Free shipping versus not - Any definitive studies or resources?

by ryanjm
6 replies
  • ECOMMERCE
  • |
Hi all, just wondering if there are any good websites or studies that people have done out there to compare customers' preferences between free shipping and paying for shipping?

My issue is that our ecomm store is setup to have accurate shipping quotes for whatever someone orders, and many of our orders have to go Freight because they are very heavy. I've noticed that some of my competitors are doing free shipping on many things (some do it on everything). The issue I see though is that with our business, many people are buying multiple heavy items, and if I had to make every item free shipping, they would end up paying a lot more in the long run if they ordered multiple items versus just paying the actual shipping cost. Here is an example:

Without Free Shipping:

Item A: 200 lbs, $100
Item B: 300 lbs, $150
Shipping cost: $170
Total: $420

With Free Shipping:
Item A: 200 lbs, $200
Item B: 300 lbs, $250
Shipping: $0
Total: $450

When calculating "free shipping" I have to build in the shipping cost and assume worst case of someone buying just one thing and shipping it far from us. Now, if the free shipping thing is something that people like because it avoids sticker shock, then great, it makes more money for us because if people buy multiple items then our profit skyrockets. But it basically comes down to: Are people so attached to free shipping that they ignore total cost? Our prices will crush our competitors when people buy multiple items. I just don't know if they have the attention span to notice this, or if they just think they're getting a sweet deal and then when they see the shipping cost they puke and totally ignore the total cost?

Anyway, I know we could run our own tests but this is not just an e-comm store and with the size and scope of our operation this wouldn't be an easy thing to do. I'm more interested in seeing whether someone has already done a study like this and would appreciate any insights. Thanks.
#definitive #free #resources #shipping #studies #versus
  • Let me as you a hard question:

    What is the difference between 90 dollars plus 10 dollars shipping versus 100 dollars and free shipping?

    Exactly.


    You're asking the wrong question - or, really, taking the wrong approach.

    What you need to know is the market worth of your items - or, really, what people are willing to pay - in total - for your items and then take the deductions from there - including shipping.

    If you're able to make a profit from there, then you have a profitable item.

    If not, then you don't sell the item.

    Free shipping always has a higher conversion rate because the price you're selling it for HAS to be a fair market value. You cannot 'add' a shipping cost ABOVE a fair market value - otherwise people will not buy the item from that price.

    Instead of ADDING shipping to the price of the item - the price of the item COVERS shipping.

    You just need to research the total market WORTH of the item and then take the deductions from there.

    Hope that helps.

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    • Profile picture of the author bigd213
      I will second what Auctiondebteliminator said. We have been doing marketing tests of our software with over 100 clients over the past 3 years. We have found that customers go nuts when they get an offer for free shipping. We have even tested sending out a coupon like 25% off (with a value 2x what the shipping cost would be) and then split testing with a "Free shipping" coupon - guess who won? Free shipping wins every time!
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      • Profile picture of the author ryanjm
        Thanks for the responses guys. I guess our problem is that our shipping costs are HIGH because these are heavy items. Also, most people will buy several items because of the type of goods they are, when people buy they are generally buying multiple things. If we included free shipping on all of our stuff, people would end up paying hundreds more on purchases where they buy multiple items. I guess that's the tough part for us to get figured out.
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  • Profile picture of the author BKenn01
    I don't find the advantage to free shipping that others do. I have been selling on eBay since 2004 with 6400 feedback. I have tried both ways, recently I noticed most of the large sellers in my category charge shipping and that when you search for an item the one that shipping is charge often looks like the cheaper product because of the way it shows in search. I went from as an example selling an item for $39.99 with free shipping to charging $37.99 plus $2.99 shipping. People really appear bad at math because it does not slow the item down.

    I found this to be true across the board for me and really works well on lower price items. I actually come out ahead after paying FVF on the shipping charge. Plus i feel it discourages returns that are for buyers remorse.
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    • Profile picture of the author derekwong28
      It is extremely difficult to answer this and it may depend on the type of product and price.

      We used to sell PDA cases on eBay for $18 plus $5 shipping. Then some US eBayers complained directly to the manufacturer about us. We were forced to sell at $23 with free shipping. Our sales on Ebay halved as a result of this.
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      • Profile picture of the author BKenn01
        Originally Posted by derekwong28 View Post

        It is extremely difficult to answer this and it may depend on the type of product and price.

        We used to sell PDA cases on eBay for $18 plus $5 shipping. Then some US eBayers complained directly to the manufacturer about us. We were forced to sell at $23 with free shipping. Our sales on Ebay halved as a result of this.
        Wow talk about entitlement mentality, to complain to the manufacturer about the shipping costs.

        I have found that on ebay many times free shipping attracts bottom feeding customers. The ones that will send you unsolicited low ball offers on your already low price.
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