The Psychology and Logistics of Free Shipping

Free shipping has become an expectation for almost all online shopping in recent years. However, just because a shipping cost isn’t charged to the customer doesn’t mean an item is actually “free” to ship.

Free shipping is primarily a marketing tactic, but that doesn’t mean you can’t use it to your advantage as a warehouse manager. Understanding the psychology and logistics of free shipping could help you maximize customer retention and minimize costs to your business.

Convenience is Key to Customer Satisfaction

Free shipping significantly increases a customer’s desire to make a purchase online for many reasons, many of which have nothing to do with the perception of saving money. For example, e-commerce customers want to make sure they’re not going to get hit with any hidden fees between adding an item to their online cart and finalizing their order.

In fact, unexpected costs are the most common reason online shoppers abandon their carts during the ordering process. The desire to cut down on surprise fees is consistent with a larger pattern emerging in the e-commerce economy: the prioritization of convenience above all else. Customers expect to get exactly what they see on their screen for the exact price listed, and they want to get it as fast as possible.

How Does Free Shipping Help Businesses?

Of course, businesses reap a lot of benefits from the focus on “free” shipping that characterizes the modern economy. Satisfied customers are often repeat customers, and developing a dependable customer base can help keep a warehouse profitable in an increasingly competitive market space.

Free shipping is often correlated with increased order sizes as well. For instance, if a warehouse offers free shipping on all orders over $50, they can decrease expenses associated with small-batch orders while increasing the number of high-value orders they receive and fill, resulting in a significant boost in overall sales.

You can also improve your marketing strategy with conditional or universal free shipping. Most online shoppers look to reviews for recommendations on where to buy from, and offering free shipping leads many consumers to leave positive reviews about their cost-saving experience.

The Hidden Costs of “Free” Shipping

Of course, even if it comes at no cost to the consumer, shipping a product from one place to another always costs something for the warehouse that the product is coming from or going to. Postage alone may be a significant expense, depending on the size of the order being shipped. Warehouses offering free shipping also have to make up the difference in costs associated with packaging, warehouse labor, agreements with transport networks, and more.

In the long term, warehouses serving online retailers may adapt to the psychology and logistics of free shipping by redesigning storage space for more efficient, small-batch orders, working with multiple carriers at once, and relocating warehouses to be closer to high-population areas. In the short term, however, making “free” shipping work with your business may simply be a matter of finding places to cut costs while working to ensure a good customer experience leads to more incoming revenue.

With a platform like HapiGig, you can fill any day-to-day operational needs imposed by the “free shipping” economy by hiring temp workers to perform flex labor. Consider becoming a HapiEmployer today.