Should Small Businesses Join 'Free Shipping Day'?
Entrepreneur's New Year’s Guide
Business owners can still sign up for the fourth annual Free Shipping Day on December 16, by offering customers free delivery and promising that orders will arrive by Christmas Eve.
Luke Knowles, who started Free Shipping Day in 2008, estimates that about 2,000 merchants will participate this year, but he says he won't be surprised to see as many as 2,500.
While Free Shipping Day virtually guarantees a bump in sales, it's no free lunch: Eating the cost of shipping can get expensive. If you're thinking about taking part, consider the advice of three small-business owners who signed up in previous years.
For Nature Hills Nursery, free shipping is a big deal because the online garden center sends customers some pretty big items--like trees. But it's worth it to the Omaha, Neb.-based company, which has signed up for Free Shipping Day for a third time.
The Payoff: "It really comes down to attracting new customers; that is 95% of the reason we offer free shipping," says co-owner Jeffrey Dinslage. "The other 5% is getting rid of, or reducing, inventory." He estimates he has attracted between 50 and 75 new customers by participating in Free Shipping Day.
The Downside: Profits are slimmer. For example, shipping a four-to-five-foot tree can range from $15 to $23. "The challenge is we ship perishable items and we ship a large item in most cases," Dinslage says, "so free shipping is a promotional tool that we use sparingly compared to other e-commerce companies." But the nursery can use the extra business at this time of year. "This is not what you would consider peak season for our business," Dinslage says, "so it provides cash flow for the business."
Advice: Business owners need to "take a look at all the hard costs--the labor, their corrugation or box, the product, all the overhead--and make sure they are still making a profit," Dinslage says. So get out your calculators.
The Ansel Adams Gallery sells photographs, books and prints at its store in Yosemite National Park and on its website. The average online sale is about $280, and the shipping charge averages $13, according to William Garnsey, the gallery's e-commerce director. This will be the gallery's third year participating in Free Shipping Day.
The Payoff: "Marketing exposure," says Garnsey. "I feel it exposes us to a different market of consumers." In 2009, the website more than doubled its daily sales on Free Shipping Day. Last year, sales also spiked, but not quite as much.
The Downside: "Sometimes there is a scramble to make sure all of those orders get framed and fulfilled in time so that they are received by the customer," Garnsey says.
Advice: "You have got to prepare to make sure you maintain your inventory stock and make sure that you have your fulfillment resources in order so that you can get [orders], in our case, framed and packed and ready to ship," Garnsey says.
Kristine Lewis and her family make all of the products for her Crazyartgrrl Jewelry business, including the signature Embraceling bracelet that wraps multiple times around the wrist. Based outside of Buffalo, N.Y., Crazyartgrrl Jewelry will be participating in Free Shipping Day for the third time because of previous sales jumps. In 2009, Lewis received 103 orders, compared with the two to five a day she was getting back then. Last year, she got 89 orders on Free Shipping Day.
The Payoff: "It doesn't cost anything" to sign up, and the registration process is convenient, Lewis says. She also notes that on the Free Shipping Day web site, smaller retailers are being advertised right next to larger companies. "The first year that I did it," she says, "I was parked next to Cricket Wireless." Because shipping lightweight jewelry is relatively inexpensive, Lewis says, she doesn't have to cut her profit margins to the bone.
The Downside: "Now, there is going to be a lot more competition," Lewis says. "It is becoming so big it is almost becoming too big. You are going to get lost."
Advice: Do the math--carefully. Consider the cost of paying for the shipping as an advertising expense. "If you can deal with that little ouch for the day, absolutely do it," Lewis says. "I was sending bracelets across the country, which I had never done before."