EBay. Does Free Shipping Increase Sales?
In an earlier post, I mentioned I got a call from an EBay representative that was trying to help us to raise our sales. One recommendation was that we offer FREE shipping on our listings.
As a background, in one of my e-commerce businesses, we are a Powerseller with over 8500 sales done over a period of about 1 1/2 years. We list limited products and don’t really try. EBay was and is a place where we wanted to learn about this market and see if we could make a buck.
In the beginning, we experimented with Free shipping. This would result in us pricing the units higher to include our shipping costs. Then we tried pricing our units lower with shipping as an additional cost.
We found the latter to be more effective. I think this worked well because the price appeared to be lower, and most customers know shipping is a real cost and agreed to buy. Perhaps we came up higher in a sort by price as well resulting in more traffic. Whatever the main reason is, we got more sales by not offering free shipping and charging on the side.
The EBay representative told us that FREE shipping would generate more sales, that one of the most popular search terms was “Free shipping”. EBay is also offering a discount for sellers offering free shipping until Christmas. This would help reduce our fees, as EBay takes fees on the sale price, not the shipping cost. By pricing the unit higher and including shipping, EBay would generate more fees when the discount ended.
So we changed some of our listings to include free shipping and actually lowered the overall take on the revenue to make the pricing sound attractive (we originally were taking in $51.99. With free shipping we charged $49.99).
On another less active listing, we got only 25% of the average sales by offering free shipping while still lowering the overall price.
Our final result is about the same, not more sales, a bit less actually. So we are doing worse then before.
Don’t get me wrong, I believe customers like free shipping, but as long as you state your ship rates up front, they will be ok with it. In most check out systems that don’t include free shipping, the buyer has to go thru the check out process to find out. Right there, you loose buyers as the process gets longer. Buyers don’t like to do extra work and sometimes sellers charge inflated shipping prices to make up for the lower priced item, so buyers loose trust.
Seeing a set price that includes free shipping takes the guess work out of it.
With the poor result, I think Ebay is making a grab for more revenue at the expense of merchants. Get sellers used to free shipping and after Christmas take the discount away and make more money overall reducing the sellers take.
According to comScore, eBay had 70.7 million unique U.S. visitors in October, down 11 percent from the year before. EBay is on the decline and is looking for ways to get back their lost revenue but, if you are going to run any good business, you have to make it work for everyone. In our case, their recommendations appear one sided.
When we launch our site, our goal at Jigantus is to make it a win win proposition for everyone.
Tags: Ebay, free shipping, powerseller
December 14th, 2008 at 3:02 pm
Great article I really liked it. You are a great person. I like it so much!