Crickets to Cha-Chings Episode 006
What does Etsy’s push toward free shipping mean for you?
aka. Why you must incorporate free shipping into your shop
Hey hey and welcome back to you another episode of Crickets to Cha-Chings. I am so glad that you are joining us for another episode this week.
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Today we are going to talk about a hot-button issue. I have talked about this in the past but the last time I really dove into it was way back in October, which in internet time is like a million years ago, and it was on a Facebook live, so I wanted to update it for all of the new members and update it with the new information that Etsy has recently released.
So what is this hot topic?
Today, we are going to talk about free shipping.
Should you offer it, is it something that's necessary, where is this going in the future, and why are we so hung up on the idea of free shipping?
Back in the fall Etsy started to really promote the idea of free shipping and began to push it to the sellers as something that they recommended you do in your shop. They did not require sellers to offer free shipping, but they made it pretty clear that this is where we're headed and that it is something that they think is important to the buyers on Etsy. They said that they had done market research within their own segment of buyers on the platform, and that one thing that came up again and again was that people wanted free shipping. And at that time, the Etsy powers-to-be also let sellers know that the shops that have free shipping or the listings that have free shipping on them would get a SLIGHT boost in the search results for that item.
So that all happened back in the fall, but recently, in a written statement released by Etsy on May 14, they again reiterated the importance of free shipping and said, “Buyers expect free shipping when they shop online, and they should never have to worry about added shipping costs getting in the way of finding something special. We want to make shipping prices more consistent across Etsy, and we’re building new tools to help you price your shipping competitively and keep shoppers coming back. Offering free shipping is an important step you can take today to set yourself up for success” and then went on to say that they will release more details about these tools soon.
So why is free shipping such a big deal, and why do we keep talking about it, and what the heck does Etsy really mean with all of this?
Studies have shown time and time again that people want and expect free shipping on online purchases. How many times have you been shopping online and had $50 worth of merchandise in your cart, but when you go to checkout and you see the $10 shipping, and you abandon ship and decide it’s not worth it? It happens to all of us! And in talking to peers and friends and other people who do a lot of online shopping, I hear again and again that people only want to shop at places that offer free shipping (preferable free and FAST shipping, but they’ll take slower as long as it is free).
The reason that no one wants to pay for shipping is that we, as buyers, don’t see the VALUE in the shipping costs. While we can see the value in the $50 worth of merchandise that we are buying, and we’ve already decided that it is worth $50 so we are not bothered by the price we are paying for the actual item, we don’t see the value in paying for shipping.
Think about it in your own shopping experience. If you pay $20 for a necklace, you’ve decided that that necklace is worth $20 to you because it has the perfect shape and length of the chain and you can imagine the shirt you are going to wear it with when you go out to dinner with your husband.
But if that same necklace was $10 with $10 in shipping, all the sudden it changes the whole perspective of the value of the necklace for you. It’s not a $20 necklace now, it’s a $10 necklace but you are having to pay $20 to get it to your house. It doesn’t have the same value in your mind, and it seems cheaper, although you are having to spend the same amount - what a rip off!
So then you go looking for a better alternative - a $20 necklace that’s actually $20 with free shipping, or sometimes even adding extra things to your cart that ends up costing you more, just so you don’t have to pay for that pesky shipping.
In this world of Amazon prime and Zappos free one day shipping, we are used to getting shipping for free, and not having it can and will be a real deterrent for buyers.
In fact, a recent article that I read on Inc.com stated that a study done by the Boston Consulting Group suggested that 74% of US buyers cite free shipping as a top factor in improving their online shopping experience, and another research study said that 88% of people would be more likely to shop at a site if it offered free shipping.
Think about it from a consumer standpoint.
Why do we shop at Amazon instead of Walmart.com? They have the same things. They are probably the same prices, or close to it. But Amazon offers free 2 day shipping, and Walmart doesn’t. I want it free, and I want it now -- and Amazon has done a fabulous job of building a business really centered on that concept.
