The Pros and Cons of Free Shipping

If you're thinking about offering your customers free shipping and handling, think very carefully before making your final decision. Offering free shipping can be a good idea for certain businesses, but it really depends on the kind of products you're selling and how much you're charging for them. Typically, the best way to deal with shipping and handling fees is to charge just enough to break even on your costs. If you overcharge your customers, you'll scare them away. But if you charge too little, you'll end up running your business right into the ground. Some businesses think that by artificially inflating their shipping and handling costs, they can really boost their profits. But they're seriously mistaken: They might dupe some customers into paying the inflated costs, but they won't fool most people. And they're killing their chances of getting any positive word-of-mouth advertising or repeat business. The truth is, high shipping fees are traditionally one of the major reasons people decide against purchasing products online. Today's online consumers tend to be a lot savvier about the true costs of shipping and handling than some businesses might think. Most shoppers pay careful attention to these costs, and if they think they're being overcharged, they just won't buy. When trying to determine whether or not to offer free shipping, consider your products carefully. Ask yourself these questions:

How much are you charging for them?

What kind of profit margins do they yield?

How big and bulky are they?

Most importantly, how much do they weigh?

If your business sells lightweight products whose shipping and handling costs are relatively low, then it might be a good idea to offer free shipping and handling?provided that the markup on the products is large enough for you to be able to absorb the shipping costs without losing too much of your profits. For example, say you sell custom-designed jewelry at a relatively high profit margin. Your shipping and handling fees probably aren't very high, so you can absorb them into the price of the product without doing too much damage to your bottom line. If, on the other hand, you sell something that's heavy and awkward to ship, such as bark mulch, your shipping and handling fees are going to be significantly higher. If you have an enormous markup on your products, you may still be able to absorb the shipping and handling fees into the products' price. But it would probably make more sense to charge separately for shipping and handling so that customers can see exactly how much they're paying for the product. Customers generally appreciate being told exactly how much they're paying for all the goods and services they receive when purchasing something online. When you keep the shipping and handling costs separate, they can see you're not overcharging them for these services. This also allows you to highlight the true price of the product you're selling, which is especially effective if one of your marketing strategies is to offer incredibly low prices for the products you sell. For example, consider Amazon.com. They've always kept their shipping and handling fees separate from the costs of the products they sell because this allows them to emphasize their low prices. Offering a CD for $9.98 (plus shipping and handling) has proven to be far more effective than offering that same CD for $14.98 (with free shipping and handling). Customers are paying the same price for the CD with each of these pricing strategies, but they really like the idea of buying a CD that costs less than $10. One of the major benefits of keeping your shipping and handling fees separate from the price of your product is that you can offer different delivery options to your customers. This can be a great selling tool. Customers buy products for different reasons. Some don't mind waiting a few weeks until they receive their products. Others want them yesterday! If you offer a range of shipping options, you allow them to choose what delivery method works best for them. Generally, it's a good idea to offer regular surface delivery as well as express delivery (shipping that takes just 2 to 3 days) and overnight delivery. If you do choose to offer free shipping and handling, don't forget that not all shipping and handling costs are the same! Even if you offer only one shipping option to your customers, costs will vary greatly depending on how far you're shipping the item. If you end up sending your products across the country or to a different continent, your shipping costs will add up quickly and your profit margin will be lost. Be sure you understand just who your target market is and where the majority of your customers are having their orders shipped before you make any rash decisions. Also be sure not to over-inflate the cost of your products to compensate for the absorbed shipping and handling fees. Your prices have to remain competitive if you don't want to lose customers to someone who's offering better deals. Also, customers might correctly guess that you've just folded the shipping and handling costs into the price of the product, which might make them feel like they're being manipulated. And customers that don't trust you won't buy your products. Finally, if you're considering offering free shipping but will have to raise the price of your product to do so, be sure to test both options! Does your market respond better to the lower price point, with shipping factored in separately, or do they find the offer of "free shipping" more appealing? If you let your customers tell you which pricing structure they prefer, you won't go wrong.