As a retailer or manufacturer who sells car parts, free shipping can be a good way to pull in more business. While free shipping eats into margins, it often increases a consumer’s willingness to spend. Revenue – and the number of transactions you complete – can often increase. More transactions and more revenue generally leads to more long-term profits.
Here’s a brief overview of the benefits of free shopping, the costs, and suggestions for ways to offer free shipping without ruining your margins.
Cart Abandonment and Unexpected Shipping Costs
How many customers have:
- Visited your online store
- Selected parts for purchase and put them in the cart
- Started the purchase process by entering their name, address, etc. and then
- Suddenly – and inexplicably – stop the process
We call this phenomenon “cart abandonment,” and it happens more often than cart completion on a lot of websites. While there are lots of reasons shoppers abandon the purchase process, shipping costs are a biggie. According to data provided by Visual Website Optimizer, more than half of consumers (56%) drop out of the purchase process because they were “presented with unexpected costs.”
Since most websites very clearly state the price of their parts, these unexpected costs are almost always going to be core charges or – more likely – shipping fees.
The Power Of Free Shipping
Consumers have almost no idea about how much shipping should cost. The extent of an average person’s knowledge about shipping is limited to their interactions with the post office or perhaps their local shipping and packing store. As a result, consumers are often shocked to learn that it costs a small fortune to ship heavy and/or bulky items cross country.
It’s also true that consumer love free shipping and are more likely to buy from a store that offers it. Various case studies have shown that free shipping increases sales (both in terms of revenue per ticket and also in terms of transaction volume), largely because it prevents cart abandonment. Consumers are no longer “surprised” when they get to the payment section of your checkout process, and as a result more of them buy.
Anecdotally, it’s not an exaggeration to say that ecommerce juggernaut Amazon.com built their business around free shipping. We also see most of the successful after-market part ecommerce websites offering free shipping.
Basically, there’s a logical reason to offer free shipping (reduces cart abandonment) and there’s LOTS of evidence to suggest free shipping is effective.
The Pitfalls of Free Shipping For Auto Parts Retailers
The biggest problem with free shipping is that auto parts retailers often can’t afford to offer free shipping! If you’re selling OEM replacement parts online, for example, it’s impossible to offer free shipping AND a competitive asking price. The same goes for many large or heavy items (OEM or after-market), where retailers would have to sell parts for more than list price to be able to include shipping.
There’s also the fact that consumers often pay close attention to part pricing when choosing a website to buy their parts from. If you offer free shipping, but your parts have a higher asking price than other retailers, consumers might buy elsewhere.
Simply stated, it’s hard to offer free shipping. But there are some “tricks” you can use to mitigate these challenges:
How To Offer Free Shipping Without Losing Your Shirt
To recap, we know that:
- Consumers love free shipping
- Online retailers who offer free shipping usually see higher conversion rates and more revenue per order
- It’s hard – if not impossible – to offer free shipping on certain types of auto parts
What’s an online auto parts retailer to do? How can you offer free shipping AND make money selling auto parts?
We can’t answer that question definitively, but we know that it’s possible. StreetSideAuto.com, SummitRacing.com, Jegs.com, and AutoAnything.com (to name a few) all offer free shipping, and they’re all very competitively priced. Here’s how they do it:
- They’ve streamlined the pick, pack, and ship process to minimize costs. They use the least expensive shipping option each and every time they process an order. They put the right part in the box every time. They’ve got a good process for getting orders out the door quickly. Etc.
- They exclude certain types of parts from their free shipping offer. Oversized parts, parts that can only be shipped via freight, hazmat parts, tires and wheels, body panels, etc. are not included. This reduces the cost of offering free shipping.
- They limit free shipping to the continental United States – residents of Alaska, Hawaii, or Puerto Rico must pay more. People in these states are accustomed to this caveat, and the bulk of the business is in the continental USA anyways.
- They use the cheapest (read: slowest) shipping method available. If you want a part fast, you need to pay for expedited shipping. Often times, consumers will invest a few dollars in faster shipping, raising margins substantially in the process.
- They often set a minimum order amount, which ensures sufficient profit to cover the shipping and handling costs. SummitRacing and StreetSideAuto, for example, only offer free shipping on orders over $100 (or so), at least as of April 2015.
If you’re selling parts online and want to offer free shipping, we recommend implementing all of the above. Optimize your fulfillment process. Exclude free shipping to “normal” parts in delivered only in the continental United States. Use the least expensive shipping method you can, even if it means consumers must wait 7-10 days.
Most importantly, require a minimum purchase amount in exchange for free shipping. This is helpful in two ways: First, you can ensure profitability on your orders by looking at your average margin, your average shipping costs, and then setting the order minimum to cover your costs (or better) most of the time. Second, setting a minimum order amount encourages the consumer to spend more money. We recommend looking at your median ticket amount and setting your free shipping at that level (or close to it) so that your average order amount increases.
Free Shipping For Members Only?
Another concept to consider is to offer free shipping through some sort of membership program. Some retailers offer a paid membership program that includes free shipping on all orders. Other retailers have free membership programs that allow consumers to accumulate points and trade them for discounts and/or free shipping. This membership approach isn’t terribly common, but there are a lot of benefits to consider, from regular recurring revenue (at least with paid membership programs) to advanced email marketing programs that increase the odds of consumers returning to buy more parts.
Should You Offer Free Shipping?
There are pros and cons. On one hand, if your online store isn’t offering some sort of free shipping, you are probably missing out on some sales. On the other, the auto parts industry hasn’t gotten to the point where you absolutely have to offer free shipping…only that day is probably coming, especially for after-market parts retailers.
But in the here and now, we recommend testing free shipping (or inexpensive flat-rate shipping) on your site to see what impact it has on sales. Try running a “free shipping sale”, test the impact of offering free shipping on orders over $199, offer free shipping on all suspension parts, etc. just to see what happens. If you see a big lift in sales, it will be much easier to implement a full free shipping policy.