How to Make Free Shipping Profitable | Radial

How to Make Free Shipping Profitable

Insights

Cover image: 
Description: 

Customers love free shipping. So much so, in fact, that 58% of customers will actually abandon their shopping carts due to shipping costs. But for retail and eCommerce businesses, “free shipping” can seem devastating to the bottom line. After all, it’s the business that has to pay the shipping bill, if customers don’t.  

So how do you turn a profit if you offer free shipping? We’ll show you in this post.  

Set a Minimum Order Value 

One mistake business can make when they start offering “free shipping” is allowing customers to access free shipping for all order sizes. The reason this is a problem is that the smaller the order, the smaller your profit margin after paying shipping costs.  

However, it is relatively easy to remedy. All you have to do is set a minimum order limit that allows you to maintain a healthy profit margin, even while offering free shipping. For instance, you might choose to offer free shipping for all orders over $25. That way your customers can mix and match items freely and have them shipped in the same box. And the shipping fee for the order is applied to a much higher order price, eliminating the likelihood of you breaking even or being in the red after paying for the shipping costs.  

Trade Shipping Time for Cost 

Often, we assume customers are unyielding in their desire to have both fast and free shipping. But that actually isn’t always true. In many cases, customers are willing to wait long periods of time, if it means they won’t have to pay the shipping costs.  

For retail and eCommerce businesses, that means ground carriers like USPS are on the table, which is much more affordable for businesses of all sizes.  

Use Ship-to-Store Fulfillment 

While retailers generally ship products directly to customers, that’s not the only way to get a product from your inventory to a customer’s home. In fact, there are quite a few alternative shipping methods that businesses can use to cut costs on order shipments. One of those methods is the “ship-to-store” approach.  

With ship-to-store fulfillment, you can simply pack and ship customer orders to stores and your customers can pick up their orders directly from the nearest location, eliminating the cost of last-mile shipping and specialized carrier service. As with other methods, though, ship-to-store is most cost-effective when inventory is spread across all warehouses and storefronts.  

Tap Into Ship-From-Store Fulfillment 

Like “ship-to-store” fulfillment, “ship-from-store” fulfillment is designed to reduce your shipping costs dramatically by allowing you to ship products at shorter distances. Rather than picking, packing, and shipping orders from a warehouse hundreds of miles away to your customers’ doorsteps, you can pull products from your nearest store’s inventory and focus on the last-mile stage of delivery.  

This method of ship-from-store fulfillment also enables you to access inventory that might otherwise sit in boxes in the back of your stores, which lowers the risk of large amounts of overstock and clearance items at the end of the season. 

While it’s completely normal to be intimidated by the concept of “free shipping,” it’s not impossible to turn a profit if you offer it. By utilizing alternative fulfillment methods, using ground carriers, and setting limits on your order value, you can quite easily maintain a healthy profit margin.  

Latest Content