How to offer free shipping for e-commerce

As an e-commerce business in Singapore, you know that shipping costs can make or break a sale. Customers expect free shipping, and many will abandon their cart if they see an unexpected shipping fee. How can you offer free shipping without hurting your bottom line?

What is free shipping, and how important is it to consumers

Before we delve deeper, let's define what free shipping means. It can take many forms, from free shipping on all orders to free shipping above a certain order value or for specific products. You can also offer free shipping at certain times of the year, location-specific free shipping, or membership programmes. Whatever form it takes, free shipping is important for many e-commerce businesses in Singapore, especially since it can help you stand out from the competition and improve customer satisfaction.

In fact, according to a recent survey conducted by Data Report, 49.4% of shoppers said that free shipping is the top conversion incentive that would encourage them to complete a purchase. So, offering free shipping is worth considering if you want to boost your sales and attract more customers.

Steps for offering free shipping

In the world of e-commerce, customers have come to expect more than just a wide selection of products and competitive prices. According to research conducted by We Are Social, free shipping has become the standard for many online shoppers, with 57.3% of Singaporeans placing it as the top factor to reach a purchase decision. In fact, shipping speed and cost can often decide whether or not a customer makes a purchase. With e-commerce giants like Amazon setting the standard for fast delivery, businesses that cannot match these expectations risk losing customers to competitors who can offer free and speedy shipping. Simply offering a good product, exceptional customer service, and competitive prices is no longer enough. To succeed in e-commerce, online stores must prioritise shipping and delivery to meet customer demands.

It's important to keep in mind that nothing in business is truly free. As a small e-commerce business, you may need help offering customers free shipping while balancing your expenses. By taking a strategic approach, you can start offering free shipping without sacrificing profitability. Here are three steps to get started.

1. Increase your product prices

To provide free shipping, one option is to increase the price of products or accept lower profit margins. This approach can be especially important in the post-pandemic era, where shipping costs have increased. If increasing prices would make products unaffordable for customers, you may need to explore sourcing products or raw materials from regions with lower shipping costs. It's essential to balance offering free shipping and maintaining profitability.

Additionally, assessing whether your product price is suitable for a free shipping strategy is crucial. This is especially true if you sell low-cost items because increasing the product price to cover shipping costs may discourage customers from making a purchase. In such cases, offering free shipping may not be profitable for your e-commerce business.

Alternatively, consider setting a minimum order value to qualify for free shipping. This way, customers who are interested in purchasing multiple low-cost items can combine them into a larger order to meet the minimum requirement for free shipping. This approach encourages customers to purchase more items from your store, ultimately leading to a higher average order value and increased profitability.

2. Increase your average order value (AOV)

Another effective strategy for e-commerce businesses in Singapore to offer free shipping without sacrificing profitability is by increasing their average order value (AOV). AOV refers to the average amount customers spend on each order, and a great way to do this is by offering upsells, memberships, and bundles.

Upselling encourages customers to add more items to their cart, increasing the overall value of their purchase. Offering membership programmes can also be a powerful tool for increasing AOV, as members often spend more money than non-members. Another strategy is to create product bundles, offering customers a discount if they purchase multiple items together.

By increasing the AOV through these tactics, your e-commerce business can offset the cost of free shipping and still maintain profitability. It's a win-win situation as customers receive added value through discounts, and businesses can offer free shipping without sacrificing profit margins.

You can start by first trying different order value thresholds above your average to determine which works best for your e-commerce business. It's important to note that there isn't a one-size-fits-all solution for boosting conversions.

Factors such as pricing, product images, and innovation all affect customers’ buying behaviour. Therefore, it's essential to conduct routine testing to determine the optimal threshold for your target market and landed cost. Once a higher threshold is established and becomes the norm, you may be able to increase it gradually over time to maintain profitability while still offering free shipping.

3. Increase your customers’ lifetime value

A powerful strategy for e-commerce businesses in Singapore to offer free shipping without sacrificing profitability is by implementing loyalty and membership programmes. By encouraging repeat purchases through these programmes, businesses can increase their customers' lifetime value (CLV), which is the total earnings from multiple orders. 

Membership programmes, with paid membership fees, can provide the resources needed for free shipping offers. Upselling, bundling, and offering discounts to members can also boost the AOV, further offsetting the cost of free shipping. This win-win approach creates customer loyalty, higher CLV, increased profits, and the ability to offer free shipping denting profit margins.

Partner with DHL Express to access flexible shipping options

Not all e-commerce stores will benefit from offering free shipping. Depending on the products, shipping distance, and other factors, it may make more sense to use other shipping methods such as flat-rate or real-time carrier shipping.

These alternative options may be more cost-effective and efficient for certain businesses while still offering customers reasonable shipping rates. It's important to analyse your shipping data and customer preferences to determine the best approach for your store. 

By understanding your customers’ needs and behaviours, you can identify the most appropriate shipping options and pricing structures for your business.

Partnering with DHL Express can offer a multitude of benefits to e-commerce businesses beyond discounted shipping rates. DHL Express offers a range of logistics solutions that can streamline e-commerce shipping for you. Furthermore, our customs clearance and regulations expertise on import and export can help streamline the international shipping process and avoid potential delays and fees. In addition to cost savings and expertise, partnering with us also provides e-commerce businesses like yours access to advanced shipping technology. Our online shipping platform and mobile app can simplify the shipping process and improve efficiency, saving businesses time and resources that can be used to focus on other aspects of their operations, such as marketing and product development.

By leveraging our technology and expertise, e-commerce businesses like yours can offer customers a seamless and efficient shipping experience, leading to increased customer satisfaction and repeat business. Open a business account with us today to find out more.