eDesk logo

Should Your Online Store Offer Free Shipping and Returns?

Last updated February 27, 2023 5 min to read
Free shipping and returns
Table of Contents

Share this article

All online shoppers want free shipping and returns, but not all eCommerce businesses are able to offer it.

Once considered a perk, most people now expect free delivery and returns as standard—so much so that several studies have indicated that shipping costs are a leading cause of shopping cart abandonment.

For online sellers, however, free shipping is anything but free. Even Amazon spent $37.9 billion on shipping in 2019—that’s 23% of the company’s cost of sales.

So, the question isn’t if your online store should offer free shipping, but whether and when your business can afford it.

What to consider before jumping on the free shipping bandwagon

When you see successful online retailers offering free shipping and returns, take a moment to think before joining them.

Free shipping might increase sales, but it could kill your profit margin

A Walker Sands survey found that nine in 10 respondents named free shipping as the top incentive that would encourage them to shop online more often. But before diving in, you need to figure out whether it makes more sense to absorb the cost of shipping or raise your product prices slightly to cover the charges.

Either option will have an impact on profit margin, but it’s important to consider whether long-term gains will outweigh any short-term losses.

Here’s another way to look at it: what’s the lifetime value of any new customers you’ll acquire due to your free shipping offer? Is the ROI worth the upfront cost?

Related article: eCommerce Customer Loyalty: Seven Ways to Grow it

Your returns could skyrocket

Analysts estimate that roughly one-third of online purchases are returned. According to research from The Tuck School of Business, free shipping significantly contributes to this figure.

The reason: free shipping encourages people to spend more than they normally would. If a potential customer is undecided about an item, they’re more likely to purchase if you offer free shipping. This also means they’re more likely to send it back!

Related article: How to Write a Returns Policy: With Examples!

While those unused returned items can be resold, much of their value is lost as they move through the supply chain. Selling less-than-perfect products could ruin your reputation, so handle with care!

You could be leaving money on the table

Free delivery might be exactly what’s required to hook in more buyers, but it’s worth weighing up what you’d be losing by offering it to customers who would have bought from you anyway.

Offering free shipping is a great marketing tactic to encourage shoppers that are considering an item but not fully decided. For the ones that were intent on buying the product anyway, you’re simply giving them a freebie.

It’s very difficult to measure how committed customers are to buying your product. You can get some high-level indications by looking at the eCommerce metrics on your website. The time spend on product pages and then purchasing, for example. But in many cases you’ll only find out by testing and analyzing different shipping tactics.

How do some bigger retailers handle free shipping?

They might have substantially deeper pockets than most online retailers, but they’re still delicately balancing the allure of free shipping and returns, with maximum profitability. Let’s take a look at how some of the biggest online retailers in the world tackle it.

Amazon

Amazon customers receive free shipping if their order includes at least $25 worth of eligible items across all categories, delivery of which will take place five to eight business days after all products are available to ship. Meanwhile, Amazon Prime members get free shipping with two-day delivery on eligible items, no minimum spend required.

Walmart

Walmart, like Amazon, is a massive online retailer as well as being one of the biggest marketplaces in the world. It offers free two-day shipping on 2 million items on orders that are more than $35.

Related article: How to Sell on Walmart in Three Easy Steps!

Target

Target customers who pay for their online order using the retailer’s RedCard get free shipping when they spend at least $25 on eligible items.

Asos

Asos offers free standard delivery to US customers on orders of $42 or more, while Premier members ($19 annually) get free unlimited two-day shipping with no minimum order value.

Nordstrom

Nordstrom ships almost anything on its site to anywhere in the U.S. for free. In-stock items typically arrive three to five days after an order is placed.

Should you offer free shipping and returns on all orders?

Most online retailers are very careful when offering free shipping and returns on all orders.

Absorbing the full costs of all your shipping and handling, regardless of the order size, can make selling small ticket items extremely unprofitable. You’re gambling the cost of shipping an item entirely for free, without much of a reward.

