Free Shipping vs. Flat Rate Shipping

Free shipping is a nice incentive to have and it helps with conversion, but it also eats up your profit. The fact is the cost of shipping has for a long time been one of the leading causes of shopping cart abandonment as buyers realize that the cost of the shipping has made the item too expensive. And according to the study below,  72% of website visitors abandon their shopping cart because shipping charges were higher than expected. But stop here for a second, cost of shipping higher than expected, not because FREE shipping wasn’t available. The reason is “shipping higher than expected”!

19-06-2009-14-05-10-chart

Most ecommerce web sites can’t afford free shipping . So is there any other solution for website owners to compete with online store giants? I think the answer for some online retailers could be flat rate shipping.

Let me explain on overstock.com, a very well known online retailer with quarterly revenues of around $250+ million. Overstock.com is one of only a few large retailers offering flat rate shipping and based on their quarterly revenue of $250+ million, people are clearly buying from them even though they don’t provide Free Shipping, but instead offer flat rate shipping of $2.95. Obviously the question is, what if overstock.com offered free shipping? Would their sales increase along with their conversion rates?

295-flat-shipping-18-08-2009-13-11-47

Reason why flat rate shipping could work:

  • we all expect to pay a reasonable shipping cost, as on average only the top 100 retailers offer free shipping, the rest of stores will charge you. Personally I have purchased things from stores not offering free shipping and I consider for example, $2.95 shipping cost to be reasonable. What I find painful is when I have to pay $4.95+ as that to me seems unreasonable. Just my thought.

How to promote flat rate shipping to make it look like a good deal.

I believe if you display in your header, for example, $2.95 shipping on your entire order, then you have already psychologically prepared your visitors that shipping isn’t free, plus you have removed friction in the buying process. Why? Because suddenly your visitors don’t need to worry about the shipping cost. They know whatever they buy will only cost, for example, $2.95, which for many is a reasonable price to pay.

Important – don’t hide your flat rate shipping if you have it. Promote it clearly in your header so your visitors can see it on any page.

If you came across a study about flat rate shipping then please email it to me at jan@proimpact7.com.

Jan Petrovic
I’m an e-commerce consultant / conversion optimisation specialist (A/B testing). Have been in conversion space since 2008. I started my career as a web analyst using Google Analytics, then moved into conversion. This transition from a web analyst to conversion specialist helped me to be better at understanding of what’s really happening and why visitors might be struggling to buy / convert. Reason being is, that most of the work of a conversion specialist is about data analyses. I’ve worked for marketing / conversion agencies in London (UK), Toronto (CAD) and Melbourne (AUS) working on ecommerce, lead generation and university websites based in the UK, USA, Canada, Australia and in Europe so I have very good understanding of many different markets and businesses. In 2012 I have received an award from WhichTestWon.com for one of my email tests, which increased revenue by 303.08%. Yes, I do email testing too. My success rate is 70%, i.e. 7 out of 10 tests are winning and my average conversion improvement is 19%. This was one of our measured metrics, while working for a conversion agency in Melbourne as a Senior Conversion Specialist between 2015 – 2016 (over 14 months) and is fully verifiable.

Leave a Reply

Your email address will not be published. Required fields are marked *

Show Buttons
Hide Buttons