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Utilising Free Shopify Shipping Rates
We’ve broken down the free shipping strategy in regards to how and when free Shopify shipping rates should be utilised to increase sales conversions.
Written by Madeleine
Free Shopify Shipping Rates 📦
While it may not be a primary thought for the merchants who are consistently rushed off of their feet, shipping is one of the biggest considerations that customers will make when shopping for goods online.
"How much is shipping?" and "When will my order arrive?" are make-or-break questions that will determine whether a buyer decides to take the plunge and make a purchase from a particular business.
In 2021, customers expect free shipping to be offered, along with super-fast delivery and a recent report conducted by McKinsey states that more than 90% of US consumers expect a two- to three-day delivery to be the baseline of the delivery services offered and 30% of consumers would expect their orders to be delivered on the very same day of purchase.
Additionally, according to the 2021 Consumer Trends Report, 80% of consumers expect free shipping when spending a certain amount online, whilst 66% of consumers would expect free shipping for all online orders placed. In short, if free delivery is not offered for these consumers are happy to walk away without making a single purchase.
Shipping fees are frequently named as one of the main reasons why online shoppers abandon their carts with the average abandonment rate standing at 69.8%.
With these numbers in mind, we’ve broken down the strategy in regards to how and when free Shopify shipping rates should be utilised to increase sales conversions.
When Should Merchants Offer Free Shopify Shipping Rates?
The first thing that we need to make clear is that nothing is ever free - shipping rates included and for a store to be able to offer free shipping sitewide, merchants will either need to pay out of their margins or increase the cost of their products. If this is done right, absorbing shipping costs can have a huge pay-off for the businesses at hand.
Of course, not all stores on the platform choose to offer free Shopify shipping rates for their customers. Besides, this offering may not be an option for all brands depending on the company and their current profit margin.
However, just because some establishments can’t afford to hold up that free shipping tent for 365 days in the year, this doesn’t mean that the very same brands cannot make use of free Shopify UK shipping, US shipping or even international shipping as a tactic some of the time.
Instead, free Shopify shipping rates can be used as a strategy to push specific items, offload extra inventory and increase a brand’s average order value (AOV) during seasonal sale events and peak shopping holidays during the year.
Below is a list of how many merchants on Shopify are utilising free shipping conditionally or promotionally to benefit their business and its customers:
With a minimum order value.
As a one-time promo code to gain new newsletter subscribers and customers.
Exclusively during peak sales periods like Black Friday and Cyber Monday, Christmas, or Mother’s Day as a promotion or an alternate offering to discounts.
On select products or combinations of products only to help clear extra inventory or one-off items.
If a brand’s customers are already in buying mode, merchants should be thanking their lucky stars as we’re pretty sure that free Shopify shipping rates would make the deal a hard one for consumers to resist. See, free shipping makes it easier for the customer to rationalise with themselves about proceeding with a purchase.
Equally, if a free shipping threshold is established, customers are more likely to spend more so that they are eligible for this perk as opposed to being content with their intended purchases and paying for delivery on top. It is thought that 48% of consumers will add extra items to their carts just to qualify for free shipping according to a post published by Goshippo.
This confirms our thinking on this matter, but where does the free Shopify shipping rate threshold come into play?
The Free Shopify Shipping Rate Threshold
For the retailers who have decided to offer free shipping on their Shopify store, there are several ways to go about calculating the threshold that’s right for a business. To get started, one important metric to consider is the brand’s average order value (AOV).
For instance, let’s say that a business has received orders for the following amounts of $86, $112, $71, $65 and $105. If these values are added together and divided by the total number of transactions that there are, this will reveal an average order value. In this case, the value would be $87.90.
Retailers could also use the median order value (MOV) to calculate their brand’s free-shipping threshold. The median is the midpoint in a set of values that has an equal number above and below. In other words, the median order value means that half of a company's orders will be above the median value whilst the other half will be below the median value.
Going with the order example above, ranking these orders from lowest to highest, the retailer would have a MOV of $86, which is right in the middle of the number sequence. The MOV has an advantage over the AOV in some cases, especially when the average order value becomes skewed due to outlier orders that are either super high or super low.
However, 80% of consumers expect free shipping when ordering a certain amount of products in dollars. So, in this particular example, we’d suggest that the merchant should offer free shipping on all orders over $100. This would then give the brand’s customers a gentle nudge to reach an attainable free shipping threshold whilst increasing the store’s sales conversion and average order value.
Ideally, a free shipping threshold should be set just high enough above a MOV or AOV that it encourages customers to add one or two extra items into their shopping basket before they hit the checkout, otherwise the system will simply not be effective.
As you may have figured, there will be other free shipping threshold considerations for merchants to factor into their equations and they will look a little something like this:
Standard Shipping Costs: Average shipping costs can be affected by several factors such as the; shipping box size, whether you’re shipping domestically or internationally and the weight of the products that are being shipped. To move forward, retailers will need to determine what they’re going to charge their customers, whilst considering what shipping carriers are charging their business.
