The Benefits of Free Shipping for Conversion Rates

When the global pandemic put life on pause at the beginning of 2020, the e-commerce world soon found itself in high demand. Since then, online sales have skyrocketed to record highs, with U.S. sales alone expected to surpass $1 trillion in 2022. But with this surge in sales, also came a substantial increase in returns.

According to the National Retail Federation and Appriss Retail, online return rates increased to an average of 20.8% in 2021 from only 18.1% in 2020. That’s a whopping $218 billion in merchandise being sent back to online stores. And with more and more shoppers opting to make their purchases online instead of at traditional brick and mortar stores, many e-commerce sites are feeling the loss of their annual profits.

In May, fashion retailer ZARA announced it would soon be charging its customers a small fee($3.95 in the U.S.) for online returns brought to third party drop-off points. Though they weren’t the first major brand to make this change, the shift caused a shopping stir amongst loyal customers and brought awareness to an ever-growing challenge many e-commerce stores are facing. 

With more and more retailers implementing a fee for online returns (in-store returns are still free of charge), a couple questions remain: Will free online returns soon become a thing of the past? And how could this impact online shopping conversions?

First, let’s uncover whether free shipping really matters.

One could argue that eliminating free returns—or even free shipping on any purchase—is a proactive approach to increasing online revenue, but with 66% of shoppers expecting free shipping for their online orders, you might want to reconsider.

Shipping is one of the biggest considerations customers make when choosing to complete a purchase or abandon their cart and move on. In fact, in a recent survey by BigCommerce, 77% of respondents said that they've abandoned a purchase due to unsatisfactory shipping options. And while half of respondents have admitted to avoiding a retailer completely if free shipping isn't an option, only 60% of merchants currently offer it.

E-Commerce Shipping Best Practices

The good news is that there are ways to appeal to your shoppers while also helping boost your conversion rate. 

1.  Be selective.

Retailers who offer free delivery on every product often end up paying out of their own pockets or having to increase the purchase price to cover the cost. This could add up to a lot of lost revenue. Instead, use free shipping as a tactic that benefits both your customers and your profit margin.

• Offer free shipping to clear out extra inventory, such as end-of-season items.
• Provide free shipping on select sales to increase your average order value.
• Incentivize new shoppers with a single-use promo code for complimentary shipping on first orders.

2.  Set a free shipping threshold.

Free shipping thresholds—also known as minimum cart values— are the minimum price limits a store offers shoppers to qualify for free shipping. The key is to determine the average order value (AOV) over a select time frame (we recommend 6-12 months) and set a fixed shipping limit based on that number. Make sure to set a limit that is sustainable for you, the retailer, but also reasonable enough for your shoppers to want to spend the extra amount to get free shipping.

For example, let’s say your AOV is $75 and you’ve set an increase of 30%. This means your customers have to spend $97.50 (before taxes) to qualify for free shipping. For them, that’s a low enough number to make adding an additional item to their cart worth the free shipping. For you, it’s an average of $22.50 more per order. If you have 100 customers do this every week, that’s over $820,000 in additional revenue each year!

Tip: Add this incentive into your product descriptions and at checkout to “remind” shoppers of their potential to save on shipping costs.

3.  Create a positive return experience.

It’s fair to say that offering some type of free shipping helps build loyalty with your customers. But the return experience is just as important to ensuring shoppers buy from you again. 65% of customers say that they would stop buying from a brand based on a poor return experience, while 62% would buy more from a brand if they have a good one.

Sure, providing a generous return policy might sound like you’re sending out an invitation for more returns, but charging a return fee could create a poor user experience for your customers, who might be more than willing to take their future business elsewhere. On the flip side, seeing an increase in items returned also provides you with an opportunity to connect on an individual level with your customer, and assure them that they are valued and their experience is important.

So what makes a positive return experience? 

• Offering a longer return window
• Eliminating any additional restocking fees
• Receiving an immediate refund
• Having a return label provided in the original shipment package
• And of course, providing free shipping

Tip: If you want to really impress your shoppers, make their purchase experience even better too, by offering faster delivery times (over 90% of US customers expect 2- to 3-day delivery) and adding personalized touches, like follow-up thank-you emails for their recent order.

Related: How to Prevent Your Customers From Buyer’s Remorse

Final Thoughts

For many online retailers, free shipping services equate to higher conversions. However, it takes a lot more than cutting out unwanted fees to retain your customers and more importantly, get them to spend their hard-earned money at your store. Implementing free shipping best practices thoughtfully will help you increase the percentage of website visitors that convert into first-time customers. And by offering services like free returns, your customers will feel like you genuinely have their best interests at heart, and will be more willing to continue shopping at your store in the future. Not only does this create brand loyalty, but when implemented with the strategies above, can help increase your conversion rates so you won’t be left feeling “ship-wrecked.”

Increase Your CRO for the Long Haul

Granify is loaded with the tools and know-how to transport your conversion rate optimization (CRO) results to a whole new level. We’ve helped major retailers across North America fine-tune their online conversion optimization efforts  by providing proven strategies that work—without any hidden fees or upfront costs.