It’s no secret that offering free shipping to your customers can help increase your sales. But in order to offer free shipping, you have to be able to cover those costs. There are a few key metrics to pay attention to when establishing a free shipping strategy: your average order value, your margins, and your shipping costs.
Free Shipping: E-Commerce Strategies to Cover the Cost
The thing is, the most commonly used tactics to increase your average order value mean taking a bit of a hit on your margins. And in the case of offering free shipping, you’re playing in the same ballpark because you’ll be absorbing the shipping costs. So, what you need to do is pay close attention to how each tactic will impact your profit on an average order after you factor in the cost of shipping.
Don’t worry, though. There are ways to increase your average order value without taking a hit on your margins to cover the cost of shipping. You just have to be a little more strategic in the process.
Know your metrics
Before picking a strategy, there are a few things you need to know about your business.
- Average Order Value (AOV)
- Average shipping cost
- Weight & shipping costs for each product
- Weight & shipping cost of each bundle (We’ll cover the bundle strategy here in a minute.)
- Margin for each product
Ways to increase your average order value to offer free shipping:
Free Shipping Cut Off.
This is your easiest and most obvious option. In fact, you probably encounter this strategy on a daily basis. Ever visited a site that has a banner at the top saying something to the effect of: Free shipping on all orders over $75. That’s a free shipping cut off. It encourages the customer to increase the amount they’re buying at one time to avoid paying shipping costs.
In order to find a free shipping cut off, you’ll need to take those metrics mentioned above into consideration. It’s best to work backward here to determine what size order is necessary to allow you to comfortably offer free shipping and still make a profit.
2. Introduce related products.
This tactic suggests related products that your customer may also like based on which products they’ve placed in their cart. You can take advantage of this tactic with an app like Cross Sell.
3. Offer product bundles.
Instead of relying on your customers to piece together their own bundles, you can strategically partner up related products to improve your average order value. If you need a little help, grab the bundles app. All you have to do is add a few products that make sense together. From there you’ll be able to identify the total margin (after you’ve accounted for the shipping costs, of course) and price the bundle from there.
Keep in mind that bundles are often marketed with discounts to entice the customer to buy the products all together rather than individually. So just make sure the discounted rate still leaves you enough room to cover the shipping costs.
4. Encourage Gift Cards.
This method is a great way to improve your average order value while simultaneously decreasing your shipping costs. Use your gift cards as an upsell. These are especially great around gift-giving holidays. All you have to do is create a gift card in Shopify and then just add it as a product in your Cross Sell app!
Are you ready to get started with your own e-commerce business or to take your existing business to the next level? Get in touch!