There may be no free lunches in life, but don't tell that to consumers who love their free shipping.

Thanks in large part to consumers' desire to get something for nothing, free shipping has become a common part of the online shopping experience. How common? According to comScore, nearly half of online orders in Q1 2011 were delivered free of charge.

Typically, the percentage of orders shipping free increases during the holiday shopping season, for obvious reasons.

In Q4 2010, for instance, 49% of orders received free shipping. This year's Q1 figure of 47% demonstrate that it is increasingly more than just a holiday phenomenon.

In the UK, 13% of retailers featured in Snow Valley's Online Delivery Report offered free standard shipping, while a further 36% offered it for orders over a certain threshold. 

While larger retailers are generally capable of eating the costs associated with free shipping, it's far more difficult for small and mid-sized retailers to deliver purchases gratis.

With nearly half of all online orders being shipped free, however, it's going to be increasingly difficult for smaller retailers to compete without offering this themselves. For those that join the bandwagon and go 'free', some may very well have to pass their costs on in the form of higher prices.

There are alternatives too. Offering free shipping for orders over a certain amount can be a great way to increase average order values and reduce the costs of providing free delivery on everything. 

The good news is that when free shipping is offered, comScore found that customers are less likely to abandon their shopping carts and more likely to buy more. In some instances, higher conversions and AOV will make footing the bill for shipping a worthwhile exercise.

All of this said, retailers of all shapes and sizes need to be strategic when it comes to free shipping. Shipping costs are of course not fixed, and fuel prices have a direct influence on the cost of delivery.

A prolonged increase in oil prices could make offering free shipping financially painful for retailers because consumers aren't likely to be forgiving if retailers are forced to rethink their arrangements.

Already, Staples has raised the minimum order size for free shipping to $75 from $50 on, in part due to rising fuel prices.

Retailers relatively new to free shipping, such as L.L. Bean, should consider this a reminder that it can be a wonderful selling tool, but must be managed actively and wisely.

Patricio Robles

Published 18 May, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

Matt Clarke

Matt Clarke, Ecommerce Director at B2B

The thing with free shipping though is that it's only a benefit when you're one of the only ones in the market offering the service, since you'll likely benefit from an uplift in sales, which should help offset the cost.

If everyone in the market already offers free shipping it actually ceases to have any real benefits to any retailer offering it, particularly as many are unable to bury the shipping cost in the product price due to tight margins. Free shipping then just becomes an overhead.

over 7 years ago

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