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Pros and Cons of Offering Free Shipping

By Matthew King | Management and Operations

Oct 09
Pros and Cons of Offering Free Shipping

Free shipping has quickly become the norm within e-commerce. There was a time when shipping was accepted as something the customer had to pay, but with innovations in technology, such as tracking abilities and mass production, that quickly changed. However, free shipping for a small business that is already on a strict budget can do more harm than good. On the other hand, not offering free shipping may encourage some shoppers to purchase from your competitors. Keep reading to find out the pros and cons of offering free shipping and what they mean to your company. 

PRO: Puts You Ahead of Your Competitors

Free shipping — or rather, Amazon Prime — is what helped send Amazon to the top. While the larger, more established companies that existed when Amazon first appeared were still charging for shipping, Amazon quickly got ahead of the pack by offering free shipping. Today, a free shipping option is practically expected by consumers, so consumers will seek the company that offers to cover that charge, and that can be you. By offering free shipping, you are placing yourself ahead of the competition. If they have the product customers want and offer free shipping, there is no need for them to shop around with your competitors. 

CON: You Absorb the Cost

As a small business, every penny counts. Therefore, when you not only have to pay for the manufacturing or supply of your product but also the shipping, it can hit your profit margin pretty hard. If you’re selling small items, such as clothing or books, cheap shipping alternatives are pretty natural to come by, but any larger products will cost you. A fledgling company cannot take any financial hit to their records, which is a big reason that many are still hesitant to offer free shipping. The experiment of absorbing the cost of shipping can be a gamble on the life of your business.  

PRO: Larger Cart Volume

When consumers are shopping around your website, they tend to keep an eye on their cart, not for their products but the cost of shipping. Customers understand that a larger number of products in an order could mean that they’ll pay more for shipping. However, data has shown that if the shipping cost is not a factor, people will continue to add more items to their cart than they previously planned to. This psychology provides companies with a higher rate of return when they offer free shipping.  

CON: Slower Delivery

Offering free shipping does come with more than just the cost of covering the fee; it also comes with slower delivery times. Another trend that consumers have begun to get accustomed to is the two-day delivery benefit. This may work for a multibillion-dollar company like Amazon, but it will definitely hurt a small business. So, if you decide to go the route of free shipping, make it a priority to communicate with your customers that free shipping will take longer.

 

References:

4 Ways to Pay Your QVC Credit Card | GOBankingRates. https://www.gobankingrates.com/credit-cards/retail/pay-qvc-credit-card-payment/

DnD Shopkeep [1.0] – Inventory Management, Weight Tracking …. https://www.reddit.com/r/DnD/comments/5dg1kb/dnd_shopkeep_10_inventory_management_weight/

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About the Author

Matthew King is the owner of the Startup Forums, Alkries LLC, and co-owner at TR King Insurance Marketing. Partner at Independent Life Insurance Agent Association, Medicare Training 101, and Final Expense 101. When he's not creating content about running successful businesses here. He's most likely developing processes, diving into SEO, or gaming with his friends and wife.

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