I was looking over two businesses that pretty much sold the exact same stuff as well as having very similar prices for its products. The major difference was that one company offered free shipping for its products if you purchased a certain amount and the other provided various rates depending on factors such as weight load.
For the second company the reasoning was pretty simple in having to charge people a fee as they donâ€™t make a huge profit per sale and so giving away free shipping could easily make the sale into a zero profit gain. The first company admitted that giving the free shipping did indeed eat into the profits in a significant way. However, offering the free shipping does indeed attract more people to buy more things and as a result the company can obtain items cheaper when it comes to buying wholesale from various suppliers. So in the end they made more than the second company.
Offering free shipping options is a pretty powerful selling tool I think. Even for myself I am inclined to purchase a little more just to get that discount.