Now, we can all agree that free shipping is not really free and that there are costs to shipping items through services such as UPS, Fedex, or the postal service. We’re not going to sit here and pretend like this really is free and we’re just passing on that savings to the consumer. There are clearly costs involved in shipping products, so how do we deal with that as a business owner?
I am certainly not telling you to take the financial hit of free shipping and let it eat into all of your profits, although if your profits are cutting it that close than you need my pricing handmade lesson, but I digress.
The marketing psychology around free shipping doesn't have to do with free shipping actually being cheaper for the consumer to purchase, it goes back to that perception of value. And whether or not you agree with that perception, the research has backed it up again and again, and Etsy as a company certainly DOES agree. So even if you are one of the minority who says that they see through it and they don't think it's a big deal and free shipping is dumb, you have to understand that this is a marketing technique that works.
What does this mean for your shop, and what does it mean for you as a shop owner and small business owner who is not shipping in bulk and doesn’t have any special deals with the post office so that they will ship your packages for cheaper?
There are basically three ways that you can approach the issue of shipping in order to get your shipping costs down as low as possible or free. The first one is to add the cost of shipping to the product cost completely, the second is to split the difference, and the third is to absorb all the cost yourself.
Even in promoting free shipping to shop owners, Etsy is not telling us to take the loss on the shipping ourselves. They have stated over and over again that adding the shipping costs to the final cost of the product is fine - and they even seem to be recommending it. They are making it easier on the backend of your dashboard to create a free shipping profile and add the cost of the shipping to your product costs.
If you decide that you don’t want to add in the shipping completely to the cost of your product, another way of handling it is to split the different. Say you have a $30 item with $5 shipping, you could make the price $33 with free shipping. That way the consumer is still getting a bit of a discount, but you’re also getting a little bit of money to go toward the cost of postage.
Lastly, you could completely absorb the cost of the shipping into your item, and not raise your prices at all. I would not recommend doing this unless you have relatively lightweight items that ship fairly cheaply, and you are very confident about your profit margins. Calculating costs and determining prices is something that a lot of Etsy sellers struggle with, so I’d hate for you to end up in a situation where you’re not making any money or barely breaking even because you miscalculated and end up with a large shipping bill.
About this time last year I actually ran my own experience about free shipping that I talked about in my Facebook live and I wanted to revisit to talk about again now that Etsy has really ramped up their push for free shipping.
I did an experiment between April and August of last year, 2018, with free shipping or a coupon code for my shop for one set of items. I had a shop that was directly copying my products - making the exact same items, copy and pasting my titles, tags, and descriptions, and just totally replicating what I was making. Unfortunately there’s nothing particularly proprietary about my items, and Etsy would not step in and ding her for copy and pasting my descriptions and titles and all that, so I was kind of frustrated by the whole thing. She was underpricing me by a good bit, so I ran this experiment over the summer to test out the waters for my own products and see if I was missing anything in the market.
For 6 weeks, I ran a 15% off coupon on one set of items in my shop that sells very well and very regularly. This is about a $45-50 item, so 15% off equals about $6.50-7. Over the course of the 6 week promotion with 15% off, I made $4823 on that product. Not bad.
Then, for the next 12 weeks, I did a free shipping code. I charge $6 shipping on this item, so the free shipping code actually gave less of a discount for the consumer than did the 15% off coupon. However, over the course of that 12 weeks, I sold $18,034 of that same item.
Now understand that I am comparing a 6 week coupon code to a 12 week free shipping promotion, so the numbers are not directly comparable. However, even doubling the coupon code for the amount of time being doubled, you can still see that the free shipping code had considerably more sales. I do want to caveat that by saying that the summer is a very busy time for me, so there could be some normal fluctuations just in the time of year that the experiments were taking place, but regardless, I still think that the free shipping code worked better.
Have I convinced you that free shipping is the way to go yet?
Or are you sitting there justifying all the ways that this won’t work for your shop? I’ve heard it time and time again from sellers who are super resistant to this idea -- it won’t work for my shop because of blah….my items are too expensive, or my items are too heavy, or my customer doesn’t really want free shipping - they want me to be transparent in the costs and charge the actual shipping.
