The Importance of Free Shipping

Above all the other conveniences of online shopping, consumers still cite free shipping as the #1 determining factor when it comes to placing an order.

Today's consumer expects every retailer on the Internet to offer free shipping or some variation of it.
Today’s consumer expects every retailer on the Internet to offer free shipping or some variation of it.

While Amazon wasn’t the first online retailer in Internet history, they were among the first and, most importantly, grew to become the largest and most influential in shaping today’s eCommerce industry. In 2005, Amazon debuted their Prime membership program which, for a monthly subscription fee, included free expedited shipping and exclusive discounts scattered throughout the entire site. Needless to say, it was a major success for Amazon and not long after, the entire eCommerce industry took notice as more and more retailers scrambled to incorporate free shipping into their own business models.

17 years later, Amazon Prime’s impact on eCommerce still continues to set the industry’s standards and shape the expectations of the consumer public. According to Digital Commerce 360’s Top 1000 database, 74.4% of the Internet’s top 1000 retailers offer some form of free shipping. 45.1% of these companies offer free shipping once an order total meets or exceeds a predetermined amount while 20.4% offer unconditional free shipping. The remaining 14.5% only offered free shipping through a loyalty program or membership subscription service. In regards to the consumer public, 66% expect retailers to offer free shipping and, as highlighted in a recent survey conducted by Digital Commerce 360 and Bizrate Insights, free shipping was listed as the most important factor as to whether or not a shopper will place an order through a website. Of the 1,108 shoppers that were surveyed, 76% stated that free shipping was most important–even more important than pricing, available stock, product selection, and brand trust.

76% of shoppers list free shipping as the most important factor in making a purchase online.
Shoppers surveyed by Digital Commerce 360 and Bizrate Insights consider free shipping to be even more important than competitive pricing, available stock, and even website performance. (SOURCE: Digital Commerce 360)

The Psychology of Free Shipping

SCENARIO: Shoe Store 1 is selling a pair of boots for $129.99 + $5.99 for shipping. Shoe Store 2 is selling the exact same pair for $135.98 with free shipping included. Where would you shop? You’d probably pick Shoe Store 2 because Shoe Store 2 has free shipping and Shoe Store 1 makes you pay $5.99 for shipping. Completely understandable. I mean, who wants to pay extra for shipping?

If you did the math, you’d find that you’ll actually be spending the same amount at Shoe Store 2 as you would with Shoe Store 1. But there’s a reason why you were immediately drawn to Shoe Store 2–and it all has to do with the word ‘FREE’.

The word ‘FREE’ has a powerful effect on us humans. It can make us ignore every trick we’ve learned about bargain hunting; it can even make us forget how to do simple math and cause us to temporarily lose our ability to think logically. That’s all thanks to years and years of learned shopping behaviors. Much like fast food, the word ‘FREE’ appeals to our desire for convenience and instant gratification. It’s easier for our brains to process the word ‘FREE’ and the concept of ‘FREE’ whereas it takes a bit of effort to process percentages and figure out fractions. Consumers love sales, deals, and bargains–but there’s NOTHING better than FREE.

Free Shipping, or some variation of it, has become the standard in the eCommerce industry and today’s consumer has come to expect it whenever they shop. Here are 3 reasons as to why that is:

#1: No Hidden Fees

In this report by Statista, 56% of online shoppers will abandon their shopping carts if they’re hit with a surprise fee or additional cost on top of whatever it is they wish to buy. It’s impossible for an online retailer to curb ALL abandoned carts but they can significantly reduce the number of them by clearly and explicitly advertising free shipping on their websites. This will help put the shopper at ease and subconsciously convince them to complete the sale.

#2: Incentive to Buy

Adding to the previous point, people who visit a store, whether it be a physical storefront or a website, are usually there for one purpose: to purchase something. The problem with that is not every visitor is going to be 100% committed to making the purchase on the spot. Internet retail, by its very nature, unintentionally gives shoppers plenty of reasons NOT to commit to buying. Barring issues with Internet and website technology and how they’re implemented, a webstore owner can incentivize their visitors into becoming paying, converting customers by offering free shipping. According to a survey by Forbes, 84% of shoppers were convinced to make a purchase because of free shipping. 30% were said to likely purchase more items and, thereby, raise their order totals to obtain free shipping if a minimum qualifying order amount was required. Offering free shipping not only helps boost conversion rates, but also has the potential to upsell and turn one-time customers into habitual repeat customers.

