Companies could realize up to 10% increase in revenue by always offering free shipping to customers, Stitch Labs analysis indicates; small businesses are three times less likely to offer free shipping than their larger counterparts
July 8, 2014
– Retail Data Reveals When and Why Companies Should Offer Free Shipping
Stitch Labs, the leading inventory and multichannel selling platform for retailers and wholesalers, today revealed findings that indicate a potential 10 percent increase in revenue when companies provide free shipping to customers.
Mining data from more than 1 million US Shopify orders, Stitch investigated the outcomes of businesses with policies ranging from always offering free shipping to never doing so. Additional findings include:
Free shipping all the time
A Forrester study found customers avoid paying for shipping at all costs, even if it means buying elsewhere. Despite this, Stitch found that small businesses are three times less likely to offer free shipping than larger counterparts. Stitch's data shows that retailers who always offer free shipping can directly increase revenue by 10 percent.
No free shipping
The data also showed that 33 percent of businesses never ship for free. This is most likely because the average total cost per order is lowest when companies never offer free shipping. However, the same Forrester study above determined that 65 percent of customers abandon shopping carts and 44 percent do so because of shipping costs, indicating a high negative revenue impact to choosing this option.
Free shipping sometimes
Most businesses strategically use free shipping based on a threshold, such as orders over $100 or when more than three items are purchased. In fact, Stitch found nearly 57 percent of businesses use this shipping model because purchase levels help guarantee retailers a return on investment from offering free shipping.
"Our clients are often tasked with choosing between various shipping options, and the benefits and challenges are difficult to weigh without supporting data," said Brandon Levey, CEO and founder of Stitch Labs. "We hope this information gives retailers insight into when free shipping can positively affect profit margin."
Data used for analysis was based on orders synced with Stitch Labs from January 1, 2013 to December 31, 2013, which is an aggregation of more than 1 million orders, totaling more than $100 million in sales from tens of thousands of businesses. This analysis includes only orders that were shipped to a known U.S. postal code using the integrated platform, Shopify.
To learn more about how Stitch Labs' inventory control solution helps retailers make smarter business decisions through real-time data reporting, please visit www.stitchlabs.com.
About Stitch Labs
Stitch Labs is an online platform for multichannel sellers who need to manage their inventory, orders and sales data information all in one intuitive location. Stitch integrates with Amazon, Ebay, Etsy, Shopify, Quickbooks, Xero, BigCommerce and Square, ShipStation and more, enabling businesses to grow their multichannel businesses with ease. For more information about Stitch Labs, visit www.stitchlabs.com or reach out to our team at email@example.com.
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