Covering The Cost Of Shipping With Increased Order Values

The prospect of free shipping is a big attraction point to customers. As a matter of fact, free shipping can cause customers to opt for one store over another, even if they wind up spending more at the latter e-commerce shop than they would have at the first shop where they would have had to pay extra to have their order shipped. In order to offer free shipping, however, you’ll have to cover the cost, and the most common way to do this is using order values to cover the difference.

With a strategic approach, you can maintain your profit margins even after covering the cost of shipping, and this is what you should strive to do in an ideal scenario. Before forming your strategy, however, you’ll want to ask yourself a few questions and get some numbers written down. First and foremost, figure out your current average order value, and what most customers are spending when they place a single order with you. After this, take this average order cost and figure out the average shipping cost for it may be. After getting your two averages together, gather your profit margins together for each product.

Now, as for the free shipping, there are several different approaches you can make, but there are two that really stand out. First, you can offer a limit for free shipping offerings, and this is the most commonly used method. This may cut into your profit margins a little bit, but this will depend on the limit you set. While a lower limit will drive more customer purchases, a higher limit will still attract those away from other e-commerce stores that offer no free shipping incentive at all. Another idea is to encourage higher order values by suggesting related products. When a customer puts a product in their cart or clicks on a product, a few products that go along with the one they’re interested in at the bottom of the page can encourage them to shop a bit more.