The biggest bane of any online retailer, because they have no face-to-face interaction with consumers, is abandoned shopping carts. The product is good, the price is right, yet the 67.9 percent of customers on average fail to complete the transaction. This hits retailers right in the wallet, costing more than USD $18 billion in lost sales annually. So what gives?
According to surveys, shipping options are a priority to online buyers, second only to product quality. Additionally, 73 percent of online shoppers list free shipping as a “critical” factor in their buying decisions. Dan Ariely used this example in his 2008 book, "Predictably Irrational":
In one study of the effects of free shipping on buyers, it was quite clear that free shipping drove up sales in every country — except France. France's Amazon hub performed poorly in comparison to others because instead of offering completely free shipping, it added a surcharge of one franc (about $0.20 USD at the time). When Amazon removed the tiny shipping charge, sales surged up again.
Granted, that's an old example (France has been using the Euro since 2002). However, Amazon made $48 billion in sales in 2011, so business is still good.
In addition, according to this infographic, 90 percent of shoppers buy more when shipping is free. This is obviously an important consideration for online retailers, including dropshippers, who want to optimize their sales generation.
Free shipping isn't the only reason online buyers decide to abandon their carts, but it is a concern that cuts across all product categories. it turns out that buyers think that when shipping is free, it translates to a significant cut in the total bill. However, this isn't always the case.
As mentioned earlier, people buy more when shipping is free, but more importantly, they will often buy something they don't need just to qualify for free shipping. This is a good way to move the inventory that isn't exactly flying off the shelves, as well as your surplus items.
Amazon's model goes a long way in illustrating this behavior. The site requires a minimum purchase of $35 to secure free shipping for qualified items, so buyers are motivated to look for items that will count toward that minimum rather than items that they would normally consider purchasing.
Buyers have also been known to pass up on a discounted item that doesn't offer worldwide shipping free in favor of something more expensive that includes free shipping, even if the total bill comes out lower for the discounted item with the shipping charge thrown in.
Online buyers also tend to forgo comparison shopping when they find an item they need if it already offers free shipping. They often assume they're getting a bargain based on nothing more than the fact that there's no shipping charge. This may not seem to make sense, but that's how the average online buyer behaves.
So now we come to the crux of the matter: how Amazon worldwide shipping benefits the dropshipper. In the strictest sense, it doesn't. Free shipping by Amazon often requires that the item be fulfilled by Amazon, which requires whatever item offering free shipping to be warehoused by Amazon. The very nature of dropshipping precludes keeping any item in stock, but there are always exceptions.
For instance, if your supplier is offering substantial discounts on a particular item that has fair to high demand in your market, that could potentially make you a lot of money if you purchase them in advance. With the item now eligible for free shipping, you could make a killing. Amazon would be an excellent platform in this venture.
You could also invest in low-priced items that can be used as filler by buyers to help them reach the minimum requirement for free shipping. This would help increase your ranking and visibility to buyers while simultaneously building brand loyalty.
Shipping worldwide is also a great way to improve your sales on Amazon, as long as you enable the proper restrictions for countries where the shipping costs are too prohibitive (and thus cause massive declines in your profit margins). Consult with your suppliers about specific worldwide shipping rates so you can establish the right price for your items.
There's also the option of profiting on the free shipping buying frenzy by padding your prices to include your shipping costs, over and above your profit margin. This way you can offer free shipping without worrying about FBA.
This may affect your sales to true bargain hunters, but keep in mind that as long as you offer a good product, most buyers won't mind paying a little more for an item because of the free shipping. That, and it's never a good idea to compete with Amazon on price in the first place. The site can almost always undersell you.
Keep in mind, however, that this method doesn't qualify your items for the free shipping minimum purchase requirement. Make sure that this is made clear to buyers to avoid complaints later on.
You should remember that big marketplaces like Amazon or eBay aren't the only players in the field. As a dropshipper, you can choose the platform that works best for you. Just keep in mind the level of exposure, selling costs (including transaction fees), flexibility of seller policies, and shipping options available per platform. Some will have wide exposure, low selling costs, no restrictions regarding items or services being sold (as long as they're legal to sell), and self-fulfillment in shipping.
In other words, you can choose to offer free shipping without fear of misrepresentation. You may want to consider these other selling platforms as an alternative to Amazon such as SaleHoo Stores.
If you really have to charge for shipping, let the customer know from the outset to avoid wasting their time and yours. Attracting and keeping the attention of a customer long enough to get to the shopping cart is difficult, and it's no fun at all to lose them at the last second because free shipping isn't available, or the shipping costs are unacceptable.
Most online retailers spend a lot of time and effort in presenting their product in the most appealing way possible but neglect to give the shipping options due attention. In order to reap the most benefits from Amazon and other online retail platforms while minimizing cart abandonment, prioritize shipping. The buyer almost certainly will.
Do you offer your buyers free shipping? Explain why or why not in the comments. I'd love to hear your reasons!
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