If you haven't checked out our article on fulfillment costs and how billing works, it may be a helpful read before you dive into this article.
Study after study confirms that offering "Free Shipping" on orders increases how likely a customer is to place an order. In addition, offering thresholds for free shipping can increase your average order value because customers add more to their cart to reach the free shipping threshold.
"Free Shipping" isn't free. Consumers are paying for "Free Shipping" whether they realize it or not. "Free Shipping" should really be called "Shipping Included". There are two ways that companies offer "Free Shipping" to their customers:
1) Subscription model: Let's face it - customers are spoiled by Amazon. Amazon's "Free Prime Shipping" has created a global expectation of free, fast shipping from businesses. What many consumers seem to neglect, is that they're helping Amazon cover the price of shipping orders by paying Amazon a subscription of $12.99 per month.
2) Built-In: If you aren't charging your customers a monthly subscription fee that helps cover your shipping costs (or even if you are) you need to build the expected shipping cost into the retail price of your items. Let's say we're selling a $25 t-shirt, and we expect the average shipping cost to get that t-shirt to your customer is going to be $5. You have two options:
Charge shipping at Checkout: Your customer sees $25 + $5 shipping
Build $5 into the retail price: Your customer sees $30 + Free Shipping
In either scenario, the customer is being charged for the shipping cost, it is just a matter of whether they see a lower retail price and shipping added, or a higher retail price and shipping included..
Free Domestic Shipping | International Shipping:
We've already covered the benefit of increased order conversion and perceived value by offering your customers free shipping, but there is another key benefit when it comes to international shipping: Lower perceived international shipping costs.
International shipping is always more expensive than domestic shipping. For example, it may cost $5 to ship a t-shirt domestically, but it may cost $15 to ship that same t-shirt to an international customer. For this reason, many businesses choose to offer "Free Domestic Shipping" and charge international customers for international shipping.
For our $25 t-shirt scenario, here's what it looks like to include free domestic shipping, and charge international customers for shipping:
Domestic order: $30 + Free Shipping
International order: $30 + $10 Shipping
In this scenario, we're assuming an international order is going to cost $15 to ship, but since we've already built $5 into the retail price of the item to cover domestic shipping, we only need to charge the international customer $10 at checkout, rather than $15. Overall, because we've built $5 into the retail price of the item, and collected $10 extra at checkout from the customer for shipping, we've collected $15 in shipping total from the customer.
For more information on international shipping, check out our article on Offering International Shipping.
How CALA Can Help:
When you participate in CALA Fulfillment, your dedicated CALA Fulfillment and Logistics Specialist will work with you to come up with a customized fulfillment plan and make sure you're collecting enough from your customers, whether that is charging them for shipping at checkout, or offering "Free Shipping".