Here are some points to bear in mind when setting your free shipping and returns conditions.

Site-wide free shipping is expensive

Determine the type of shipping service you want to offer and how much that will cost, then factor that into the cost of your goods. Can you absorb the cost yourself or will you need to raise your prices to make up for the charges? And if your prices do need to increase, will you lose existing customers? Remember, it’s cheaper to retain a customer than to acquire a new one.

Free shipping is expensive
Don’t underestimate the cost of offering free shipping. It’s a great marketing tactic, but could have serious implications for your margins.

Free delivery doesn’t make sense for certain items

Small lightweight items such as jewelry, makeup or small accessories are cheaper to ship than larger ones. But that doesn’t mean it makes sense to only offer free shipping on those items. Consider high-margin items that not only have a low shipping cost, but also enough markup to offset shipping fees.

Customers are used to free shipping thresholds

Let’s face it, free shipping on everything all the time isn’t sustainable. Setting a minimum order value can encourage larger orders and reduce risk. According to UPS, 48 percent of shoppers add items to their cart to qualify for free shipping.

Related articles: eCommerce Shipping: How to Boost Sales and Slash Costs

The bottom line

Thanks to Amazon, consumers expect fast, free delivery—and that’s unlikely to change any time soon. But it doesn’t mean that your online store has to offer it, too, especially if it’s going to hurt your bottom line.

That being said, the promise of free shipping and returns provides an incentive for first-time visitors to become paying customers. From there, focus on nurturing the post-purchase relationship and turn those new leads into loyal customers.

Say thanks

It sounds obvious but sending shoppers an order confirmation and thanking them for their business is a must-do. Go one step further and provide some value-added content they won’t expect to receive, such as a support manual, a how-to video or an ebook on a related topic.

Anticipate their needs

Contact customers a few days after delivery. Make sure everything went smoothly with their orders, address any common queries and ask if they need help.

Reach out regularly

Segment your new customers based on the data you have collected from them so far and send targeted emails that encourage them to return to your online store and spend.

Did you know that over 60% of US online retail purchases were made through Amazon last year? Amazon’s hold over eCommerce is well established, with 9.1 million active Amazon sellers worldwide and an average of 66 thousand orders per day. Newer sellers may be wondering how they can get more sales on Amazon in such a competitive environment.

The truth is, they absolutely can because with Amazon’s booming market share come many opportunities. We’ve assembled this digestible list of 14 quick wins and strategic moves, to help you up your game and sell more on Amazon.

1. Do keyword research

Having the right keywords can be one of the most important tactics in reaching your target audiences. Using the keywords that are common to searches for your products is the objective, but search engine optimisation (SEO) is a constantly evolving game. That means that keywords used successfully in the past may not be as effective with updated search engine algorithms today.

The terms used by customers to find products change daily and are affected by seasonal, cultural, and economic factors. Hence, it’s important to stay on top of the latest SEO trends and make sure you cast a wide net when implementing keywords for each product listing.

Each product should be optimized with as many relevant keywords as possible – into the hundreds! This gives you the best possible chance of getting your products found by customers, helping you sell more on Amazon.

Amazon keyword research tools like Helium 10, SellerApp, Jungle Scout, and AMZ One can help by generating a list of related keywords with search volume, competition level, and other useful metrics, making it easier for you to choose the best keywords for your product listing

2. Use a repricing tool to get more sales on Amazon

When it comes to sealing the deal and making a sale, price is a main deciding factor for many customers. As an Amazon seller, you always want to make sure you’re pricing your products competitively, but equally, you don’t want to lose your margin! 

This is something that using repricing software can help with. Repricing software automates the pricing process in real-time, ensuring your prices stay in line with those of competitors, and with market fluctuations, while you get more sales on Amazon.

Repricing software also has many customisable features that allow you to set prices at optimal levels to help drive sales, without compromising profit. It’s worth taking a trial to see how it can help lift your sales. 

