How To Make Free Shipping Profitable

Customers are more likely to buy a product if it bears zero delivery charges. So, many brands are offering this facility to increase their conversion rates.

But have you ever wondered about the loss incurred in free delivery? Yes, there are ways to minimise this loss and compensate profit through greater sales. In this article, we will analyse 4 steps to curb loss in free shipping and make it profitable.

So, here are the efficient 4 steps-

1. Do regular tests- Analyse where you are getting larger profit- with or without delivery charges.
2. Set limits- Give free delivery only when the customer exceeds a fixed order value. And test your profit.
3. Restrict- Don’t sell away all the products with free shipping. Restrict this alluring offer to some selected products only. And check the profit margin.
4. Increase product pricing- When you are excluding the delivery charges, you can add it to your product prices. So, your loss is compensated.

Now, we are going to analyse all these steps one by one. Stay with us to witness the practical examples where brands boosted their profit by 30%!

Free Shipping pros and cons

Many brands witnessed a huge increment in their conversions because of free shipping. You will find a lots of case studies on internet. Here are some of the data-

• Red Door- Number of orders grew by 90%.
• 2 Big Feet- Orders increased by 50%
• Comscore- Boosted sales by 16%

These brands succeeded by monitoring their strategy through tests. But some companies have failed terribly as well. They incurred a large loss in their profit margin and stopped the free delivery completely.

Be like the first group of marketers and not like the second one. Here are the ways to reap maximum profit.

Setting up the tests

You will be doing the tests in the A/B testing format. They can done for two metrics- lifetime value or net profit.

In this context, checking the net profit per purchase is the ideal option. It can be tough because you will be tracking every single products bought by each visitor.

Again, there are two ways to perform this A/B testing. You can do a spilt URL test where you will compare two different site versions.

Or you can program CSS to do the comparison on the same sales page. The demerit here is that you change the price in the front end and not in the back end. So, the customers might get annoyed. So, the first process of 2 sites is more ideal.

Do regular tests-

Before jumping into the free delivery strategy, spend some time in testing. You will know whether you will make a satisfactory profit or not. And if the test results are not impressive, you can abandon the plan.

So, create two site versions to start the A/B test. The second site will be your test site. Here you will make a small change. You will just add the free shipping facility beside the original header.

Now, track the metrics of each site. As per our research, most of the brands encounter a boost in conversion rates by some fantastic 30%. At the same time, their net profit per margin drops down by 30% as well. But if our first priority is surging the conversion rates, we must go on.

The next steps are based on how to compensate for this 30% loss in profit. Keep reading.

Set limits-

You can impressively get your losses back by setting limits or thresholds. By threshold we mean something like this- Free Shipping for orders above $100. $100 is your threshold. You can test your profit margin by increasing this value to some extent. Here there will be two test headers for two sites. One with threshold $125 and other with $150. What we noticed was people placed more orders in the $125 threshold. And it too had a good impact on profit increase.

This means that customers flee away if your threshold value is too high. So, when you are increasing it, look for the research data. The fix a threshold that is not too low or not too much.

Using this tactic, you can improve the net profit per visitor to 15%.

Restrict-

Here you will be restricting the free delivery option to some selected products. The products which have actually low shipping expenses like shoes. For testing you have to change the description on header to ‘for shoes only’. Also, you have to change the coding of cart system to provide offer on shoes only.

According the data, you will earn a net increase of  2% only. That doesn’t sound great but can be actually productive.

The tactics is best when you are delivering a product which has really low shipping cost. For example, if you are a fashion brand where mostly sold products are shoes. Here you can expect a great profit because most of the visitors would place orders.

Increase Product Pricing –

This is the last option left which is worth of testing out. But, this may require a lot of coding.

On one site, there will be original product pricing plus delivery charges. And on the test site, increase the prices by 10% and offer free delivery. Now compare the day obtained.

You will see that on the second site, conversion rates dropped a bit but the average order value shoot up. At the end we got, 26% increment in overall profit.

It prove that this tactic is best to curb free shipping loss.

If you are a unique shop with a less competitive niche background, you will earn rich from this tactic. But if you have tough competition in your niche, your improvements would be meagre. Try free shipping if none of your competitors are offering it.

So, these were the 4 cost saving tricks for business. By applying these, you will be optimising your free delivery system to another level. You will pay a price but at the end you would get profits worth it. These 4 tests will be your saviour. So, hurry up and implement these techniques to reap more!