How to Offer Free Shipping on Shopify And Still Make Profit
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Offering free shipping on Shopify can boost sales and improve customer satisfaction, but it's essential to do so without sacrificing your profit margins. By strategically adjusting pricing, setting order minimums, and optimizing shipping processes, you can provide free shipping while still maintaining profitability. Here's how to implement free shipping and ensure it works for your business.
What is free shipping?
Free shipping is an attractive incentive that gives customers peace of mind when shopping. Knowing the exact cost upfront on the product page makes the process clear, transparent, and encourages quicker purchasing decisions. This helps reduce cart abandonment rates and increases the likelihood of order completion. Many online retailers cover shipping costs as an investment to boost sales and enhance the customer experience.
Why offer free shipping?
Free shipping is a major plus in customers’ eyes. Sometimes, even a few dollars in shipping fees can lead to cart abandonment, especially for low-value orders. Offering free shipping provides clear benefits for your store:
- Reduces cart abandonment: About 70% of users abandon their carts before completing a purchase, with 55% citing high additional costs as the reason. Eliminating this barrier significantly improves conversion rates.
- Creates a competitive edge: In a crowded e-commerce market, free shipping can set you apart from competitors. For online shoppers, a few dollars’ difference can sway their decision.
- Encourages more purchases: 54% of consumers say they’re more likely to return to stores with flexible shipping policies. Setting a minimum order value for free shipping creates a “win-win” feeling for customers while increasing your average order value (AOV).
TOP 3 types of free shipping on Shopify
- Site-wide free shipping: Applying free shipping to all orders, regardless of size, is an effective way to boost conversions and reduce cart abandonment. However, covering shipping costs can cut into profits if not carefully calculated.
- Conditional free shipping: This strategic approach encourages customers to spend more to avoid shipping fees. Conditions can also apply to customers near your store or specific groups like new buyers or loyalty members.
- Free shipping for loyalty members: This is one of the most valued perks in loyalty programs. It not only retains existing customers but also drives revenue from those already familiar with your brand.
=>> Read more: Understanding Shopify Shipping: Costs, Rates, and Delivery Methods
8 ways to implement free shipping effectively
Free shipping is a key driver of purchasing behavior, but without careful planning, it can hurt your profit margins. Below are 8 smart strategies to delight customers while protecting your business:
- Optimize pricing based on profit margins: Instead of absorbing all shipping costs, consider incorporating a portion into product prices. Calculate profit margins after accounting for operational, marketing, and warehousing costs to avoid losses. Shopify’s profit calculator can help you set reasonable prices.
- Set a minimum order threshold for free shipping: Encourage higher spending by offering free shipping on orders above a certain value. This increases AOV while offsetting shipping costs. For example, if your AOV is $40, set a $55 threshold to maximize profits.
- Limit free shipping to specific product categories: For bulky or high-cost-to-ship items, apply free shipping only to smaller, lightweight products. This maintains a positive shopping experience while controlling operational expenses.
- Restrict free shipping to specific geographic areas: If shipping to remote areas is costly, limit free shipping to regions near your warehouse or key markets. This ensures fast, low-cost delivery and makes local customers feel prioritized.
- Negotiate discounts with shipping carriers: Leverage deals from partners like UPS, DHL, USPS, or Shopify Shipping to lower shipping costs. This makes it easier to offer free shipping while maintaining stable profits.
- Offer free shipping as a reward: Encourage valuable actions like signing up for an account, subscribing to newsletters, following social media, or referring friends by offering free shipping codes. This boosts engagement and expands your potential customer base.
- Run time-limited free shipping campaigns: Create urgency with short-term free shipping offers, such as during weekends, holidays, or special events. Promote these campaigns via your website, email, and social media to drive conversions.
- Provide in-store or local pickup options: If offering free shipping all the time isn’t feasible, provide pickup options at your store or designated locations. This saves costs while meeting the demand for convenient, fast delivery among local customers.
