Free Shipping or Item Discounts – Which is more Profitable?

According to consumer statistics, online sales via eCommerce stores increased approximately 24% in the late Christmas 2010 season due to companies offering numerous shipping discounts. Based on numerous studies, free shipping is often used to lure customers in even more than item discounts.

Shoppers Love Deals

Shoppers flood the internet searching for the best discounts and deals. Why do you think Groupon and Living Social are some of the top sites on the internet today? Consumers will do whatever it takes to get something for less and snag a deal. Whether it’s the sheer enjoyment and thrill of saving money or simply the affordability of the item, shoppers are coupon crazed and highly savvy when it comes to saving a buck online. Don’t you think it’s time to jump on the money saving bandwagon?

What compels consumers to shop on the internet?

For one, the convenience can’t be beat! To shop in the comfort of your home while beating crowds, checkout lines and traffic is a dream come true for many, yet sometimes a discount simply is not enough. Many merchants offer 10-15% off, even discounts as high as 20-50%, which can help to increase sales. Unfortunately, shoppers loathe the shipping costs and as a result they continue to shop near their homes to save these extra fees. Contrary to what people may think, online shoppers are more lured by free shipping than item price slashing.

It’s All About the Psychology of the Matter

In order to successfully build an eCommerce business, you must understand the psychology of why people buy. Yes, it is has to do with the convenience, but a stigma arises when consumers shop online. What is the one thing they are required to pay that they will not if they shop locally? Shipping!

In your customer’s mind, the negative tradeoff for convenience is a shipping cost. Even if the cost for shipping is only $2.99, it still has a negative psychological impact on the buyer. As a result, even discounts, regardless of how high, may still not be enough to compel your customers to buy online.

Consumers are often thinking, “Will the item be discounted in my local store? Is this merchant increasing the price to get my business? If the local store has the same item for the discounted price, won’t I still save because I won’t have to pay shipping?”

By offering shipping discounts or even free shipping, you annihilate any questions right at the source and compel your customers to take a look at your store and what you offer. In their minds, you just removed their question of whether or not they should shop locally…they just saved on shipping, so why trek to the store if it won’t cost that additional and annoying shipping fee?

Shipping discounts make it more than convenient for your customers to point, click and buy because they know they are getting a deal. Consumers know that shipping charges are inevitable regardless of the price of the item, so if you take this charge away from them, they are more inclined to buy.

Test it Out

Wondering if free shipping discounts will help to increase your sales? Test it out. Try free shipping on individual items or for a minimum order. Or take a gamble and see how a sitewide free shipping discount brings in more business. Let us know what you tried and how it works for you.

 

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