dropshipping partner for new and established online retailers.
When you shouldn’t offer free shipping
You have low margins
Not all products available for dropshipping will offer insanely high profit margins. Dropshipping companies like Oberlo often advertise high product margins, but it often comes at the expense of product quality and fast shipping.
With low margin products, offering free shipping may not be sustainable when factoring all of the costs involved we covered earlier. Increasing the selling price of your products seems like a solution to this, but it could put your prices far above competitors and turn away potential customers.
Don’t worry. This is not a bad thing! While free shipping can be a great way to drive order volume, it is ultimately not a deal breaker for consumers if you have great branding and quality products. If competitors are offering free shipping for similar products, find different value propositions to entice customers visiting your store,
You’re planning to use it as a promotional tool
A big mistake many dropshippers make is offering free shipping year-round, then trying to use it as a promotional tool during the holidays or other peak seasons. When you always offer free shipping, you can’t advertise to customers ‘free shipping today only’ to persuade them to make a purchase.
When customers are accustomed to free shipping all year, you’ll need to find another way to entice them into buying your products. A buy one get one free sale or promotional discount can be powerful alternatives when marketing to customers.
You want to offer free returns as an alternative
You may notice that while many companies do not offer free shipping, many of them will offer free returns. This is an excellent alternative for dropshippers who may not be able to afford free shipping in their business model. Free returns are enticing to dropshippers due to the fact that returns will likely cost less than free shipping since the number of returns will be significantly lower than the number of orders,
Free returns is especially beneficial for stores selling clothing and fashion accessories. Many online shoppers fear purchasing clothing online due to the fact that they cannot actually try on what they’re purchasing before they pay for it. A free return policy will help put your customer’s mind at ease as they browse your store.
Take time to determine whether or not your business can afford to offer free shipping. It’s a powerful promotional tool when used correctly and can help drive order volume for new businesses. However, sustainability is what will determine how long your business can bring in a profit. Consider your cost of goods, cost of acquisition, and retail price when deciding whether or not to offer free shipping. Even if you decide not to, there are plenty of different ways to drive sales that are just as powerful!