I’m here to tell you that you’re wrong. 😬
Your items are not special, and your customers are not above the statistical research that suggests otherwise.
I had a comment on my blog recently from someone who claimed that “FREE shipping probably works for underpriced, commoditized products like you sell. It does not work for true artisan pieces, which is what Etsy was originally set up for” and then went on to say that pushing her price up in order to accomodate free shipping would hurt her business more than being honest in her headlines about charging a flat rate fee for shipping.
Putting aside the underhanded insult to my products that she gave me, I’m just going to flat out disagree. I don’t know this person’s business and unfortunately she did not leave a link for her shop in her comment, but the price point that she mentioned was a fairly high price point for the average Etsy seller, and I am just going to go out on a limb here and say that especially in those higher price points, people want the value in the product.
Go back to our necklace example, but this time let’s say it is a handcrafted artisan glass blown vase.
The cost is $175, and you charge $25 shipping because you have to package it so carefully; it is really fragile after all. As a buyer, I’m getting $175 worth of a beautiful vase that I love and will cherish, and I’m throwing $25 out the window to pay for shipping. If you incorporate that shipping into the price of the item, I’m getting a $200 vase. And then you’re throwing in the shipping for free -- hey thanks!
The vase is the same, the value perception is different. And in that price point, I’m obviously valuing the vase pretty highly since I was willing to pay $175 before, so increasing that cost to $200 isn’t that big of a deal.
But if you worry that it would completely kill your business, perhaps try out splitting the difference first instead. For that $175 vase, add in $13 for shipping. You lose $12 that you originally were getting for shipping costs, but now you’re selling the vase for $188 with free shipping.
Remember, nothing is set in stone. Play around with it and see what works for your market, your customers, and your items.
Here’s the thing, while I know that everyone wants to bury their head in the sand and not deal with free shipping, or to say that this isn’t applicable to their market and their customers, at the end of the day I think that Etsy is going to end up all but forcing sellers to offer free shipping - and as a business owner and especially an online business owner, it is absolutely vital that you know how to bend and adapt as the market changes.
I don’t think that ultimately Etsy can MAKE you do anything in your business, it is one of the best things about having your own business after all, however they do control the search platform, and I think that the search results is the way that they will end up squeezing out sellers who do not offer free shipping. Let me step back for a second and say that I don’t, unfortunately, have any BFF that works in the backend of Etsy and is giving me awesome behind-the-scenes tips.
Sadly, that isn’t happening although I wish totally wish it were. This is just my own theory, and my own prediction based on how I have watched this play out with Etsy over the past year, and based on my years of selling on Etsy and watching the platform change over time.
And this is why I say you have to be able to adapt.
Rather than list out all the reasons why this isn’t going to work for your business, or list out all the reasons why free shipping is dumb and consumers should see through the fact that it isn’t actually free, figure out how to make it work for your business.
If you dig your heels in and refuse to change, you are not going to be able to be successful selling online and running a business - and I don’t mean that to be harsh or even to be tough love, but I have seen over the last 6.5 years of selling on Etsy that every.single.time Etsy comes out with any new change to the platform, sellers are in an uproar. “They’re ruining Etsy” “I’m leaving and building my own site” “This is ridiculous and they can’t make me do it.”
And you know what? The only people those sellers hurt are themselves.
They are the ones that are not successful because they refuse to listen to research, they are set in their ways, and they aren’t able to creatively think about a solution to the issue in front of them.
Whether you agree or disagree that free shipping is where it’s at with online shopping, the fact of the matter is that the research shows that it works. So figuring out a way to make that work for your shop, your business, and your profits is crucial. And you know what I can guarantee in all of this? This won’t be the last time you have to roll with the punches and adapt as a business owner.
If you have strong feelings about free shipping or you want a second opinion about how you should approach it with your shop and what your next best move is, I’d love to have you join us in the Etsy Roadmap FB group. You can check it out at creativemomboss.com/etsyroadmap and that will forward you directly to the FB group.
I hope this episode has been helpful and gotten the wheels turning in your head about how you can make changes to your shop and what your plan of action will be moving forward. I’ll see you next week, same time same place. Bye for now.