There are numerous reasons why you need to ship goods and other carefully packaged items by way of using a transportation service provider. In online retail, it is simply central to the business model, but there is such a need in many other entrepreneurial sectors as well.

But here, as elsewhere, nothing is free, at least not for one of the parties involved. This is where shipping costs come into play. We will now show you not only what a free free delivery but also how it affects the sender and recipient and what you as a retailer should bear in mind and can adjust.

Free delivery: What does the term mean in common parlance?

If the goods are indicated as "free delivery",
the sender shall bear the transport costs and shipping charges

Before we get into the explanation, first an important note: There is a certain discrepancy between what most people understand by free delivery and what the German legal system understands by it. Let's start with the former: What your customers associate with the term - whether B2C or B2B.

From a very sober point of view, this is first of all a clause between the merchant and the customer, where each of the three words hides an important fact:

• Delivery: The customer can rely on the fact that the product purchased by him will be brought to him by the dealer by some shipping route. However, exactly what this shipping route looks like is subject to further agreements or clauses. Typically, most people also imply that the shipper has initiated the transport without their intervention. This is true even if recipients are allowed to choose the exact method of shipment (for example, if they have a choice between different parcel delivery companies).
• free: In this context, this means that the shipping or transport costs incurred for the delivery are borne by the sender, which in this case is the retailer. In plain language: The customer does not have to pay any additional delivery-related fees. His price is only what he has to pay for the product itself and any other services (such as an extended warranty). Everything that goes with shipping is the merchant's responsibility.
• House: Is a bit woolly, but in most people's understanding means a delivery to a specified (building) address. Whether it is an apartment, house or workplace is irrelevant. It is therefore best to remember the definition as follows: "House" in this context always stands for a delivery address at which the recipient is located anyway. This means that the recipient does not have to travel any additional distance to receive the delivery.

In summary, if you advertise free delivery (in any context and whether to all customers or only to certain recipients) then the vast majority of people will expect you to deliver to an address of their choosing, with you bearing all the costs of transport.

A similar principle is used by most people to define a "free pickup". Only in this case, they are in possession of an item to be shipped, which you have picked up in some way at your expense - this may or may not be a transport service provider.

Definition from a legal point of view

What your customers expect has thus been clarified. But how does free delivery behave from a legal point of view? This is where things get a little more complex.

Since free delivery is a commercial custom, some indisputable facts arise from it:

• The sender shall bear all transport costs to the contractually agreed address.
• Delivery free domicile alone does not imply any agreement on the assumption of transport risks by the shipper (compare BGH ruling VIII ZR 108/12). That means, only by advertising a free delivery you do not automatically assume a liability risk for damage to the goods during transport.
  
• The jurisdiction in case of disputes is in the area of the address specified for the delivery, specifically the place of residence of the recipient of the delivery.

Trade customs primarily apply only between two commercial contracting parties. However, private individuals can also make use of it if they are aware of such customs. Since free delivery is definitely a very widely known trade custom, the regulation therefore applies to both B2B and B2C trade.

• Since a ruling by the Higher Regional Court of Hamm( OLG-Hamm) (4 U 32/10), mail order companies may only advertise free delivery under specific conditions. For you, the issue of additional charges is particularly relevant. You are neither allowed to charge packaging costs for such a delivery nor are you allowed to advertise that there is a surcharge if you fall below a minimum order fee.
  Additional costs (and thus advertising with a free delivery) are also not permitted if, for example, the delivery exceeds a certain weight or is to be delivered on a special date (requested by the recipient).
  In plain language: The customer may only have to pay what he collects through voluntary actions in terms of product costs.
• The item "house" is usually understood as "delivery directly to the building", no more, but also no less. However, this does not result in an obligation for the shipper to ensure delivery to the actual place of use. Relevant, for example, in multi-party buildings or for private deliveries to a company address.

In summary, if you advertise free delivery, you are literally legally obligated to cover all charges incurred for shipping, except for the risk of any damage in transit. In addition, there must be no clauses that impose any additional costs on your customer, whether for packaging or specific delivery dates. So free delivery is just that: delivery on the recipient's terms, entirely on your account.

How does it affect shippers and recipients?

