Why Use Free Delivery – why it is important and how you do it without losing money?
This week I have been thinking about ‘Why Use Free Delivery’. I have been making some price adjustments to a customer website and starting to build an Etsy shop for them. Prices have gone up to take into account the cost of inflation but also some increases in printing costs that have taken place. It is essential that you always have a clear idea what your costs are for all your products, what the average inflation rate is each year, what competitors charge for similar products and even if you don’t put your prices up every year because it can seem like such an administrative task remember to do it every couple of years and increase prices proportionally for the whole period.
Updating prices, however, got me thinking about free delivery which once was a special offer during a sales promotion but these days is much more common place and I thought it was time to have the discussion with the customer about implementing it into their pricing model on their website before rolling it out in the new Etsy shop also.
Why Use Free Delivery On Etsy?
Last year there was a lot of anger amongst shop owners when Etsy announced a new strategy. Their strategy was to give priority in searches to shop owners providing free delivery. Many shop owners where angry because they didn’t want to be put at a disadvantage on Etsy but also they felt they would be making a financial loss if they offered free delivery especially for particularly large products or products being sent overseas.
The argument went back and to over a number of months but looking at what has evolved I don’t think Etsy has done anything wrong here they are simply evolving with the times and what customers want and if we study what has happened on Etsy and elsewhere we should be looking at something similar on our own websites. On Etsy they are giving priority on search to sellers providing free delivery in the US. Sellers are at an advantage if they provide a guarantee of free delivery on orders over $35 US dollars.
Customers Expect Free Shipping
Maybe you sell to the US in which case this might be important to you but even if you mainly sell to the UK it should still be important to you. Etsy has a good handle on customer trends and it has implemented this strategy because it realises that customers are starting to expect free delivery and it’s shops will be able to sell more and therefore make more money for Etsy if they offer free delivery.
If like me you do a lot of your shopping on Amazon you will know that they are here too. You can pay postage on most products to get them quickly if you like but if you are prepared to wait another 2 or 3 days you can get free delivery on many orders over £20. Even if you want to buy something for £15 that costs another £4 to deliver you will usually add another product of £5 or more to take the order to £20 to get your free delivery. As a customer you buy more than you really want to but feel that you have got a deal because you have either got delivery for nothing or ended up with a 2nd product for free or at a considerable discount.
Does Free Delivery Mean You Have To Lose Out?
Like it or not Amazon and companies like them set the bar for customer expectations. But are the vendors on there making a loss now because customers are expecting this? Of course not. They have simply changed their pricing model to absorb those costs. Try searching for a mainstream product on a price comparison site, a popular piece of technology or domestic appliance for example that is competitively priced. The price comparison site will show the item available in a number of mainstream stores.
Perhaps there will be the odd store with a slightly cheaper or slightly more expensive but price comparison sites now show not only the item price but the delivery cost and if you add the delivery cost to the item price for those that charge and compare that to the price charged for those offering free delivery you will see that many stores are charging a very similar total price, the ones offering free delivery have simply increased their product price to accommodate delivery. Some stores lend themselves to delivering everything, some lend themselves more to collect in store so they might adjust accordingly to compete but its clear they are working with very similar numbers just presenting them differently.
Will Free Delivery Get You More Exposure?
Another move Etsy made was to include a tick box for free delivery. When you search for items your initial search can often bring back hundreds of items. You then refine your search by adding more descriptive terms. Then you might use a price filter and tick boxes down the left hand side to isolate colour, size and so on. Many customers reluctant to pay delivery now due to shopping experiences elsewhere will tick the ‘free delivery’ box. Once they do that’s it, even if your product fits the bill exactly if you don’t offer free delivery then you are now out of the running with that customer and somebody else gets the sale instead.
It’s not the end of the world. Some customers will still pay delivery and if you are shipping overseas you cannot usually absorb overseas delivery into the product as that will price you out of the market in your home market. The point is with free delivery you will increase sales even if you put prices up by the equivalent home market postage price as you will end up in more searches on platforms like Etsy and even on your own website more customers will buy if they are more comfortable with free delivery and they will add extra items to their order that they might not have bought otherwise to reach your minimum order value for free delivery.
How To Calculate Prices To Include Free Delivery
So how did I implement free delivery for my artist customer this week? Well here is a breakdown. The artist in question offers giclée prints printed on paper in varying sizes such as A4, A3, A2, A1. Prices were first increased to cover inflation and increased printing costs and would have worked out as follows (remember these items are carefully packaged art prints so some weight and bulk to prevent damage in transit, small items such as jewellery for example are at a real advantage here!).
|Size||Product Price||Home UK Delivery||European Delivery||North America||Rest Of World|
So next I looked at adjusting the above prices so that the delivery to the UK would be free. I achieved this by subtracting the home UK delivery price from each of the other 3 delivery options and adding it to the product price as follows
|Size||Product Price||Home UK Delivery||European Delivery||North America||Rest Of World|
Now consider the customer perception looking at this 2nd set of prices over and beyond appearing in some Etsy filters that the shop would not have previously appeared in if a customer had ticked the ‘free delivery’ option. First of all the product price has increased. Yes of course it has but this is art not the latest piece of tech that can be sourced from 101 different stores. The price has increased by a very small amount but not enough to be substantially noticeable at each price band. What is very noticeable is that delivery to the UK is now free. Customers love that and it will really grab their attention.
Reduced International Shipping Costs
What is perhaps less noticeable but equally important is that I have reduced overseas shipping prices. Despite Brexit recently we are still very much part of the European market place here in the UK and we have now made the barrier to selling to Europe much smaller by reducing the postage cost. The American market is much bigger than the market here in the UK and we have now taken a third off shipping costs there too making things much more inviting.
Selling art to the other side of the world might seem like a dream to many but with the internet and a good website or other selling platform it is within everybody’s reach but shipping can get very expensive. If a customer really wants something they will pay the shipping but anything like this to get the shipping down really helps that buying decision like reducing shipping of an A1 print from £32 to £24 for example. The piece costs £220 so that keen collector in Australia might be prepared to pay £24 shipping but £32 might just deter their decision.
In the early days of our international shipping my partner Lucy Gell sold 2 framed screenprints to a lady in Australia. The total order value was around £400. At the time it was very unusual for her to ship large framed product such a distance never mind 2 at once to the same customer and we hadn’t really properly calculated overseas pricing or expected multiples so the website charged £40 shipping on the order. In reality the shipping actually cost over £90! Fortunately the order was big enough to absorb that slip up but I doubt very much Lucy would have got that order if shipping had been advertised at £90. If, however, the product had been a little more expensive to absorb more of the shipping she might have!
It Shouldn’t Cost You To Include Free Delivery!
The important thing here is that you are still charging what you always charged, you are simply changing customer perception and providing what customers are demanding. Neither Etsy or anybody else is trying to take your profit away. You are simply changing your pricing model to evolve with the times! Once you switch though free delivery becomes a BIG SELLING POINT so shout it loud!!!
Are you offering free delivery yet? How is it working out?