How to Make Free Shipping Policy Fit for Your Online Shop

Most online shoppers prefer free shipping. Without offering free shipping, your prospective customers are very likely to place an order in your competitors’ stores where free shipping are provided.

But free shipping really increases the cost of selling products online, especially hard to burden for ecommerce starters or small business owners. Are there any good methods to make free shipping affordable for small business owners or new online sellers?

Of course there are some ways.

  • providing a limited-time free shipping to urge the buyers place orders.
  • Adding shipping costs to product prices.
  • Making free shipping as a bonus for repeat customers or special promotion.

But there is another free shipping way proven to be more effective. That is setting up a free shipping threshold.

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Benefits of setting up the free shipping threshold

  1. Increase your profits. Offering free shipping for every product of your online store is not a good shipping rate policy for small business owners. As some products are really of low profit margins, it is wise for sellers to set the threshold for free shipping. Customers can gain free shipping with more than one order or more than one product.
  2. Retain your most valuable customers. A free shipping policy for every customer of your store is not a good way to reward your most valuable customers. Especially during holiday season, customers are more likely to buy products with new brands.
  3. Grow average order value. With a free shipping threshold, customers are more likely to buy additional products in your online store in order to meet the standard of free shipping. So you can sell more items for a single order.

One thing you should keep in mind: the free shipping threshold should neither be too high nor too low. Then what is the right free shipping threshold for your online store? How to calculate it?

Calculating the right free shipping threshold

  1. Calculate Your Average Order Value. You can use a 12-month order data to get it(for example $60).
  2. Count your Average Shipping Cost. This should include the lable and package fees(for example $7).
  3. Calculate your Gross Profit Margin. (Total SalesCost of Producing Products)/Total Sales=Gross Profit Margin. If your Total Sales is $120K and your Cost of Producing Products is $60k, your Gross Profit Margin=($120k-$60k)/$120k=50%.
  4. Test a Minimum Cart Value(for example $72).

The difference between Minimum Cart Value and Average Order Value is $72-$60=$12.

Then you multiply this amount by your Gross Profit Margin($12*50%=$6).

Lastly, you subtract this from the Average Shipping Cost($7-$6=$1).

This means that your store will have to pay $1 shipping rate for every order reaching the free shipping threshold $72.

Attention: If your store sell both small/light and large/heavy products, the free shipping threshold should be different for the two types. As is well known that the shipping cost of large/heavy products are much higher than that of small /light products, the free shipping threshold of large/heavy products must be higher than that of small/light products.

Moreover, if your orders are worldwide, you should have different free shipping thresholds for domestic orders and international orders.

worldwide shipping and fulfillment by chinadivision

How chinadivision saves your shipping cost

  1. Maximize customer benefits: chinadivision can provide customers with tailor-made transportation solutions, and do our utmost to save costs for customers.
  2. Continuous optimization of logistics channels: our professional logistics channel department continues to use big data to open up more high-quality, time-efficient and stable logistics channels for customers.
  3. Diversity of channels: a full range of channels can meet customers’ requirements of different types of goods and different delivery time.
  4. Channel customization: The shipping channel can be set separately according to the customer’s product types and the destination country.

Chinadivision is professional and trustworthy in providing thousands of worldwide clients with best order fulfillment services, gaining their praise and gratitude. Want to cooperate with us? Please feel free to contact us.

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