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Free Shipping vs. Flat Rate Shipping

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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”!

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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?

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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.

About the author

Jan Petrovic Jan Petrovic is the founder of proimpact7.com, 2012 Award Winning Conversion Optimization Agency. He is also a master certified conversion optimization & web analytics professional. Proimpact7.com provides conversion optimization services for small and large online business. Jan also works as a web analyst for large U.S. online & offline retailer. Jan studied conversion optimization with MarketingExperiments and Bryan Eisenberg, the most recognized of conversion optimization experts. He gained his master certification in analytics with another widely recognized expert in the analytics industry - Avinash Kaushik. After Jan finished his studies, he launched a website called dashboardinspector.com, which provides dedicated web marketing analyst service for small and large online businesses, allowing businesses to save up to 60% on in-house cost.

Questions or comments?

For queries regarding conversion optimization of your site, or for more information on this article please contact Jan Petrovic, founder of proimpact7.com and master certified in conversion optimization and web analytics.

jan@proimpact7.com



2 Responses to “Free Shipping vs. Flat Rate Shipping”

  1. jesse lopez says:

    Great post….. just looking for ways to increase my conv rate. I just might try 2.95 flat and decrease my prices, because I was offering “free shipping” but the cost was in the product….. wish me luck, ill let you know how it works. Thanks again.

  2. Gail O says:

    This is an intriguing idea. I am just wondering how I could implement it. My product prices range from $4.95 to $138.95. Most individual items are less than 10 ounces but I also carry figurines and these weigh up to 5 pounds each. If I charge say $5.95 in shipping as a flat rate, then that is too high for the smaller products such as bracelets and way too low for the statues. Maybe I will consider flat rate above a certain amount.

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