3. Get more Amazon reviews

Online reviews are important to spread confidence through word of month and for building credibility for your brand. It’s also a fact that 72% of shoppers won’t buy until they’ve read reviews of a product from people like themselves – people they trust. 

Even a strong product with great marketing behind it still has to overcome the fear of the unknown if there’s no social proof. Plus, positive reviews are a significant factor in deciding which products win the Amazon Buy Box.

Get more Amazon reviews by encouraging feedback from your customers. The best way to do this is by utilizing feedback software to automate the process.

4. Provide great customer service

Customer service is absolutely essential in eCommerce. Offering top-quality customer service not only adds value, but helps retain customers. A big part of making a sale is assuring the customer that they can trust you to deliver, and that trust is hard earned but easily lost. Providing good eCommerce customer service is critical, and committing to providing great customer service is all the more so!

As an Amazon seller, you need to be on top of your customer service. Responsiveness, a friendly manner and quick and easy resolution processes are all ingredients that make for a winning approach to great customer service. 

But it can be confusing trying to streamline it all. Thankfully, there are all sorts of tools available to make this job easier, like helpdesk software to keep all your customer interactions in one place. This helps you to respond quickly and accurately to customer inquiries when they come in, so that your customers always know you’ve got their back.

5. Leverage Amazon seller tools

The best part about being an Amazon seller is that you don’t have to go it alone. There are numerous tools available to help you maximize your business and get the most out of selling on Amazon, whether third-party or FBA. 

From repricing tools, to help desk software, to review software and even shipping assistance, many tools exist on the market today that specifically help Amazon sellers optimize their listings, prices, feedback, shipping, customer service and even their taxes. 

There are many different seller tools available, so it’s worth reading about options and making an informed decision about the right ones to choose for your business. With the right tools, you can grow your business more than you ever thought possible. 

6. Get more sales on Amazon with ads

Running ads is almost guaranteed to help you get more sales on Amazon, but it’s easy to just throw money at them and hope for the best. You can do better! Pay attention to your advertising cost of sales (ACOS) metric, the figure for how much ad spend you need in order to make a sale.

By advertising more efficiently, you lower your ACOS and ensure you get more bang for your buck. Over time, you’ll learn what works and you can employ a strategy with regards to how you run your ads. Taking an insight-driven approach to Amazon ads results in a more profitable Amazon business!

7. Optimise your product pages

The old saying goes that 80% of readers never make it past the headline of any piece of content. That means once you’ve written your product title, you’ve effectively spent 80 cents of your dollar.

When writing product titles, stick to the formula of:

  • Brand name
  • Product name
  • Features (size, colour, gender etc). 

This lets you include the right keywords in the right order to immediately tell shoppers that this is the product for them.

Moreover, making sure to visually design your product pages so that they’re clean, simple and easy to read will also help win over shoppers. No one wants to read through a cluttered page. The more straightforward (yet informative) and the cleaner you make your design, the more likely you’ll be to win over those elusive eyeballs!

8. Win the Amazon Buy Box

The quickest way to get more sales on Amazon is by ensuring that your products show up consistently in the Amazon Buy Box (the area in the top right of a product page, where shoppers can ‘Add to Cart’ or ‘Buy Now’). This is because over 82% of sales happen through this highly sought after space.

Although the exact formula to win the Buy Box is unknown, there are a few things that we know are essential. These are mainly metrics that prove the seller is providing a good customer experience. Customer reviews play a big role here. The more positive reviews a seller can amass, the likelihood of winning the Buy Box increases. 

In addition to reviews, something else that’s obviously very important to Amazon shoppers is price! By using repricing software, you can automatically set your prices at the optimal level to win the Buy Box and maximize profit, even if you’ve got an enormous inventory.

9. Amazon account health rating

The Amazon account health rating (AHR) is a new feature that helps you monitor your account health based on its adherence to Amazon seller policies. 

