Psychology of Shipping Costs: How to Advertise Shipping

Allison Champion
4 min read
May 11, 2020
Modified: March 20, 2023

Is free shipping really the best option? Do customers prefer free shipping? Can free shipping actually improve sales? If you’ve asked these questions before, then you’re wondering about the psychology of free shipping. So we created this article on the psychology of shipping costs and how to advertise free shipping. 

Why is Free Shipping Important?

Free shipping is important for three reasons; consumers expect free shipping from retailers; it makes them more likely to shop and it makes life more convenient. Convenience shapes customer behavior and ultimately determines whether or not they will return. 

In fact, nine out of ten consumers are likely to choose a retailer based on the convenience of the customer experience. Whatever the reasons consumers choose free shipping, it’s clear that consumer behavior changes when shipping fees are imposed.

We found across numerous studies that shipping and handling costs account for almost 52% of abandoned shopping carts. This statistic correlates with consumer psychology, which dictates that it is unreasonable to pay extra for something that is required. But someone always pays for free shipping, right? 

Is Free Shipping Really Free?

No. Nothing is free, especially shipping. Someone always pays for shipping but the illusion of choice makes consumers feel they chose the smarter, cheaper, more convenient option. The trick is to offer your customers the option to choose between free shipping and the next cheapest option. By doing so, you make your customer feel a lot better about the decision they made. 

How Can You Offer Free Shipping (Without Taking A Loss)?

There are five ways e-commerce retailers can offer free shipping and still make money. 

  1. Hide the Cost of Shipping

The best way to offer free shipping without taking a loss is to hide your shipping costs in the cost of the item. Don’t deceive your customers – you must be transparent about all shipping options and their associated costs, but there is nothing stopping you from raising the cost of an item from $30 to $35 to cover the cost of shipping. 

  1. Launch a Loyalty Program

When you think of loyalty programs, the first one to come to mind is likely Amazon Prime. Fortunately, you don’t have to be retail-giant to mimic their example. The idea is simple: customers pay you a month or yearly fee to receive free shipping and that subscription fee covers the cost of shipping, which encourages repeat business. 

  1. Offer Free Shipping When Margins are High

When your margins are high enough to cover the cost of shipping and still make a profit, then there is no reason not to offer free shipping to your customer. Remember, you don’t have to offer free shipping until it’s profitable to do so and you can always set conditions like a minimum order value to ensure sure you always make money.

  1. Offer More High Margin Items

Since it’s easier to offer free shipping on high margin items, logic dictates that you should stock up on high margin items to sell if you want to offer free shipping to your customers. Though this isn’t likely possible for every eRetailer, you have to keep an eye out for competitors willing to sell the same thing for slimmer profits. 

  1. Include an Add-On Option

One way to offer free shipping to your customers is to offer an add-on option. Add-on options enable customers to order the items that would be too expensive to ship if purchased alone. Use add-ons to incentivize customers to quickly add high margin items that qualify for free shipping. Add-ons are a win-win for you and your customer because they can always charge for shipping if customers choose to buy a cheaper item alone.

How to Set Up Free Shipping

Customers will almost always choose free shipping but only if they feel like no one is taking advantage of them. Therefore, to set up free shipping, you must remove anything from the buying process that could make a customer feel at odds.

  1. Remove dollar signs from items
  2. Use round numbers
  3. Limit the number of purchases per customer
  4. Use the “left digit effect”, i.e., $9.99 instead of $10.

Outsource to a Logistics Provider

The psychological tricks mentioned above are one way of many ways to help your customers feel more at ease with their purchases and offer affordable free shipping.

The best way to offer affordable free shipping is with Flowspace.

As the premium on-demand warehousing and fulfillment provider in the country. As the premium on-demand, Flowspace can put your products close to your customers, lowering the costs of shipping, and making it easier for you to profitably offer free shipping.

Request Information

Written By:

flowspace author Allison Champion

Allison Champion

Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing.

Table of Contents