The way you price your shipping rates on your e-commerce site can make the difference between an order being completed or abandoned. According to Baymard Institute, nearly 70% of e-commerce shopping carts are abandoned, most often because shoppers found the “extra costs” of shipping and fees too high.
As an e-commerce business owner, you need to cover your fulfillment costs while still letting your customers feel they are getting a good bargain. The strategies below can help you price your shipping in a way that keeps your customers online.
Consider Free Shipping
Customers love seeing the word “free.” Some sites, like Zappos, find success by offering free shipping for everything. However, you need to take care to not lose money.
Offering free shipping on all purchases works best with higher-end or one-of-a-kind products where adding the shipping costs into the cost of each item will not discourage your customers.
Another case where offering free shipping may be best is if your competitors are already aggressively promoting free shipping themselves. In that case, you will need to cut your fulfillment costs in other areas to stay profitable (a third-party fulfillment service may be invaluable in this, as described below).
Some businesses will offer free shipping with a minimum order. This can be an effective strategy because customers can still have free shipping, but the larger amount they order to qualify gives you a little more room to cover fulfillment costs.
Another strategy is to offer a range of shipping speeds, with the slowest shipping option being free. In that case, customers know that the free option is always available to them, but they can choose to pay just a little more for the convenience (or necessity) of faster delivery.
Offer Tiered Pricing Based on Shipping Speed
As mentioned above, you can offer your customers different shipping rates based on how quickly they will receive their order. To prevent your customers from abandoning their carts, at least one option should be either free or set at a very low price. Even if your customer opts for a more expensive method, they can still feel that it was their choice to make. