How do eBay sellers ship for free? Or for that matter, anyone else who sells online? It’s hard to imagine turning a profit when shipping and handling costs are so high, but it’s entirely doable. Here’s how to offer free shipping and still make money:
Last updated 12/27/2019.
1. Hide Your Shipping Costs
The most straightforward way to make money with free shipping is to not make the shipping free at all. Instead, you simply roll it into the price of your item. Rather than charging $5 for shipping and $30 for the item, you just charge $35 and call the shipping free.
In most cases, when eBay sellers ship for free, this is how they do it.
2. Build a Loyalty Program
Amazon Prime is the most famous ecommerce loyalty program in existence, and its core model is easy to mimic: customers pay you once a year or so to get free shipping. The idea is the fee and, more importantly, the repeat business you get will make up for the shipping costs. It can also help you keep customers away from the competition.
Yet, as we discussed in our article on ecommerce customer relationship management, Amazon spent a long time losing money on Prime. Even now, it has to make the occasional 9-figure investment to keep it competitive. Be careful implementing these.
3. Offer Free Shipping When Margins Are Healthy
If you offer free shipping on an item with a $3 profit margin, you’ll likely lose money. But ship for free when someone orders $50 worth of items you can pack into one box and you should come away with a profit.
The customer satisfaction legends at L.L.Bean do exactly that: they offer free shipping on orders over $50. Since most of their items have a high price tag (and presumably a healthy profit margin), it makes perfect sense for them.
Offer free shipping when it becomes profitable to do so. Set conditions like a minimum order value of $50 or whatever works out for your business—just make sure you’ll still make money shipping out nearly any combination of items in your inventory.
4. Load Up on High-Margin Items
If you can set an item's price way above costs, why bother charging for shipping? Just buy low, sell high, and let your customers think the free shipping makes it a good deal.
This one isn’t possible for every ecommerce business. You have to watch out for competitors willing to sell the same thing for slimmer profits. But if you stick almost entirely to high-margin items, you’ll make plenty of money even while offering free shipping.
5. Use Amazon’s Add-on Strategy
As we stated under option three, you rarely make money off a single cheap item. But this is another place where you can mimic Amazon’s strategy: they have add-on items that qualify for free shipping when purchased with enough other stuff.
Although Amazon rarely uses the add-on program anymore, the technique still works well for any online retailer selling small, cheap items.
There are two main ways to do this. You can:
- Offer free shipping on everything. Only allow customers to order the stuff that would be cost-prohibitive if they also buy enough of your high-margin items.
- Charge shipping if the customers buy a cheap item alone, but not if they buy it with items that qualify for free shipping.
Of course, there are plenty of other ways to use add-ons if you let your imagination run.
6. Cut Costs in Other Areas
Do you have multiple agents handling customer service? You can cut back on those costs significantly by connecting eBay, Amazon and Walmart with a helpdesk if you sell through those channels, reducing work hours or even staff needed.
Does your team spend a lot of time readjusting Amazon prices? Use Amazon repricing software to automate the process, save time and money, and boost sales.
We live in an age of connectedness and automation. Take advantage of it! If you cut your other costs, offering free shipping will become more profitable, or at least affordable. See our article on multi-channel software for eBay and Amazon sellers for more.
Adapt a Strategy to Your Business
There’s no one-size-fits-all solution, but if you adapt these strategies to your business’s specific needs, you’ll find a way to offer free shipping and still make money. Don’t be afraid to experiment, but do measure your ROI. Always remember that the goal is to increase your profits!