The Importance of Offering Free Shipping for Ecommerce Businesses

The landscape of ecommerce has changed drastically since I started my first online business about 20 years ago. When I first began selling drop-shipped products on websites or sourcing products to sell on eBay, it was seen as normal to require the customer to pay shipping costs. In fact, many sellers on the various online marketplaces available back then would tack on handling and other fees to fulfill orders.

Then Amazon came along, and grew, and grew…until it has now become the place where nearly half of all online shopping is done. The major change that Amazon introduced to the world of online purchasing is the expectation of free shipping.

Having built and operated a couple Amazon businesses myself, starting in 2015, I’ve experienced firsthand as a merchant the reality of the expectation that shipping be provided without adding anything to the cost of the order. Because Amazon now has almost any type of product known to exist, or a close substitute, the standards for selling on the internet are now almost completely controlled by Amazon. That translates into a near necessity for almost anyone selling online, excepting those businesses that have very niche products or brands that allow them to push back against the idea that the seller is obligated to eat the costs associated with transporting the product from them to their buyers, to offer free shipping.

Etsy’s Announcement About Favoring Free Shipping Products

Today I saw this announcement in the heading of my Etsy store when I logged into my account.

The announcement makes it clear that Etsy will soon start favoring those shops who offer free shipping for their products. The interesting thing about Etsy making this change is that their sellers consist of mostly small businesses making handmade products. They’re not large corporations with the advantage of purchasing power like many of those who sell on Amazon and on their own brand outlets.

Clicking through to Etsy’s explanation behind why they’re giving priority placement in the United States for those who offer free shipping (qualifying orders for free shipping must be at least $35) leads to an explanation of the research they’ve been conducting about the impact of offering free shipping. Etsy’s research, a limited study they did in May, 2019 concluded the same as what Amazon and other large retailers did: people don’t want to pay for shipping, and they’re even willing to buy more things to avoid having to “waste” money on shipping costs. Etsy’s research found that people were more likely to add-on other items to their cart to reach the $35 free shipping threshold than to pay shipping costs.

Offering Free Shipping While Retaining Profits

For retailers, including me, the most obvious response to this announcement by Etsy that they’re going to be favoring shops who offer free shipping is, “There go my margins!” Etsy recommends that its sellers update their pricing in consideration of their new approach to prioritizing items that include free shipping. Because we can ship our products cheaply using USPS and because we have high enough margins, we already offer free shipping, regardless of the minimum order amount, so my store will be fine. However, many store owners will find that they need to simply increase the price of their products. In many cases, it will mean adding the cost they would normally charge for shipping into the cost of their items. For others, it will mean splitting the cost between increasing product prices and absorbing some of the shipping costs, lowering margins.

If you’re a retailer selling on Etsy, regardless of which approach you use to deal with their new favoritism of products with free shipping, it’s clear that you need to have a strategy that allows you to provide free shipping to your Etsy shoppers. If you don’t have a way to offer free shipping to your customers, you’re going to start losing sales beginning August, 2019.

Competing In Today’s Online Sales Environment

For retailers in general the past decade of ecommerce has brought a new level of competitiveness that requires us to be more assertive about all the facets of our business, including lowering product sourcing costs, reducing overhead and fulfillment costs, being better at marketing and finding ways to increase the perceived value of our products and preserve margins. This need for constantly learning and implementing improvement in our business is especially true for smaller retailers like me (and likely you), family-run companies who don’t have access to large budgets and who have to be lean and smart to stay profitable.