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    1. Cheaplists is offline

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      #1

      Pros And Cons Of Free Shipping - Advantages and Disadvantages

      Hi everybody. I have been seeing a lot of people experiment with free shipping of late. Not sure if it is a good idea or not. Can anybody here help me understand the pros and cons of shipping free of cost?
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    2. Green devil is offline

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      #2
      Free shipping, like the word implies, is “free” and that is its biggest disadvantage. Offering a freebie over a long term is never a good idea. People come to expect it, competitors end up copying it and it erodes profitability. The worst part is that no customer thanks you for it, and most sellers dislike it. It also screams “desperate” to a lot of customers who are used to seeing prices being dropped on substandard goods.

      The biggest advantages are:

      1. It can increase online sales volume, if not profits, drawing more customers and more sales to your store.

      2. If you are selling on eBay, it can help your listings appear closer to at the top of the Ebay "best match" search results. Ebay has a search algorithm that favors listings with free shipping, so it will bump yours up if you include that feature. If you're a small seller, this can give you a visibility that you're not accustomed to.

      Studies and anecdotal evidence show that there may be advantages to free shipping sometimes, particularly if it is done correctly. For instance, offering free shipping only with a minimum purchase can work out, but often, just plain free shipping under any circumstance does not prove profitable to the seller.

      It is also a fact that better sales entitle you to a powerseller status on Ebay which entitles you to further discounts which can offset shipping costs. For those not becoming a powerseller, volumes and scale in any case brings down overall operating costs.

      It’s the math ultimately. May be good for one, may not be so good for another.
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    3. Hugh is offline

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      #3
      I think it is also important to take into account the product category that you are selling in. High value goods don’t need free shipping promotions, while a low value article cannot afford the additional burden of free shipping.

      You need to see what product deserves it or can benefit most from free shipping. Offering free anything is definitely not the best umbrella strategy.

      It has, however, become really popular after E bay’s Best Match system was found to give preference to sellers offering free of cost shipping. Ebay also calls sellers and tries to get them to offer it, so sometimes people offer it even though it doesn't benefit them because they haven't done the math.

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      #4
      Who says that free shipping actually has to be free. Just add it to the cost and write shipping free. Everybody goes home happy.

      Customers dont really stop to calculate. They just want to think they have got themselves a bargain, that they are smart shoppers.etc

      And if eBay is using it as a criteria to judge which listing to put on top, I m sure its a critical enough parameter for customers to judge you on.

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      #5
      That will only work well with non commoditized goods – prices of which consumers will not be able to check against suggested retail price or competitive pricing.

      Plus if they catch onto what you are doing, you’re in big trouble anyway since you’ll get a bad feedback rating.

    6. Green devil is offline

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      #6
      Well, it's true that you can add shipping to the cost of the item, but remember that ebay takes its fees as a percentage of the price of the item. If you add shipping to the item, you actually pay fees on shipping, too, and you end up with less net profit. Your customer is paying the same thing, but your profits are less - why do that?

      The only counter rationale to this argument is that over time the free shipping tag will bring in better sales (you hope). Maybe this higher sales volume will boost you up to a powerseller, which will get a bigger discount.

      Like I said before, It all comes down to the math – not just current but for the predictable future.

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      #7
      In considering whether to offer free of cost shipping or not, you may also want to factor in short and long term business objectives. A student who has got hold of some goods at half price may think nothing of offering shipping free of cost because he does not have the time, energy or inclination to build feedback scores and whatever else that gives visibility. He is also not concerned about reducing future profitability as there is no “future” as such. It makes perfect sense for him and any such “short term” or hobby operator.

      A store owner with a near permanent presence will need to view this issue very differently. Offering free shipping once may mean he will have to offer free shipping always. As more and more competitors follow suit, the advantage will be lost and you’ll have to drop your price and you’ll make a lower margin. Now that’s like shooting yourself in the foot.

      You need to see which of these situations you fall into.

    8. Green devil is offline

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      #8
      Coming back to what I said earlier – Free of cost shipping or free anything cannot be a sustainable competitive advantage. It can be at best a promotion which should not be the only reason why people are buying from you.

      Furthermore, offering too many freebies can discount the image of a brand because discounts are usually associated with desperation on a sellers need to get rid of excess stock.

      My advice would be to use it sparingly and focus more on building some kind of USP – a unique selling proposition that gives you a real edge in the market place – whether online or offline. This could be quality of design, quality of response, speedy delivery or something that is unique to you. Even if it is not totally unique, a good communication campaign can help you own that space in the consumer's mind.

    9. Cheaplists is offline

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      #9
      Are there some specific situations on instances in which shipping free does make sense?

    10. Green devil is offline

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      #10
      You can use shipping free of cost as bait in any of the below:

      1. As a short term strategy / promotion to get rid of stock that you have in excess.

      2. When you offer no cost shipping as an incentive to buy more – free shipping with purchase of 3 CDs kind of thing – here the extra sales is directly offsetting the investment that you are making.

      3. When you are trying to build good feedback scores or have just started out and need the extra visibility.

      4. If you have really deep pockets and are willing to undercut all competition in the long haul.

      #2 above is something that Amazon has used to great advantage with their free shipping program - you know, where they offer free shipping once your purchases add up to a certain dollar level. Hell, I've done it myself - You have to have $25.00 from Amazon in order to get free shipping, and a couple of times I've had, say, $22.00, and I'll buy something else just to get free shipping. If the math works for you on a deal like that, where you actually get people to buy MORE from you, then go for it.

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