Nobody likes to pay more than they actually have to. Conversely, however, hardly any businessman likes to take in less than would be possible. Under these circumstances, free delivery has several effects at different levels:

1. The customer pays only the price of the product. In the mail order business in particular, this is a very powerful, effective advertising argument that sets a company apart from its competitors (both online and offline). Free delivery is therefore a good means of marketing and customer loyalty.
2. Your operating costs will increase, your profit will decrease. After all, shipping costs are deducted from your revenue. This complicates your calculations and reduces profitability.
3. Delivery only to the house can be negative for your customers. This is the case if the delivery is particularly heavy and/or bulky. You must therefore consider whether a different formulation would be better, such as "delivery free to the point of use". However, be careful with this, because depending on the transported goods, this can increase your costs even more.
4. Free delivery in some product categories can tempt people to order products only on a trial basis. This is particularly pronounced in cases where the sender also bears the return shipping costs.

In practice, free deliveries are therefore a double-edged sword, especially for retailers. The increase in attractiveness can have a very positive effect on sales and also helps to reduce bounce rates. However, depending on the type of shipment, this is offset by greatly increased costs that the retailer has to bear entirely on its own.

Therefore, in order to take as much positive as possible from this principle and negate the disadvantages, you should proceed thoughtfully.

Free delivery: What can shippers optimize here?

This brings us to the final chapter. You want to attract more customers and increase your revenue. At the same time, however, you don't want to cut into your profits in an insubordinate way. Based on these two wishes, you have it in your hands to adjust the topic of free delivery to your advantage:

• Be highly flexible when it comes to transport service providers, especially if you offer very different shipments in terms of size and weight, you should, in case of doubt, rely on several partner companies and, depending on the delivery, commission the one that transports this parcel format or weight most favorably.
• Don't be afraid to offer free delivery only above a certain value of goods. First, this is a good way to adjust your costs. Secondly, it is a psychological incentive for many customers to spend more money with you.
• Always use your product structure to check whether you really want free delivery or, for example, "free delivery to curb" or "free delivery to point of use". Your costs play a role here, as do the advantages and disadvantages of the respective approach for your customers.
• Optimize your shipping packaging. Especially for transport service providers, where dimensions play an important role in the calculation. The shipping packaging should be as small as possible, but without providing too little protection - for example, because there is no room left for cushioning materials.
• Always consider whether you want to offer other methods to get the products to your customers. For example, a (of course also free) pickup at your location, shipping to packing stations and the like. The more options you provide, the better. Alternatively, you could exclude a general free delivery and replace it with free shipping to packing stations. The shipping itself usually costs the same, but depending on the customer structure, there are sometimes not so many people who choose this option - you therefore have to pay the shipping costs less often.
• Always use the possibility for prepaid postage and similar ways. With the vast majority of shipping service providers, this makes the whole process cheaper. Especially if you have a high sales volume, these differences can be very noticeable.

Conclusion: free delivery is a well-known, but not always optimal method

Your customer pays for the goods, while you pay for packaging and shipping. From a strictly free-market perspective, this may always look like a win-lose situation. However, you should never forget what the external effect of a free delivery can be - namely positive for most people.

However, no matter how great the advertising effect can be, never use this instrument without thinking, but only after careful calculation and verification. Not only because there are legal consequences, but also because free delivery should at least be a zero-sum game for you, not a losing proposition.

FAQ

1. Can I offer free delivery and simply add the costs to the product price?
   Legally, yes. However, this only works if you have a monopoly on the products. As soon as you are only a middleman, customers can compare the product price with several suppliers on the Internet. If your price is dramatically higher, you are more likely to scare away your customers.

2. Are free returns a better alternative for retailers than free delivery?
   It depends on your product structure. It's true that with free delivery you really have to pay for all shipping, and with returns you only have to pay for part of it (because not everyone uses it). Free returns, however, have been shown to increase the propensity of your customers to buy on a trial basis only, i.e. to return more often. In particular, because returns cost you more than just the shipping price (for example, because you have to inspect the returned goods and repack them if necessary), free returns are by no means a better method across the board.

3. Is the "free delivery" clause sufficient, or do I need to provide additional information?
   It is highly recommended to refer to the general terms and conditions of these uses, for example on a sub-page, in order to rule out all misunderstandings (especially among B2C customers) from the outset.

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