#3: Convenience

As stated earlier, bargain hunting takes a bit of mental effort and with online shopping itself being a convenience, shoppers want their online shopping experiences to be as quick, easy, and as uncomplicated as possible. To the everyday consumer, free shipping is quick, easy, and uncomplicated and because of Amazon’s success and stranglehold over the eCommerce industry, the consumer public has come to expect every retailer on the Internet to offer free shipping or some form of it. It really is an unrealistic expectation when you think about it, but overwhelming public demand leads to change and, more often than not, the change ends up being permanent.

Free Shipping Also Benefits Retailers

As the old saying goes, “Competition breeds success” and with an estimated 24 million retail websites on the entire Internet as of 2022, there’s certainly no shortage of competition. Still, with over 20 million online stores across the globe, they’re still grossly outnumbered by the 7 billion+ people currently inhabiting the planet. Or, better yet, 7 billion+ prospective customers.

Free Shipping has become the latest tactic used by online retailers to earn the public’s business. Consumers benefit from the ease and convenience of free shipping and retailers that offer it benefit from the increased business from these consumers. Here are 3 reasons why online retailers offer free shipping to their shoppers:

#1: Increase Customer Conversions

This one is a pretty easy concept to digest: free shipping convinces shoppers to go through with their purchases. Each shopper that completes a purchase is one more convert from shopper to customer for the retailer. There are roadblocks that prevent shoppers from converting to customers and the more time a shopper has to mull over the decision to purchase, the likelihood increases that they won’t go through with it. Free shipping removes one of those roadblocks to conversion and while that doesn’t seem like very much, in the big picture, it’s still one less roadblock–not to mention, a MAJOR roadblock in today’s eCommerce trends–that could jeopardize a retailer’s chance at converting a customer.

#2: Increase Average Order Values

In our earlier article, Reducing Returns in eCommerce, we touched upon how product upsells can help prevent a customer return. Upsells are often advertised as accessories or companion pieces to a larger item. These products are often optional but in cases where they are essential or required to the main item (as in the case of replacement parts for certain products or replenishment consumable items), an upsell would sell itself and not require a bit of convincing on the retailer’s part in order to get the shopper to add it to their order. Free (or discounted) shipping can be used as an upsell; retailers can offer free shipping once a minimum order amount has been met. This will incentivize shoppers to spend more than they’d normally would just so that they can take advantage of the shipping offer.

#3: Reduces Coupon Leaks

Many retailers have exclusive loyalty programs and preferred shopper clubs that offer secret coupon codes and discounts that are not intended to be used by the general public. Unsurprisingly, these unique coupon codes and promos will often get leaked onto the Internet for anyone to find and use. By offering a universal incentive such as free shipping, online stores reduce the risk of unexpected cuts to profit by having an exclusive code leak out to the public. Plus, as 41% of online shoppers are motivated to purchase through discount codes, coupons, and special promos, it helps stop them from exploring options through other competing retailers.

Free Shipping is Here to Stay (Most Likely)

Nearly 2 decades have passed since the launch of Amazon Prime and retailers are still trying to model their policies to keep up with public demand as well as remain competitive in the eCommerce industry. Consumers have become so accustomed to free shipping that they expect every retailer, especially those outside of their preferred shopping circles, to offer it. It’s understandable to think of free shipping as a short-term trend that could eventually be so overexposed that it becomes stagnant and no longer interesting to the public. However, as fickle as the public’s tastes are, the concept of ‘FREE’ has outlasted all trends and overnight sensations. While free shipping won’t be going away from the eCommerce industry anytime soon, it’s up to the retailers to create additional incentives for shoppers because while it’s hard to turn down ‘FREE’, for some people, even ‘FREE’ isn’t enough.

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