How much of an affect does shipping play on ecommerce conversion rates?
A surprising amount, actually.
The number one reason online shoppers abandon ecommerce carts is due to high shipping costs, according to Internet Retailer. 46% of shoppers who jump ship before the transaction is complete cite the cost of shipping as their reason.
With nearly half of all shoppers abandoning their purchase because of shipping costs, if you aren’t actively working to eliminate the shipping cost objection, you’re missing out on a substantial number of sales.
The solution is easy: free shipping and free return shipping.
Obviously, you aren’t in the business of giving things away. I get that. But I also know that 93% of consumers state that they would make more online purchases if free shipping were offered. 93%! So, let’s look at the free shipping option from a dollars and cents perspective:
Let’s say that you have a minimum order amount of $100 before shipping is free and that the average cost per item on your store is $40. Your average order total is $85 before shipping and tax (if applicable).
You already know that your average customer is probably going to order $85 worth of stuff automatically. You also know that the customer is going to be more interested in purchasing another $15-$40 item and getting free shipping than to pay $12-$18 in shipping and handling and have nothing to show for it.
Which would you prefer?
$85 worth of merchandise + $14 in shipping = $99 for $85 worth of stuff
$85 worth of merchandise + $40 on additional item + free shipping = $125 for $125 worth of stuff
I’m guessing you’re like most consumers and you’d rather get more of what you want or need than to pay for shipping—an “invisible” cost—instead.
But how does that help your bottom line?
First there’s the increase in sales—the extra item that the customer must purchase to earn free shipping.
“But doesn’t the free shipping negate the extra purchase?”
Let’s say that the wholesale cost for the “additional” item the customer purchases is $15 and you charge $40 retail. The shipping is $12 for the entire order. For simplicity’s sake, all costs associated with the item are included in the cost below.
$40 retail price – $15 cost – $12 in free shipping = $13 profit
True, it’s not the $25 of profit that you would have had if the customer hadn’t opted for free shipping, but then there’s the other $85 worth of product that the customer ordered that isn’t factored into the equation. Without the free shipping, you wouldn’t have booked that extra $13.
Second, the free shipping offer drives sales in another way. The consumer is likely to order more on each order that has free shipping (“The shipping is free so I might as well get that other item I wanted now instead of paying shipping on it later.”) and/or order more frequently as they know they can get what they want without shipping costs and never leave the comfort of their arm chair. And shipping costs go up in small increments after the initial charge, so the cost of shipping on the second and third items are likely to be considerably less than the shipping on the first item.
Free Return Shipping
Free return shipping is a little different, but plays an important role in the psychological side of buying process. Knowing that free return shipping is guaranteed helps the customer get past the “what if I don’t like it/it doesn’t fit/it doesn’t work” mentality. In fact, two out of three shoppers would buy more online if returns were free (Source: Econsultancy.com). That means by offering free return shipping, you can successfully increase your ecommerce conversion rate—and your bottom line. (Also, keep in mind that while some customers will definitely take advantage of your free return shipping guarantee, others will simply choose not to make the return regardless of how they feel about the product they ordered.)
Free shipping and free return shipping will increase your ecommerce conversion rates. Use them effectively and not only will you increase your conversion rate, but you will increase your bottom line and customer satisfaction level at the same time.
To learn more about how to maximize the effectiveness of your ecommerce website, download the white paper, B2B Ecommerce Success – Seven Questions to Consider When Beginning and Ecommerce Initiative.