Additional Fees: Any other fees that an ecommerce store pays on transactions, such as; customs duties or credit card fees will also need to be considered here.
Profit Margins: The cost of products, packaging and a brand’s profit margin is another consideration that will need to be made, but the question is - how much of a hit would your brand be willing to take to its overall profit?
Average Order Value: Keep in mind that there may be outliers such as extremely high or extremely low-price SKUs that can distort the value of an average cart.
If you’re thinking of experimenting with free Shopify UK shipping, US shipping or free rates no matter where your business is located, we would recommend testing out several different thresholds above an AOV or MOV to find the minimum order number that performs the best for your business.
From our experience, we’ve found that there’s no silver bullet when it comes to conversions, as factors such as; price, image quality and product innovation will all influence customer behaviour differently, but with this approach and preparation to do a little tweaking, we know that more brands will have the potential to hit the jackpot when it comes to turning over increased sales by utilising free Shopify shipping rates.
Note:For the best results, we’d suggest embedding the free shipping threshold throughout a store's customer experience, including not-so-subtle reminders at the checkout. This strategy will coax further shoppers to add more items to their shopping cart so that they qualify for the free shipping service.
Competitive Shipping Rates
When free shipping is offered, reducing the cost of each shipment is one way to make fees more sustainable. Delivery costs, including holiday surcharges, have been rising across the US throughout the pandemic and these charges are now expected to be the new norm.
To be able to effectively minimise shipping costs, we’d suggest doing a little research on the available shipping options within your brand's location to see if there are any ways to save money by providing lower rates than retail pricing.
Note:If you’re selling in the US, Canada, or Australia, Shopify Shipping offers discounted delivery carrier rates. So, there’s a little food for thought and it’s a good place to start your investigation into the available offerings.
Local Delivery and Local Pickup
If your business simply cannot offer free shipping on an ongoing basis, why not consider adding local delivery or curbside pickup as an offering? Data from Shopify indicates that online shoppers will spend around 23% more money whilst having a 25% higher cart size when local pickup and delivery are offered.
On a local scale, customers will actively look to support their local businesses to sustain the community and economy. Customers are also interested in local shipping and curbside pickup options due to their enticing advantages.
For ecommerce retailers, the unfortunate reality caused by the pandemic are shipping delays and naturally, customers will want to avoid this. Local delivery and pickup services can offer price and delivery speed advantages over shipping, so it might be worth implementing this into your business strategy.
Additionally, local delivery also offers a way for merchants to create a personalised brand experience. Customers who shop locally are looking for that personal touch, but because this can't be provided in-store, local delivery is a great way to offer this to your customers.
Merchants can leverage this to connect with existing customers and attract new ones. For instance, why not include a personalised packaging insert to thank buyers for their purchase. Equally, a personalised message within their delivery notification will also do the trick.
Note:To set up local delivery or local pickup in your Shopify store’s Shipping and Delivery settings, log in to your Shopify account to view the store’s admin.
Close To Customer Inventory
Over time, a brand’s order data will show patterns of what customers are buying, where they’re based and how much they’re spending on average. This information is crucial for businesses when it comes to deciding whether they’d like their store to ship products from multiple locations or outsource its fulfilment to a warehousing network.
By storing a brand’s products close to customers, merchants can reduce carrier costs and offer standard free Shopify shipping rates with faster shipping speeds to their reach.
However, by relocating an inventory, ecommerce stores will incur new storage costs that will impact profit margins, but by speaking to a third-party logistics provider, businesses will be able to better understand the exact costs that they’d incur by outsourcing the pick, pack and shipping process.
As order volumes increase, many merchants can begin to consider the ways that they can outsource the pains of shipping to remain focused on scaling their business. The next big step of outsourcing order fulfilment and offering free shipping requires looking at margins and better understanding how consistent fulfilment will impact checkout conversion rates.
If you’re selling in the US or Canada, the Shopify Fulfillment Network offers fast order fulfilment for scaling DTC brands.
Revisiting Shopify Shipping Rates and Policies
We just have one question - how are you planning to keep up with customers’ rising shipping expectations? Businesses may have to play around with different free shipping thresholds and options to see which one will lead to the highest profit margins.
However, it should be remembered that this sweet spot threshold is not a set and forget number so, a strategy will need to evolve as an ecommerce business grows.
Note:Remember to revisit shipping policies at key selling periods and growth milestones to maintain an efficient conversion strategy.
Have you found today’s guide on utilising free Shopify shipping rates useful? Reach out and let us know. If you’re actively looking to work with a Shopify agency designer or developer to assist you with your business, we’d love to hear from you. Get in touch to get started!
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