It considers both negative factors (such as the number of unresolved policy violations on your account) as well as positive factors (how your account positively impacts the customer experience through its selling activities). 

Each account will be given a rating, which is regularly reviewed as Amazon monitors the performance of its sellers. If your account is off-target, you will be notified so that you can improve your performance. Conversely, a good AHR rating will work in your favor, helping assure customers that they’re doing business with a compliant seller. 

10. Maintain your Amazon SLA

A big part of being a seller is cultivating trust with your customers. That means showing them that you operate in an above-board manner and that you’ll make good on your promise of fulfillment to them. One way of doing that is by making sure your Amazon store has a Service Level Agreement (SLA). This is a promise to your customers that they’ll receive their orders on time. When it comes to fulfillment, the SLA is based on the capacity to fulfill open orders and on-time shipping and delivery. 

SLAs help manage customer expectations by defining standards and outlining circumstances under which you as the seller won’t be liable for unfulfilled promises (e.g., natural disasters preventing shipping, etc). 

eDesk’s customer service solution is designed to alert you when your SLA is expiring, so your business is never caught without one. Having a current SLA helps you maintain transparency with customers, thereby building trust which helps ensure customer loyalty.  

11. Focus on products that already sell

Most ambitious business owners want to try new streams of revenue, but it’s important not to lose sight of the things that are making you money now. 

By doubling down on the products that already provide your Amazon store with a reliable revenue stream, you not only deliver to market demand but ensure that you have the financial runway required to take risks on innovative new products, if need be. 

Review your financial statements every quarter and look at the items that are performing best in your store. Think about how you can continue to market these with ads, SEO keywords and upgraded images to maximize their selling potential in your online store. 

12. Sync your inventory

Inventory can be a delicate balancing act. Hold too much inventory for too long and you need to pay over the odds to store it. But hold too little inventory and you lose out on vital sales, or even customers, due to an inability to fulfill. Amazon can also penalize you if your inventory performance isn’t up to standard.

Stock control is something every seller needs to understand and have the capability to manage for optimal results. Smart inventory management is an under-appreciated way to increase your Amazon sales and profit margin. Fortunately, there are tools that can help. Investing in the right tools and software can help sellers take the stress out of balancing supply and demand.

13. Expand into new Amazon marketplaces 

Amazon currently has 20 marketplaces around the world, which include the US, Canada, Mexico, UK, France, Germany, Italy, Spain, Japan, Singapore, Brazil, Australia and more. 

You can scale your brand by moving into some of these marketplaces. This can involve doing market research to find out which products are popular in each market and then uplevelling your shipping operations in order to be able to ship globally.  

But expanding into new markets also means you’ll need to take language into consideration and localize your listings so that they feature each marketplace’s local language and SEO keywords in the appropriate language. Multilingual customer service is also needed in order to be able to service customers across various marketplaces in their local language. 

Sounds complicated? It doesn’t have to be. eDesk’s help desk solution is designed to support customer service and workflow in multiple languages, so you can expand your business without investing in the overhead of hiring a global team. 

14. Spy on your competitors

Ok, maybe “spy” is a bit of an exaggeration, but profitable sellers are always on the lookout for what their competitors are doing. You want to make sure you’re offering the right inventory for your market at the right prices. Repricing software will monitor this for you, taking the guesswork out of pricing at the right levels. 

Using data gleaned from helpdesk reporting can also help you gather valuable insights and feedback from your customers, which will help you to better understand what customers want and need. Acting on analytics-driven insights from easy-to-read reports means you’re always one step ahead of the competition. 

Final thoughts

The quest to increase your store’s Amazon sales doesn’t need to be an uphill struggle. There are many resources available to Amazon sellers today to help them optimize their store and develop a healthy sales pipeline. 

By staying in touch with how the Amazon platform grows and using the right tech tools to drive your business, you can continue to do what you do best: building a great brand, winning customers, retaining existing customers and improving your bottom line. 

Looking for more great content like this? We’ve curated a list of related resources for you down below