Could Your Business Benefit from Offering Free Shipping?

Many companies are offering free shipping for the holidays.

can your business benefit from offering free shippingFab.com just announced a free shipping initiative. Not a holiday special but a permanent new policy on free shipping on all orders of $75 or more.

“Our team conducted a thorough business analysis and refactored our technology to enable this great benefit for our customers. Globally. We specifically planned Fab’s Free Shipping to launch today, November 15, in time for the holidays — and it’s here to stay. It’s not just a holiday promotion. We believe that the best shipping is fast and free,” said CEO Jason Goldberg.

Other sites are also offering free shipping this holiday season. Groupon is launching its first holiday catalog named “Groupon Goods” and offering free shipping and returns on items sold. Orders over $15 and weighing less than 150lbs., will come with free shipping and free returns within 14 days.

“The holidays are a time for giving but no one wants to give half their budget to pay for shipping,” Faisal Masud, head of Groupon Goods, said in a statement. “We’re happy to alleviate some stress and help shoppers stretch their dollars with the debut of free shipping for purchases over $15, just in time for gifting season.”

Many companies point to the popularity of Amazon Prime, a 7-year-old service that’s been so popular that more items are shipped using it than Amazon’s older free Super Saver Shipping initiative. Amazon Prime offers customers free two-day shipping on one million items for only $79 dollars a year. Customers quickly see the value of this service and often use more than $79 worth of shipping costs in a few weeks. While the size of customer’s orders often decreased according to one study, the frequency of orders increased.

The success a business can gain from offering free shipping can come at a cost. The price of shipping will have to be absorbed somewhere else. In the case of Amazon, industry experts believe Amazon is spending more money that it earns on the program – by as much $11 per user. Also, the company lost $2.4 billion last year in net shipping costs, according to Fortune Magazine. Amazon remains committed to the free shipping program however, writing in their 2011 annual report, “we believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.”

Before rushing to offer free shipping, a business should check if they can accept and absorb the cost of shipping without reducing their overall profit. Taking advantage of discounts offered by the US Postal Service’s flat rate shipping is one way to offer this promo. Most customers will want a minimum of 2day shipping at the most. With the holidays around the corner, no one wants to wait too long for a package.

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