Free shipping is not free, you pay for it in the price of products you buy and through bundling.
Free shipping has never been free. Customers pay shipping costs directly for an order, the merchant spreads shipping costs over multiple products in larger orders, or the merchant captures shipping costs through loyalty programs with low-use customers subsidizing higher-use customers.
An automotive-focused e-commerce company wanted to launch products in a consumer durable category. Because the client was focused on a low-cost, high-volume strategy, we recommended offering free shipping. Before committing, we analyzed all-in costs to estimate margins under free shipping. After launching with free shipping, we tracked margins closely, incorporating actual logistics costs into a customized pricing model. As the client achieved scale, we passed some of the savings to customers and kept some as additional margin.
Other companies should make a different decision based on the uniqueness of their business. If you are a low-cost brand, your pricing and shipping decisions should reflect that. In contrast, premium brands should make different choices that fit their positioning.
Free shipping decisions should flow directly from how you position your company and products, not whether others are offering it. Copying competitors’ free shipping offers ignores the unique circumstances of your business.
When you developed your shipping pricing approach, did you deliberately align it with your strategy?
How have you tested various free and paid shipping options?
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