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Can Your Business Afford to Offer Free Shipping?

Can Your Business Afford to Offer Free Shipping?

After more than a decade with Amazon Prime, online shoppers have gotten used to receiving their purchases in a matter of days for free.

Not every e-commerce business has to be Amazon, but small businesses may want to use free shipping as a tool to drive sales without wrecking their bottom lines.

Remember, “shipping isn’t free,” says Danielle Malconian, CEO of clothing line Vikki Vi and online store Plus by Design. “It’s included in the price.”

Here’s how your business can make free shipping work — and how to tell customers if you decide to charge for shipping after all.

1. Track your costs

Shipping costs can be hard to predict. Prices vary by package size and weight, how far each parcel is traveling and how fast it needs to get there.

“If you have light, expensive items, that’s where you’re going to be able to offer free shipping because you’re going to have it in the margin,” Malconian says. “It gets much harder when you’re either shipping inexpensive items or you’re shipping heavy items or large [items], because those prices are really, really high.”

You can use accounting software or inventory software to track your shipping expenses over time and develop an understanding of your business’s unique costs.

2. Set a free-shipping threshold

Once you have a sense of how much shipping costs, you can use free shipping as a marketing tool to increase sales.

Grace+Love Candle Co., a candle and fragrance company based in Virginia, started by offering free shipping for orders over $50. But after looking more closely at shipping costs, founder Jamahl Grace says he decided to raise the threshold to $75.

“That’s a very, very comfortable spot for us to not feel like we’re losing too much money,” Grace says. “Being able to stay on top of our analytics and our books is important to us to really be able to optimize the customer experience, really give them the best offers we can.”

Make your free-shipping threshold prominent on your e-commerce website and in customers’ carts, adds e-commerce expert Liz Kressel, CEO of Lizard Strategy. If customers are only a few dollars away from qualifying, they’re much likelier to spend a little more.

3. Find ways to save

There may be ways to reduce your shipping costs before passing them on to customers.

First, explore different shipping providers. Malconian suggests Priority Mail Flat Rate from the U.S. Postal Service, which charges a flat rate based on package size for goods weighing less than 70 pounds no matter how far they’re traveling. UPS publishes its small-business rates so you can ballpark costs in advance. And FedEx offers account holders discounts on a variety of other services, including office supplies and business insurance.

Second, right-size your packaging. Since shipping costs are usually based on both size and weight, make sure your most popular order quantities aren’t shipping in boxes that are too big.

“You can’t have just one size as if you’re shipping the exact same product [in] the exact same quantity every single time,” Grace says. “Understand the cost associated with shipping in those boxes and the weight, because then that’s where your efficiency comes into play.”

Third, Kressel suggests higher-volume sellers consider third-party fulfillment services. These companies negotiate bulk shipping contracts on behalf of lots of small sellers, getting cheaper rates than individual sellers could qualify for on their own.

Lastly, if you have a brick-and-mortar store, encourage customers to pick up their orders in person instead.

4. Adjust your prices

When Grace+Love’s costs increase, Grace says he absorbs what he can. But eventually, prices need to rise too.

“At the beginning of this year, we did a price increase after increased shipping costs and things of that nature,” Grace says. “As opposed to trying to inflate the cost of shipping, we just raised the cost of our candles to try and sort of offset that.”

And while it’s important to monitor your business’s performance closely, pricing isn’t an exact science.

“Pricing is so emotional,” Malconian says. “It just has to make sense for you, for your store.

“We have to be unapologetic about staying in business,” Malconian adds.

5. Consider charging — but communicate

If you’re losing money on shipping and can’t raise your prices any further, there’s one last option: Charge your customers.

“Customers are reasonable,” Kressel says. Shoppers typically don’t mind paying to ship heavy or bulky items, and they don’t usually expect free expedited or international shipping.

But don’t surprise them. Find out whether your e-commerce website builder offers a tool — often available as a third-party app — that can show customers an estimated shipping cost. Display rules like minimum order sizes prominently on your website and remind customers often.

Customers will decide to pay for shipping “as long as you give them the time to make that decision,” Kressel says. “The time to make that decision is not at checkout — that’s too late.”


Amazon raises free shipping minimum for some non-Prime members

New York CNN  — 

Amazon is raising its free shipping threshold for some customers.

To qualify for free shipping, non-Prime members typically have to purchase an order totaling at least $25. On Monday, the e-commerce giant said it has raised that minimum to $35.

“We continually evaluate our offerings and make adjustments based on those assessments,” Amazon spokesperson Kristina Pressentin told CNN. “We’re currently testing a $35 minimum for non-Prime customers to qualify for free shipping. Prime members continue to enjoy free delivery on over 300 million items, with tens of millions of items available for free Same or One-Day Delivery.”

Amazon says it has more than 200 million Prime members across 25 countries, and the shifting goalposts for free shipping could drive more consumers to pay the roughly $140 annual fee to join its Prime service.

The threshold testing is being carried out for regions based on zip codes, meaning that all customers in a given region will see the new policy applied to their orders.

The move comes after Amazon announced that its first Prime Day of 2023 on July 11 was “the single largest sales day in company history.”


Amazon increases its free shipping minimum to $35 for non-Prime members in some regions

Amazon is increasing its free shipping minimum to $35 for customers who don’t have a Prime membership in some regions, the company confirmed to TechCrunch on Monday. Up until now, the free shipping minimum was $25. Amazon says it’s testing the new free shipping threshold randomly by ZIP code-grouped regions and that everyone in the same region will see the same free shipping threshold. The news was first reported by CNBC.

“We continually evaluate our offerings and make adjustments based on those assessments,” an Amazon spokesperson told TechCrunch in an email. “We’re currently testing a $35 minimum for non-Prime customers to qualify for free shipping. Prime members continue to enjoy free delivery on over 300 million items, with tens of millions of items available for free Same or One-Day Delivery.”

The company is looking to push more customers toward it Prime offering with this new change. The change does not impact Prime members, who pay $139 annually or $15 per month for free shipping and other membership perks.

It’s worth noting that this isn’t the first time that Amazon has changed its free shipping threshold, as it increased the minimum to $49 from $35 back in 2016, and then brought it back to $35 in 2017. The company later dropped the price point to $25 to undercut Walmart, which has a $35 free shipping minimum for customers who aren’t subscribed to Walmart+. The new change brings Amazon in-line with Walmart’s offering.

By increasing the free shipping threshold, it seems that the company is attempting to cut costs, which is something Amazon has been looking to do across its business.

Amazon cut 27,000 jobs this year and froze corporate hiring. The company also started charging delivery fees for Fresh grocery orders that are less than $150, removing a perk that gave Prime members free delivery on orders over $35. In addition, Amazon ended AmazonSmile, which was a donation program that redirects 0.5% of the cost of all eligible products toward charities.

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