How to set up free shipping discounts in Shopify
Offer free shipping on everything
1. In your Shopify admin, go to Settings > Shipping and delivery > General shipping rates.
2. Under Shipping zones, find the shipping zone where you want to offer free shipping.
3. Click Add rate and name it Free Shipping.
4. Set the rate price to 0 click Done.
Offer free shipping based on order cost
You can offer free shipping for orders that reach a certain value, e.g., free shipping for orders over $100.
Steps:
- In Settings > Shipping and Delivery, find the shipping zone where you want to apply the discount.
- Click Add Rate.
- Click Add conditional pricing > Based on order price.
- Enter the minimum order value needed for free shipping (e.g., $100).
- Set the shipping rate to 0 then click Done.
Offer free shipping based on weight
If you want to offer free shipping based on the weight of the order, follow these steps.
Steps:
- Go to Settings > Shipping and Delivery.
- Click Add Rate.
- In the desired shipping zone, click Add conditional pricing > Based on order weight.
- Set the weight range for free shipping (e.g., 0 to 5kg).
- Set the shipping rate to 0 then click Done.
How to cover free shipping rates
Add the shipping cost to the product price
One way to cover the cost of free shipping is to incorporate the shipping fee into the product price itself. By slightly increasing your product prices, you can absorb the shipping cost without affecting your profit margins.
Customers perceive free shipping as a valuable offer, even if the price of the product is higher. This strategy works best when the price increase is minimal and not noticeable to the customer.
For example, if the average shipping cost is $5, you could increase the product price by $5 and still market the product as having free shipping.
Utilize Fulfilment Services
Third-party fulfillment services, such as Shopify Fulfillment Network or Amazon FBA, can offer significant savings on shipping rates.
These services have bulk shipping agreements with carriers, which allow them to pass on reduced shipping costs to businesses. By outsourcing your fulfillment to these companies, you can offer free shipping at a lower cost than if you were handling shipping independently.
This strategy not only saves you money but also simplifies your logistics, freeing up time and resources to focus on growing your business. Leveraging fulfillment services can help make free shipping a sustainable and affordable option.
>>>> Read more: How to Fulfill Orders on Shopify: Detailed instructions
Negotiate Lower Shipping Rates
Another way to cover free shipping costs is by negotiating better shipping rates with carriers. Many shipping companies like UPS, FedEx, and USPS offer discounts to businesses based on shipping volume.
As your business grows and you ship more orders, you can negotiate lower rates, which helps reduce the impact of offering free shipping. This approach allows you to still cover costs without having to raise prices significantly or lose profits.
Additionally, comparing shipping rates between different carriers can help you find the most cost-effective option for your business.
Offer Free Shipping with conditions
Offering free shipping with conditions, such as requiring a minimum order value, is an excellent way to encourage larger purchases. By setting a threshold, like "Free shipping on orders over $100," customers are incentivized to spend more to qualify for free shipping.
This not only helps you cover the shipping cost through the increased order value but also boosts your average order value (AOV).
You can also set location-based or product-specific conditions to limit the scope of free shipping, ensuring that you maintain profitability while still providing an attractive incentive.
Other Shipping Rate Options on Shopify
Other than free shipping Shopify gives you 2 other viable options: Flat Shipping Rates and Calculated Shipping Rates.
Flat Shipping Rates
Flat shipping rates allow you to charge a consistent shipping fee regardless of the order’s size, weight, or destination. This option works well for businesses with relatively uniform product sizes or weights, as it simplifies shipping costs for both the business and the customer.
Flat rates can also be tiered based on order value or regions. For example, you can charge $5 for standard shipping within a specific country and $15 for international orders. This approach is easy to understand for customers, making it more predictable and transparent.
Calculated Shipping Rates
For businesses with a diverse range of product sizes and shipping destinations, calculated shipping rates are a more accurate and cost-effective solution.
Shopify integrates with major shipping carriers like USPS, UPS, DHL, and FedEx to calculate real-time shipping rates based on the weight, size, and destination of the customer’s order. This option provides the most transparency, as the shipping rate reflects the actual cost charged by the carrier.
See Also:
- How To Change Shipping From Address On Shopify
- How to Remove "Shipping Calculated at Checkout" in Shopify
