Free Shipping vs. Paid Shipping

Does it make a difference?

Free shipping can significantly impact your business, and some version of discounted shipping is now the norm with popular ecommerce brands. With more and more brands offering free shipping as a part of their strategy, it has become an expectation for customers to receive free shipping when they shop online.

Here are two reasons why free shipping MIGHT be correct for you.

1. Free shipping may increase sales and your bottom-line revenue

People love free shipping. Knowing this, we can assume that with everything else being equal, if you are selling similar products as your competitors and you don't offer free shipping. Your competitors do. I'm sure we know who the online shopper will choose.

The only time online shoppers will pay for shipping is for the speed of delivery. Some people want fast shipping and are willing to pay for it, but other than that, free shipping will always win.

It's a no-brainer as to why free shipping can increase conversions and sales. But if you want more reliable statistics on how free shipping has helped other businesses increase sales and revenue, check out some of these studies.

Retailers who offered free shipping saw a 10% increase in revenue. — Stitch Labs

2 Big Feet reported that offering free shipping increased site conversions by 50% — Site Point

Another case study claimed that a free shipping offer had increased ecommerce orders by 90% — Red Door Interactive

2. Free shipping can boost average order value

One of the most effective ways to leverage free shipping is by offering a threshold which customers have to reach before they qualify to receive free shipping.

Example: Orders over $50 will receive free shipping.

There is a psychological aspect to this; people want to take advantage of the offer and are willing to purchase more items to qualify for the free shipping.

A study in 2015 from comScore and UPS concluded that 52% of American shoppers purchased more than they intended to qualify for free shipping.

How to control free shipping costs

If you're a company that competes on margins and every dollar counts, here are some ways to control your shipping costs and offer free shipping without breaking the bank.

• Use fulfillment services — Using fulfillment services could potentially shorten the distance packages need to travel, reducing the cost of shipping, even after you include fulfillment fees. It will be up to you to determine if this is a viable option for your business.
• Create Shipping rules per location — Another method you could use is offering free shipping for places near your warehouse and then providing a minimum purchase amount to qualify for free shipping locations further away from your business. This way, you can still offer free shipping to all of your customers, but different rules apply based on location.  

Free shipping problems are in your head

Many ecommerce websites have no problem offering 20—30% off coupons or paying $5 per click on their advertising campaigns. Still, they are not willing to provide free shipping to their customers because it's just an extra cost to the business.

My suggestions are to test things out, see how offering free shipping can affect your business, and if things work out, great and if they don't, go back to doing what you were doing before. You will never know unless you test things out.

Who knows, you might be the next success story who increased site conversion by 50% and average order value by 15% by offering free shipping.

Editor's note: This article was originally published on October 31. 2016. It has been updated for freshness, accuracy and comprehensiveness.