What Does 'Free Shipping' Really Mean for Retailers?


Free shipping? Smaller ecommerce companies, in particular, need to plan strategically in order to make this feature pay off for both their customers and themselves.

Related: Free Shipping: 7 Ways It Can Hook Your Customers

But of course there’s always a caveat. You’ve heard the old saying, “There’s no such thing as a free lunch,” and you’ve probably realized by now that “lunch” can mean just about anything.

When it comes to ecommerce retailers, there may as well be no such thing as free shipping: Carriers won’t work for free, after all, so someone has to foot the bill, be it the customer or the retailer.

In fact, major carriers are raising their fees. In January, the U.S. Postal Service announced that rates for priority mail packages would rise by an average of 9.8 percent, and priority mail express prices, by 14.4 percent. The Postal Service is just the latest member of an inflationary fraternity that includes UPS and FedEx, each of which has increased its rate by an average  4.9 percent this year.

Consumers, meanwhile, generally understand that there is a cost of admission for free shipping, usually in the form of a minimum-order requirement. However, what’s often overlooked is the damaging effect free shipping can have on smaller retailers. Retail behemoths such as Walmart and Amazon operate at such a scale that they can absorb sharp increases in shipping costs. But the same is not true for smaller operations that need to keep a closer eye on their profit margins.

“Free” is not a four-letter word.

That’s not to say that any retailer on a smaller scale than Amazon should ditch free shipping. Free shipping still offers benefits for retailers of all sizes. For one thing, customers clearly care about this perk. According to Walker Sands’ 2016 Future of Retail study, 9 out of 10 respondents ranked free shipping as their top incentive for shopping online.

Retailers also have plenty of reason to love free shipping. Shoppers will spend more money on your products, and the lure of free shipping will lead to higher conversion rates.

For the average retailer, however, it’s important it to think strategically about how and when free shipping pays. Here are a few tips to put in action when formulating your own free-shipping strategy.

1. Be picky about packaging.

When shipping packages, it’s the outside that matters most. Do judge a book by its cardboard shipping cover. A universe of packaging options exist for your products, but certain options will save you money. For instance, soft goods should go in a poly mailer, not a box. It’s cheaper to ship and doesn’t risk damaging the product.

Online couch retailer Burrow took this concept to a new level when it engineered its sofas for shipping. It took Ikea’s idea for flat-pack design and applied it to a couch. Now, if buyers order a Burrow couch, it comes in two to five boxes — each with its own built-in handle. The sofa pieces come off the boxes, and, just as if they were dealing with an upholstered 3D puzzle, all that customers have to do is fit the pieces together and lock them into place.

Related: 3 Ways to Be More Savvy About Free Shipping

2. Hunt for deals.

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