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Peak Planning

How to Offer Free Holiday Shipping

Peak Planning
October 31, 2022
7 min read
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Offering free holiday shipping attracts more customers who create larger carts. But free shipping for consumers is not free for merchants. Learn the sales and fulfillment strategies you can implement now to make free shipping a competitive advantage this holiday season.

Why Offer Free Holiday Shipping?

Many merchants are concerned about consumer spending this holiday season. Between inflation and changes in shopping habits, 23% of merchants say they think they may have bought too much inventory this year. Another 19% feel they may have invested in the wrong types of inventory for the holiday season.

Consumers report that while they do plan to shop this year, their priorities have changed. 74% of consumers plan to adjust their holiday spending in the following ways: 

  • Purchasing lower priced gifts
  • Purchasing fewer gifts
  • Purchasing different types of gifts

So, what can merchants do to attract holiday shoppers? According to consumers, they will be swayed to purchase by:

  • Free shipping offers (56%)
  • Online deals and coupons (55%)
  • 1- to 2-day shipping on all products (42%)

Free holiday shipping, then, can be a powerful tool to attract more customers and stand out from competitors in a year where every sale counts.

Three Benefits of Offering Free Holiday Shipping

Offering free shipping at the holidays can benefit your business in following three ways:

1. More top of funnel conversions

In a recent consumer survey, 69% of shoppers said they were more likely to click a display ad that mentioned fast or free shipping. And according to Google Shopping’s consumer behavior research, their Free and Fast annotations increase overall conversion rates by 9%.

That means that in addition to offering free holiday shipping, you must also advertise free shipping to draw shoppers in at the top of the funnel.

2. More cart conversions

Don’t forget to remind shoppers of your free holiday shipping offer at checkout to ensure they follow through on their purchase.  56% of merchants report that free shipping is the most effective way to improve cart conversion rates. Similarly, 53% of consumers report that free shipping would increase their likelihood of making a purchase.

3. Greater perceived value

Everyone loves a deal. Shoppers love to feel like they’re getting more than they paid for. That’s what drives retailers to offer discounts and promotions. However, a study by Retention Science found that consumers are twice as likely to choose free shipping over a percentage discount on their purchase.

The perceived value, then, of free shipping is greater even than an equally or greater-priced product discount.

How to Make Holiday Shipping More Affordable

Every merchant knows that free holiday shipping for consumers is not free for businesses. Offering free shipping for the holidays will only benefit your business if it increases the profitability of your sales. In order to offer free shipping without hurting margins, you must look at both your fulfillment operations and your sales strategy. Three major opportunities to look for are:

1. Inventory distribution

It’s no secret that today’s consumers expect fast shipping. In fact, 42% of shoppers report that they expect a 1- to 2-day delivery option for every purchase they make online. In order to meet that expectation, many merchants rely on Next-Day Air shipping, which is prohibitively expensive.

Distributing inventory throughout multiple warehouses to get inventory closer to your end customers enables you to meet their expectations for fast holiday shipping without overspending on expedited shipping options like Next-Day Air.

2. Optimize packaging

You may be overpaying for shipping if you’re using the wrong packaging. If your package can safely be shipped in a smaller box, you could reduce the dimensional weight (DIM weight) and therefore reduce the cost of shipping.

The right size packaging will also save money on protective fillers like packing peanuts, bubble wrap and shredded paper. Even better, if your product is able to be shipped in a poly mailer as opposed to a box, you could realize significant savings in both packaging and shipping costs.

3. Increase average order value

The more a shopper adds to their cart, the higher their average order value (AOV). A higher AOV will offset the cost of fulfillment and shipping, resulting in higher profits at a per shipment level. Some ways you can increase your AOV include: 

  • Offering bulk discounts to encourage shoppers to purchase SKUs in higher quantities
  • Kitting and bundling, or grouping complimentary products into a convenient kit (This makes shoppers more likely to purchase accessories and add-ons.)
  • Offering payment options to entice shoppers to buy more with the ability to make smaller payments over time

How to Offer Free Holiday Shipping

Use free holiday shipping offers to an even greater advantage with these tactics that can influence shoppers’ actions in a way that benefits your business.

  • Offer free shipping after a spend threshold. One tactic to drive up AOV and offset shipping costs is to set a minimum order quantity. Free shipping is a powerful incentive for most shoppers. In fact, 84% of consumers say they have added something to their cart to meet a minimum threshold to qualify for free shipping. A study from the Harvard Business School found that shoppers spend around 9% more when trying to meet a free shipping minimum.
  • Target shoppers early with free shipping campaigns. Take advantage of early holiday shoppers with a targeted campaign that offers free shipping on orders placed before a cut-off date. Getting inventory moving early in the season means faster time to revenue and less time that products sit on warehouse shelves driving up inventory carry costs.
  • Offer free shipping on select items. Some products are more economical to ship than others. Consider offering free shipping only on high-value or slow-moving products you’re looking to sell quickly.
  • Offer free shipping with a subscription. Subscriptions are a great way to build Customer Lifetime Value (CLV), and subscriptions make great holiday gifts. Use a free shipping offer to incentivize repeat purchases in the form of a recurring subscription.

Looking for a Holiday Shipping Solution?

Ware2Go is a UPS company that’s simplifying the end-to-end supply chain to enable merchants of all sizes to compete and win. A network of warehouses strategically distributed across the US and a fully integrated supply chain technology platform makes affordable 1- to 2-day shipping possible for any business during the holiday season and throughout the year.

To learn more about how Ware2Go can grow your business, check out our solutions.

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