Blame Amazon, blame impatience, blame an overwhelming number of options for shipping—whatever the reason, more customers are demanding free shipping as an option these days.

For distributors and retailers, this is a double-edged sword. Free shipping has been shown to increase revenue across the board, but it can also create a number of logistical headaches elsewhere in the operation.

 

These headaches come primarily in the rates of shipping. Even if you’re not having your customers foot the bill for shipping, someone has to—and that winds up being you. Not only is your warehouse left holding the bag more often, these fees are bound to increase over time. Usually referred to as General Rate Increases (GRI), these yearly rate hikes occur across the board for nearly every major shipping provider and will begin to chip away at your bottom line if you’re not careful.

It can also begin to impact the demands of your customers. By offering free shipping once (or even during special promotions) you can begin to create the expectation of free shipping for every sale in the minds of your shoppers. This isn’t a bad thing, but it will require a careful examination of your current shipping options and promotions to determine if it will be worth bringing back or resuming, or if the perceived increase in shipping costs will drive away potential customers after the free period ends.

 

Above and beyond the impact on your finances, free shipping can have an impact on your daily operations and product handling methods. As the volume of sales and orders increases, your staff may need to develop new methods of picking items and gathering shipments together to keep up with the volume. If you only offer free shipping on certain items, you may consider keeping these items off to the side on their own separate pallet rack to make them easier to grab and better help distinguish them from the items that need to be shipped via more ‘traditional’ methods. Similarly, items picked for the ‘free shipping’ method (which you’ve likely had to discuss with your shipping provider) should be given their own wire shelving or metal shelves to keep them separate and help your workers (and shipping vendors) better distinguish between what gets the free shipping treatment and what gets sent out the normal way.

 

Maybe this is all starting to sound like doom and gloom, but the truth is that free shipping isn’t all bad and can have a number of benefits. In addition to the increase in overall sales, free shipping has been shown to increase average order value beyond what it normally is. Particularly in cases where free shipping only kicks in at a certain order value threshold (for example, after $25 worth of items are added to the cart), the average order volume found itself jumping up to negate the shipping cost. So long as you’re properly equipped, this can be a huge benefit.

And that’s really the point of all this. So long as your warehouse is able to absorb the costs of these free shipping offers—and has the staff and warehouse storage to properly manage the whole enterprise—free shipping can be a huge benefit to your operations. Just make sure you know what impact it will have across your entire warehouse.

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