Choose the best shipping mix for your e-commerce business
If your business sells a physical product, then you need to be able to get that product to your customers. As high delivery fees are the biggest cause of abandoned shopping carts, it’s important to choose the right e-commerce shipping options for your business.
In an extremely competitive market, this requires a fine balance between what the shipping service costs you and what it costs your customer. Let’s look at how to manage that balancing act.
1. Identify e-commerce shipping objectives
The first step is to decide what you want to achieve with the shipping options you provide on your e-commerce site. This can be many-layered and apply across your business or just to certain categories or products.
At a bare minimum, you’ll want to:
- Increase conversions: Avoid chasing customers away by surprising them with high shipping costs at checkout; and
- Offer a reliable service: Ensure their goods get delivered according to their expectations.
You may have other objectives too though, perhaps even linked to your business or marketing goals. Your aim could be to:
- Boost the average value of orders: For instance, consider offering free shipping over a certain order value;
- Control shipping costs: Reduce or eliminate your shipping costs by adding pick-up options or including shipping in the product price, for example;
- Differentiate your brand: You might add a “wow” factor to the delivery, by offering exceptional delivery times or including a hand-written note in the package; or
- Expand your target market: You could provide specific services, like delivering to remote areas or internationally.
Make sure you’re clear on what you’re aiming for before proceeding any further. You want to make sure you’re putting your money where it matters.
2. Shipping factors to consider
- Product type: Are your products particularly heavy or unusually shaped? Are you sending bulk orders of robust items or just one small and light yet sensitive product?
- Product price: You may be able to include shipping costs in the cost of a high-value product, but not in cheaper or more competitive ones.
- Product uniformity: If there is a large variance in size and weight across your product range, your shipping costs will be irregular and need extra careful planning.
- Your customers: Your customer segments should tell you whether they care more about getting their product quickly or getting it cheaply.
- Tracking and insurance: Does the value of your products warrant this? Do your customers expect it?
- Shipping routes: Where are your products produced and stored – in one place or many? Do you ship locally or internationally (if internationally, be aware of any restrictions or extra customs costs)?
- Your e-commerce competitors: What’s their delivery strategy and what can you learn from it? How does it contribute to your customers’ expectations?
- Make sure you know exactly what the weights and dimensions of each of your products are, so your courier rates are accurate.
- Reduce your shipping costs by optimising your package sizes, i.e. making them as uniform and or as small as possible.
3. Choosing a shipping strategy
When you’re selecting a strategy, two things are critical:
- Run the numbers: Don’t just guess your figures or work on trial and error – you may end up eating into your profit margins or having to change your policy later on, potentially damaging your customer relationships. Rather use exact numbers and run some financial models to help you make the best choices around your e-commerce shipping options right up front.
- The customer is key: Your e-commerce shipping policy and costs should be clear and easy to understand, and they should never get in the way of your customer converting. Surprises when they get to the payment page are only going to lead to abandoned carts.
Each of the four popular shipping strategies below describes a different way of charging the customer. They can be used alone or in combination with each other.
This is self-explanatory, and offering free shipping really helps to attract visitors to your e-commerce site and convert them into paying customers. If you haven’t run your numbers though, your business could end up losing money
To make it work, you could try one of these tactics:
- If you sell luxury goods, you may be able to increase product prices to absorb shipping costs. This obviously won’t work if your products are extremely competitively priced to start with or your customers are price sensitive.
- Offer free shipping for specific products with large profit margins or for order totals over a specific amount, thus encouraging customers to buy more. Then use the profits to help subsidise shipping rates and cover your costs.
- Partially cover the shipping cost by increasing product prices slightly, while offering the customer perceived lower shipping rates.
Flat rate shipping
Here the customer pays one shipping rate regardless of what they buy or where they want it delivered. It’s popular with customers because it’s simple and they know exactly what they’re in for, especially if you advertise it prominently on your site.
This method could work for you if your products mostly fall within a fairly narrow size and weight range. Working out the average shipping cost across your products will give you the flat rate. You may lose a little while shipping a slightly heavier product or to an outlying area, and then gain a bit on another lighter, closer delivery. As long as it balances out though, it’s workable. It’s also often a good way to start until you’re able to work out a more accurate method.
In this method, the shipping cost is calculated from a table, based on rules you have set up. The rules are embedded in your chosen website software and executed on each checkout. This should help cover your costs, especially if you offer a large variety of different products or you ship to far-ranging areas.
The rules you set up can be as simple or as complicated as you choose. They may take into account order value thresholds, geographical zones, volume and weight, and also include a combination of various other shipping options. Your chosen website software should make your life easier – ask us about this.
A simple example using order value thresholds:
- For order value R0 – 500 = Flat rate of R60
- For order value R500 – R1500 = Flat rate of R40
- For order value above R1500 = Free
Be sure to make the shipping rates simple for your customers to understand. Customers need to know upfront how much they will be paying, so they’re prepared and willing when they get to check-out.
This works via an integration with a shipping agent, which provides live, real-time rates when the order is placed. Although it ensures your costs will be covered, it’s difficult to prepare customers in advance for the delivery costs. As a result, you may end up with many abandoned carts
Our e-commerce shipping strategy recommendation
Things change fast in the e-commerce industry and there are always new options becoming available. Right now though, we recommend that you:
- Do your financial homework using real courier rates and delivery scenarios.
- Use these figures and a combination of free shipping, flat rates and courier rates to compile shipping table rules that cover the costs involved for your business. Make this very clear and easy for your customers to understand.
- Compare this with what your competitors are offering. If getting a product from you costs the customer much more than getting it from your competitors, your business won’t last long.
- Ask us about our SmartFreight integration, which takes the hassle and admin out of deliveries. It allows you to:
- Apply your own shipping table rules;
- Choose from over 60 courier options, ensuring you always get current and competitive rates; and
- Automate the entire process from checkout, through scheduling pick-up, generating labels and waybills, to billing, tracking (where available), delivery and much more.
Tip: Be sure to indicate current shipping promotions above the fold on your homepage.
Tip: Create a detailed shipping policy up front for your e-commerce business. This will force you to do the necessary calculations and help you think things through. Then put a link to it on your homepage so customers can easily find it too.
Shipping strategies from well-known retailers
When putting together your shipping strategy, remember that you need to take into account:
- Your goals;
- The specifics of your products, prices, customers and their expectations, delivery routes and what your competitors are doing;
- Your own financials; and
- The mix of shipping options available.
Bringing all these together will give you the best solution for your business.
Spree: Standard & Premium Options
They define their delivery options as follows
Mr Price Home: Economy & Express Options
The bottom line…
Shipping strategy is crucial to your e-commerce business. Charge too much and you lose customers – charge too little and you may not be able to cover your costs. Get this balance right, and you could boost your sales while minimising your costs. And more importantly – don’t surprise your customer, state your fees up-front.
Have high shipping costs caused you to abandon a shopping cart? What would have changed this and encouraged you to complete your purchase?