Why charging for shipping hurts revenue (instead of helping)

One of the biggest myths in the e-commerce world is free shipping results in less money in your pocket.

But in reality that is a shortcut to thinking.

And here’s why.

Shipping costs are easily the #1 reason why online shoppers abandon their carts. According to Commerce Hub, over 60% of users view shipping costs as a major hurdle to closing the deal.

Consumers are now used to free shipping, and have come to expect it.

And statistics suggest the total value of lost sales due to abandoned carts is over 3.5x the revenues retailers make online.

Yes 3.5 times.

The point being… there’s a lot more money left on the table from abandoned carts, than there is in carts that convert.

So rather than focusing on saving a few dollars on shipping, it makes a lot more sense to reduce friction to buying as much as possible.

Still not convinced?

Okay, then how about these added benefits in favour of free shipping:

  1. It increases gross merchandise value
  2. It increases order volume
  3. It increases average order value
  4. Greater customer satisfaction
  5. Higher profitability in the long run from increases in the life time value of a customer

But wait, theres’ more…

To make the concept of free shipping even more attractive, consider this:

A ComScore study resulted in 83% of shoppers indicating they were willing to wait an extra two days (over the regular delivery promise) so they could avoid paying for shipping.

Therefore, you can ship items via the cheapest possible shipping option, and still capture the sale.

But if you don’t want to do that, there are other ways of getting around the free shipping conundrum.

The most obvious way is to increase your prices by a small percentage to offset the extra charges.

You can also set minimum order amounts to qualify for free shipping. This is a great way to increase your average order value.

So there you go!

At the very least you should try some of these suggestions to see what works best for your business.

Either that or continue to put people off by charging for shipping.

Your choice.

For more kick-ass valuable ecommerce tips like this, you can book in for free website audit with myself. I guarantee it’ll be an eye opener and show you where your website is likely to be leaking money. Here’s where to go: