E-commerce is fiercely competitive, with online retailers regularly slashing profit margins in an attempt to stay one step ahead of the competition. But what if you didn’t have to resort to lowering your profit margins to increase sales in your e-commerce store? Surely there are better ways to keep customers happy?
Countless studies have shown that offering free delivery attracts customers and boosts sales. So, could your business increase sales by dropping delivery charges? In this blog post we’ll discuss a few of the pros and cons associated with this sought-after service. Keep reading to find out more.
Did you know?
• Customers prefer free deliveries to money-off discounts. Analysis by RetentionScience.com of 100 million online transactions revealed that free delivery offers are 2X as effective as money-off offers.
• According to a study by Deloitte, 20% of online shoppers say that free delivery is the number one reason to shop with a retailer.
• Unexpected costs are the number one reason for abandoned carts. Research by Worldpay revealed that 56% of those surveyed had left sites without paying because of unexpected costs.
It’s important to be aware that offering free delivery is not always worthwhile – your business could actually risk losing money. If you’re thinking of offering free delivery you’ll need to decide whether you can actually afford to support the service in the long-term and consider whether or not your business will benefit from it. This information lies in your product profit margins.
Profit margins
Deciding whether or not to offer free delivery requires a lot of number crunching. Would offering free delivery eat in to your profit margin, or do you make enough money to cover delivery charges and still make a profit? Take a close look at the profit margins for all of your products and find out how many, if any, would sell at a loss with free delivery taken into account. If a few of your products have low profit margins, do others have a high enough profit margin to absorb the losses?
Do: Promote free delivery with a marketing campaign if you have the budget.
Don’t: Risk free delivery if you think it’s unsustainable in the long term.
Getting started
If you’re thinking of giving free delivery a shot, you should consider setting a minimum order value. This would mean that customers would only qualify for free delivery once they hit a certain target, and ensure the cost of delivery is worthwhile for your business.
Tip: Many e-commerce platforms, including Magento, offer modules that make implementing free delivery a doddle.
Pros and cons of offering free delivery
Pros…
• Free delivery makes your site more attractive to customers and improves conversion rates.
• People will be more likely to purchase smaller items when delivery is free.
• Happy customers are loyal customers.
• Free delivery and minimum order values encourage larger orders.
Cons…
• Eats into profit margins.
• May not be profitable for your business, especially if profit margins are low across your entire range.
• Isn’t suitable for every retailer.
• Once you’ve offered it, taking it away could alienate customers.
Conclusion
Offering free delivery is a great way to increase sales and ensure your customers feel looked after. With the right planning, free deliveries could put your e-commerce business on the path to a brighter, busier future.
If you’d like to find out how to implement free delivery from you e-commerce store, Fluid Digital can help. Our award-winning team specialise in Magento services, so whether you’re looking for digital marketing, web design or a helping hand with Magento e-commerce – we’ve got the knowledge your business needs to thrive. Get in touch with the team today on 0161-762-4920, or complete a contact form and we’ll be in touch soon.
