Free Shipping Doesn’t Kill the Bottom Line

free-shipping-300The words “free shipping” may make operations managers cringe, but it doesn’t mean it has to kill a merchant’s bottom line.

Speaking Aug. 13 at eTail East in Philadelphia, Victor Castro, director of ecommerce for gifts seller Vermont Teddy Bear, said his company offers coupon codes for free shipping year round, but consumers hardly use them.

“As a promotion, free shipping works,” Castro said, but in its rush seasons – Valentine’s Day, Mother’s Day and Christmas – Castro said last-minute customers will pay a premium for shipping

“Our customers are late to buy, so we make them pay big,” Castro said. “We’re saving them, and we’re saving their relationship. Not only can we get away with charging a premium [for shipping], our customer is willing to pay for it.”

But Castro stressed that not all Vermont Teddy Bear’s customers are willing to pay a premium for shipping. Looking at his company’s analytics, Castro said it’s clear that female buyers will wait for free shipping offers before they make a purchase. And they also do not wait until the last second to purchase a gift from Vermont Teddy Bear.

In the same eTail East session, Hugo Smoter, head of global marketing for custom apparel maker Spreadshirt, said free shipping does not move the needle unless it’s promoted.

From April 7 to April 20, 2013, Smoter said Spreadshirt offered its customers “economy free shipping,” but did not use any marketing methods to promote the offer. A slide in Smoter’s presentation showed the free shipping offer did not change conversion rates.

But on days when Spreadshirt promoted the free shipping offer, Spreadshirt sees a significant spike on order activity.

“We thought free shipping would be a big deal for us, but it’s turned out to be a great promotional tool,” Smoter said.

Both Smoter and Castro agreed free shipping helps with another aspect of their respective companies’ operations. Since both companies sell custom products, they can both use free shipping promotions to keep manufacturing up.

Tim Parry is senior content manager with Multichannel Merchant. Follow him on Twitter, LinkedIn and Google+

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