Reducing Shopping Cart Abandonment Rates through Free Shipping

If you sell physical products online then you’ve probably grappled with the issue of shipping costs.

I’m an advocate of free shipping. Or more correctly, shipping included.

By that I really mean the vendor needs to sort out the complexity of shipping costs and include them in the product cost to make it easy for the buyer.

Free shipping isn’t really free, it just means that shipping has been included in the base pricing. Just like other components of cost have been included, like customer service, returns and warranty.

Evidence? Ok, I wish I had some hard evidence to back up my theory. It isn’t that easy to test the impact of alternative shipping policies. When you are launching a product online, you set the price and after that price variations need to obey the laws of the market – you can’t just change them as easily as you might change the wording or images that present your product.

You can probably see the immediate disadvantage of including shipping in your standard prices – your prices need to be higher than they would otherwise be. I’m not trying to pretend this isn’t an issue. But it might just be *less* of an issue than the alternatives.

And you can do things to counteract this. For example, sell small items in minimum quantities, or set a minimum order value.

But why is free shipping so important?

Firstly, selling a product online works better when it is simple. Easy to say, hard to do. And shipping fees get complicated real quick. When things get too complicated, some of your potential customers leave.

Sure it might be complex for you, the business owner, to figure out how to sort out the complexities of including shipping in your standard pricing. But better you sweat over it once than every one of your customers sweats over it every time they think about buying (or get close to buying). If you look at it that way, your pain doesn’t count. Sorry.

Secondly, every time you introduce someone to the cost of doing business with you, you invite them to make a choice to leave.

“Look at these widgets … beautiful red ones, just what I’ve been looking for … wonder how much they are?”
$10
“$10? Hmm, are these red widgets worth it? Maybe I’ll go have a look elsewhere …”

Every time you introduce a new cost, you create the circumstances in which a customer is likely to consider their choice.

Lets try that again with shipping costs.

“Look at these widgets … beautiful green ones, just what I’ve been looking for … wonder how much they are?”
$10
“$10? Hmm, are these green widgets worth it? Well, they are real shiny, and I can get them right here. Sure, I’ll buy them. …”

(a short time later)

“Ok, looking good, just got to complete this boring checkout. Wait, what’s this! (Sirens, searchlights activate). OMG, I’ve got to pay shipping costs! How much will that set me back?
$2
“$2? Ouch, more costs, they’re already hitting me up for $10. Hmm, are these green widgets worth it? Maybe I’ll go have a look elsewhere …”

You get the idea.

The first time you introduce the price, you better have established enough value or your prospective customer might leave.

Each time you add another cost, you ask them to roll the ‘make a decision to stay or go’ wheel once more. I don’t think it even really matters how much more money is involved. Any additional amount is just that – more money! As soon as you introduce an additional price element, you run the risk of the prospect leaving.

Instead, present your product, let your prospective customer understand the benefits so they can see its value, and then let them know the cost. Once. If they like it, let them buy. Don’t trickle feed uncomfortable bits of information to them in the lead up to them buying. Just focus on removing any remaining barriers to the sale.

So there you have my rationale for including shipping in your product price. If you need to, perhaps include domestic shipping in the price and have a one off fee to add on for international shipping. Anywhere.

When you sell enough in to a new country for this to be a problem, hey, you’ll have a great problem to solve. But it will fun to solve that sort of problem, a lot more fun than staring a a low conversion rate and wondering what to do next.

Launch your product without including shipping prices and maybe one day you’ll find yourself wanting to compete with the compelling power of sites that offer the magic of free shipping. How do they do it?

Ok, so I mentioned I don’t have any evidence for this theory, but at the very least you can read what others have to say on this topic.

From a PayPal survey on the topic of Why Online Shoppers Abandon Purchases:

A PayPal (NASDAQ:EBAY) survey released today revealed that nearly half (45 percent) of online shoppers have abandoned their carts multiple times in the past three weeks due to high shipping costs, security concerns and lack of convenience. High shipping costs was cited as the largest single reason for cart abandonment.

Surprise, surprise, about 12 months earlier an eMarketer article Shopping Cart Abandonment Rises quoted:

Online shoppers surveyed by PayPal and comScore were also concerned about costs. High shipping fees were the main reason for online shopping carts to be abandoned by survey respondents. The companies estimated that two-thirds of consumers who put items into shopping carts did not end up buying the items.

Commenting on that eMarketer article and other sources Linda Bustos notes:

… e-Tailing Group’s research in late 2006 reported … 84% cited free shipping as “very to most influential” when buying gifts online. It could very well be a dealbreaker between buying from you or a competitor.

An old school article on Understanding the Causes of Shopping Cart Abandonment says that:

… according to Forrester Research, the top reasons sited for cart abandonment are as follows: [1st] 57% – Didn’t want to pay shipping costs
… How can you as a merchant prevent these reasons from getting in the way of a sale? Here are a few suggestions: Offer and advertise free or discounted shipping: Although this is perhaps easier said than done, it really is a great closing tool.”

I like this article because of the insight into what is important to online retailers – you guessed it, free shipping happens to be on their mind:

The debate about whether free shipping is a short course to ruin, or an important driver of sales, rages on. .. over three-quarters (78%) of retailers surveyed for Shop.org’s annual pre-holiday eHoliday report plan to plow ahead with popular free shipping promotions, although many will offer the service with conditions attached such as a minimum order value or product-based promotions.

And finally, because I find it consistently one of the most useful sources of information on conversion rate optimization, I’ll quote Khalid on free shipping:

.. you can claim your chunk of the growing numbers [ordering online] by offering free shipping and competing with other retailers who use it as the ultimate shopping lure.” (my emphasis)

So there you have it, my 10c worth on the topic of shipping. If you are planning on launching a new product, have a think about whether including shipping fees in your pricing might work.