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Free Shipping Strategies Gain Retailers Loyal Customers

Retailers can attract customers by paying attention to the seven types of free shipping

A rapidly growing number of people are turning to the Internet for shopping, away from bricks-and-mortar stores, according to Luke Knowles, founder of FreeShipping.org. Supporting Knowles’ point is the fact that online shopping increased two percent in January 2009 compared to January 2008.

To help retailers more easily incorporate free shipping into their marketing strategy, Knowles wrote an e-book titled, The Free Shipping eBook: A Guide to Help Merchants Increase Profits with Free Shipping. The e-book can be downloaded for free at http://www.freeshipping.org/ebook/. Written for large and small retailers, The Free Shipping e-Book describes how free shipping can increase sales and turn casual shoppers into loyal customers.

In the e-book, Knowles writes about the seven types of free shipping offers.

1. Free Shipping on Everything (or Free Shipping without Conditions). Merchants who have a high profit margin can offer free shipping with every order. Many shoe and jewelry merchants offer complimentary shipping on everything for this very reason. Lalit Dhadphale of HealthWarehouse.com began offering free shipping on all orders in August 2006, a first in the online healthcare segment. Lalit says, "We opted to go free shipping across the board with no coupons or minimums for everyone and the results have exceeded our expectations (and our customers as well)."

• Major advantage: This is the most enticing deal for shoppers and can generate increased sales.

2. Free Shipping with a Minimum Order. The most common free shipping offer is free shipping with a minimum purchase price.

• Major advantage 1: This type of free shipping offer encourages shoppers to spend more to qualify for the discount.

• Major advantage 2: As fuel costs increase, merchants can raise the spending limit needed to qualify for free shipping.

Tip: If the average customer spends $90 per order, try offering free shipping on purchases over $100. This will encourage shoppers to buy more to get free shipping.

3. Free Shipping on Select Items. Many merchants selling small and large items promote free shipping only on select products (as it is not cost effective to offer free shipping for oversized items).

• Major advantage: This type of free shipping offer can be a great way to quickly increase sales on overstock items or last year's model.

4. Free Shipping Site-to-Store. Some large merchants, like Walmart and Sears, offer free shipping when you pickup the items at a physical store location. At first glance the site-to-store savings may not be as apparent to the customer without front door delivery. However, as Walmart.com offers a much larger selection than a local Walmart store, it is still a benefit to the shopper.

• Major advantage: Free shipping site-to-store can be a great way to get customers to enter your physical location.

5. Free Shipping by Delivery Location. On estimate, more than half of all free shipping offers are for deliveries within the continental United States.

Tip: Don't forget about Alaska, Hawaii, and U.S. territories. Many merchants who provide complimentary delivery only offer it to the lower 48 states. By offering free shipping to locations outside of the contiguous U.S., you can create an advantage over competitors in those markets.

6. Free Shipping by Membership. Membership has its rewards. Many online retailers offer free shipping to those who have joined a special members-only club. It is customary to charge an annual fee for membership. A prime example of this is the Amazon Prime membership which gives members free two-day shipping on their orders among other rewards. For $79 per year, members join Amazon Prime. Sears has a similar offer called ShipVantage.

• Major advantage: Free shipping with a Membership can help to build customer loyalty. Loyalty programs are a great way to lock in future purchases.

7. Flat Rate Shipping. Flat rate shipping differs slightly from free shipping. Flat rate shipping is when a retailer offers a low shipping rate regardless of purchase price, quantity or weight. The Gap and Old Navy both offer flat rate shipping of $7 for any size order and Kohl’s regularly offers 99-cent shipping per item.

Major advantage: Customers shop with confidence knowing that delivery costs will not increase with a larger shopping cart. This helps to reduce abandoned shopping carts.

"With at least seven different types of free shipping offers available, merchants should be able to craft an offer that is alluring to shoppers and profitable for the company," Knowles says. "A flat rate shipping offer is also attractive to shoppers because it allows them to know what the shipping charges will be up front. This helps to reduce abandoned shopping carts."