The Pros and Cons of Free Shipping vs. Charging for Shipping
Jun 17, 2024
Liam Brennan
In this episode of Subscription Box Answers, I break down the benefits and negatives of offering free shipping versus charging your customers for shipping. A shipping charge can be a conversion killer, but there are things you can do to help mitigate that. Also, there are customers who are willing to pay for faster shipping, and you can use that as an opportunity to make more money.
If you have a question you want answered on the show, head over to www.SubscriptionBoxResources.com and join the free Facebook group to post your question there.
In this episode of Subscription Box Answers, I break down the benefits and negatives of offering free shipping versus charging your customers for shipping. A shipping charge can be a conversion killer, but there are things you can do to help mitigate that. Also, there are customers who are willing to pay for faster shipping, and you can use that as an opportunity to make more money.
If you have a question you want answered on the show, head over to www.SubscriptionBoxResources.com and join the free Facebook group to post your question there.
Speaker 1:
Welcome to Subscription Box Answers with your host, liam Brennan. You're no rubbish, no crap. Straight to the point podcast with real, actionable tips, real strategies and insights from the industry which will help you start and grow your own successful subscription box business. You ask the questions, you ask the questions, you ask the questions. Liam gives the answers. It's as simple as that.
Speaker 2:
Welcome back to a brand new episode of Subscription Box Answers. I hope you're having a fantastic day. On today's episode episode, I am talking about shipping Free shipping versus paid shipping and what you should actually do. Let me read out a question that came in during the week. I have a quick question for you. I'm new to subscription boxes and me and my partner are debating free or paid shipping. What are your thoughts on this? Very good question, and I know this is something that a lot of people debate back and forth about. Look, in an ideal world, you would offer free shipping. That's my opinion, but the data also backs that up.
Speaker 2:
A unexpected shipping charge popping up on your checkout is usually a conversion killer. It's the truth. Okay, these days, the majority of customers tend to expect free shipping, and if you've got them over the hump of actually selecting your product and getting to the checkout, you have a good opportunity to sign them up. But if anything unexpected pops up on the checkout, such as a shipping charge, they are more likely to abandon the cart. Now we ran a test in BusterBox a while ago and we added a smaller shipping charge. Now some things in the UK market are very different to the US. This was only like a couple of pound extra for the shipping charge. Now we ran the test for a few weeks and we basically paid attention to what was happening. We were tracking everything and we noticed our conversion rate dropped quite significantly and our customer acquisition cost went up. Then we just switched it back to including the shipping price in our overall price and the conversion rate went up and the customer acquisition cost went down.
Speaker 2:
So for us, free shipping is defo more beneficial and I do honestly believe that is the case for the majority of boxes. People just expect free shipping and it converts better. Now when I say free shipping, it's not really free and I think we all know that You're still making the same margin. You're just including the shipping charge in the overall price. Now I do understand that there is an argument that by separating the shipping charge from the overall price, the customers are more likely to see the overall value in your products. I do understand where people are coming from when they say that, but in my experience you're still better off offering free shipping if you can, because you're going to get a higher conversion rate and you're going to get a lower customer acquisition cost.
Speaker 2:
Now I do understand completely as well that free shipping will not be possible for some businesses. Depending on what you sell and where you're based, it simply would not make sense to bundle this into your pricing and you have to charge separately. I know in Canada, for instance, shipping can be pretty expensive and because of that it can be very difficult to bundle the shipping charge into the overall price, but Canadian consumers are aware of this and they seem to be more inclined to not mind a shipping charge because they just expect it. I know this from working with many Canadian boxes over the years. Honestly, though, I think everybody should test and find out what works best for your business. I've told you that free shipping works the best for BusterBox, but shipping in the UK is quite cheap compared to other countries, so it's easier for us to bundle the shipping cost into our overall price.
Speaker 2:
If you're in a different country, it may not be so easy, or if you're selling a different product, it may not be so easy, but you should still test. What you should do is you should bundle the shipping into the overall price and run it for a week and measure your conversion rate and your customer acquisition cost. Then switch it out. Don't change anything else. Just switch this out and charge shipping separately and run that for a week and track your conversion rate and your customer acquisition cost. Then compare the data and you will find out what is the clear winner and what you should do in your business. Also, right, do not be afraid to play around and test different things. You can even test a small shipping charge and bundle in the rest into your pricing and see how that performs for you. You usually never know what's going to work until you test it and sometimes you end up being pleasantly surprised. And this is especially important if you're in the phase of your business where you're looking to scale up and invest a decent amount of money into customer acquisition, because if you can improve your conversion rate slightly and bring down your customer acquisition cost slightly, you can end up having a much more profitable and valuable business. It really makes difference. The small things really make a difference when you're actually scaling up. So, yeah, definitely don't be afraid to test different things, because even the smallest thing can have a enormous impact to your bottom line.
Speaker 2:
Now something else to bear in mind, right, is, there's a percentage of people out there who are 100% willing to pay extra for faster shipping. I'm definitely one of those people. If I'm ordering something on Amazon and I have the opportunity to pay a bit extra to receive the product quicker, I'm definitely going to take up that option, and a lot of people are exactly the same. Now we have tested this in BusterBox, where we offer priority shipping for a small extra monthly charge shipping for a small extra monthly charge. Now this basically allows people to skip the queue and get their boxes shipped out ASAP and guess what? People go for this and it helps us raise up our average revenue per user. If you're driving a lot of customers to your website, this will have a enormous impact, even something small like this.
Speaker 2:
Now in Subli, this is really really easy to set up. You can set a separate shipping charge for each product and you can name it whatever you want, and then that name will appear on the checkout. So it could be like skip the queue shipping, or fast shipping, or priority shipping whatever you want to call it. Now I definitely recommend testing this in your business for a couple of different reasons. Number one it's really easy to set up, no matter what platform you're on. This should only take you a couple of minutes to set up. And number two this is as close as you're going to get in your business to printing free money. You're basically charging for nothing, just sending out the boxes a bit earlier. So, yeah, it's definitely a good idea to test this. Remember, you should get creative and never be afraid to test different things in your business because, honestly, you never know what will work, and the little things can make a big difference.
Speaker 2:
I hope you enjoyed this episode and I hope that has cleared up what you should do when it comes to charging for shipping versus free shipping in your company. We will be back next week at the exact same time. If you have a question you want to answer it on the show, please head over to subscriptionboxresourcescom, join the free facebook group and post your question there. And also, can I ask a big favor? If you got some value from this episode or you've been listening for a while and you've learned a lot from this show, would you mind giving me a review on apple or spotify or whatever you listen to this podcast on? It really doesn't matter, it just helps me get the show out to more people. Thanks very much and chat to you next week. Have a great day, bye.