How Maltese Businesses can offer Free delivery successfully

Free delivery is worth trying. As we discussed in our previous article, people will generally prefer free delivery even if the prices of the products are actually higher. This is because of two key reasons: First, an e-commerce store that provides free delivery enables a more simplified shopping experience. Second, people intuitively respond very positively to free services and products.

Free delivery is essential to decreasing friction in your customer’s journey and lowering cart-abandonment rates.

But offering free delivery is easier said than done. The last thing you want is to offer free delivery to your customers but go bankrupt in the process.

You don’t necessarily have to offer free delivery on every item to meet shopper expectations. Customers know that some items are too heavy or too large to ship for free.

In this article, we go through successful, tried-and-tested offers and conditions that can help your business offer free delivery successfully and sustainably.

1. Add the cost of delivery to the price of the product

The primary way to offer free delivery without too much difficulty is to include the delivery costs in the prices of the product. This way, the customer indirectly pays the delivery costs.

Remember that, for the consumer, the psychological impact of free delivery is much greater than a price difference of a few euros in the value of the product.

Still, make sure the prices of your products aren’t too much higher than those of your competitors. Moreover, distinguish between items that are elastic and prices that aren’t. A product is considered to be elastic if the quantity demand of the product changes more than proportionally when its price increases or decreases. If your product is elastic, increasing its price may not be your best move.

If you want to keep the increase in prices to a minimum, then there are multiple other conditions you can apply to your free delivery offer to make it more profitable.

2. Establish a minimum value per order to qualify for free delivery

58% of customers add more items to their basket in order to qualify for free delivery. Why? Well, the psychology behind this is simple – why pay €5 for delivery, when you can buy another item and avoid this charge? Whether it be a small add-on product or an item they’d previously dissuaded themselves out of, free delivery with a threshold is a pretty persuasive marketing strategy.

3. Offer free delivery on certain items

This one’s easy. Offer free delivery on certain items – try to prioritise high-margin goods.

4. Offer free delivery at certain times of the year

Some retailers offer free delivery periodically (such as during the holidays) rather than year-round. Depending on your products, test free delivery offers at other times of the year, such as Black Friday, Valentine’s Day and Mother’s Day.

5. Offer free delivery to members / loyal customers

If you’re expecting repeat-customers, then enabling the possibility of paying for a membership in return for free delivery can help offset costs.

A more simple route may be to offer free delivery as an incentive to encourage repeat purchases. In this case, customers that repeat purchases from your store get free delivery.

6. Offer free delivery on returns.

Buyers may find free delivery on returns appealing for items with relatively high return rates, such as clothing and footwear.

7. Flat-rate delivery.

This one isn’t free, but offering flat-rate delivery encourages larger orders and frequently translates into lower delivery costs for customers. A downside, however, is that it can discourage small orders.

Once you’ve selected which strategies will work best with your business, test and test.

Say you choose to establish a minimum value per order for customers to qualify for free delivery, test out different thresholds. Your customers may find that €100 is too high to qualify for free delivery and just give up, whereas if your threshold is too low you won’t make as much profit as you could. By carrying out multiple tests, you can find out the minimum value that makes customers go “If I spend a little bit more I’ll get free delivery, so it’s worth adding something else in the cart.” That’s the sweet spot.

Be clear on what you’re trying to find out and run your tests carefully. Maintaining consistency is essential to keeping customers returning, so ideally you run your tests once and then stick to a strategy for a significant period of time. Changing your delivery conditions every five seconds is going to confuse and discourage customers.

To maximise cost-effectiveness, thoroughly consider your margins, your audiences and which strategies best fit your business. To maximise the benefits of a free delivery offer, we recommend that you communicate with a marketing agency.

This article isn’t intended to turn you into an e-commerce specialist. Our goal here is to share information that enables business owners to approach e-commerce professionals from an informed position. 

Lower prices vs free delivery – What works better in Malta?

In the world of e-commerce, free delivery offers customers a simplified shopping experience, but is offering free delivery worth the hassle (and the costs)?

For most small businesses – and that’s including most businesses in Malta – free delivery can’t work unless they increase the prices of their products in order to pay for the costs. In other words, instead of paying for the costs of shipping separately, a consumer pays for shipping by paying higher prices on the products themselves. How much the price of all other products increases depends on the merchant’s objectives. A merchant can decide to absorb the majority of the delivery costs to keep the price increase to a minimum. This strategy may reduce profit margins, but it can also earn a store preference over competitors, attracting a higher volume of sales and a bigger share of the market.

But let’s assume your business can’t absorb the majority of delivery costs without increasing price, then the question follows: If prices rise to offset costs, does offering free delivery still make enough of a difference?

It turns out that yes, it does.

Why consumers choose Free Delivery over Lower Prices

Back in 2007, behaviour experts carried out a study to find out how free products impact consumer behaviour. The study convincingly showed that free goods have extra pulling power and, at the risk of oversimplifying, a reduction in price from €1 to zero is more powerful than a reduction from €2 to €1.

This compelling outcome has been labelled the ‘zero price effect’. The zero price effect is a phenomenon whereby the demand for a good, service, or commodity is significantly greater at a price of exactly zero compared to a price even slightly greater than zero.

A core psychological explanation for the zero price effect has been the affect heuristic, whereby options that have no downside (no cost) trigger a very strong positive affective response.

Humans generally love free stuff – a lot. Delivery itself may not be a tangible product, but it is a service, and consecutive studies have shown that the zero-price effect absolutely applies to delivery.

The benefits of free shipping over lower prices

Most importantly, free delivery reduces shopping cart abandonment. Baymard Institute’s latest 2022 study showed that 48% of shoppers abandoned their online purchases during the checkout process because of extra costs for delivery.

On this note: 24% of people selected “The site wanted me to create an account” as the number two reason for abandonment during checkout. Meanwhile, 22% of people chose “delivery was too slow” as the reason for not purchasing from a store again.

As well as sweetening the deal, free shipping also makes your company look generous. In fact, free delivery has been proven to improve customer loyalty (in the form of repeat purchases) and increase order size (especially if customers need to hit a certain price point to qualify for free delivery).

Offering free delivery can certainly give your business a significant boost, but offering a blanket, unconditional Free Delivery offer doesn’t work with every business. Check out our article discussing ways you can offer free delivery sustainably.

Our sources:

Hossain, M. T., & Saini, R. (2015). Free indulgences: Enhanced zero-price effect for hedonic options. International Journal of Research in Marketing, 32(4), 457-460.

Shampanier, K., Mazar, N., & Ariely D. (2007). Zero as a special price: The true value of free products. Marketing Science, 26, 742-757.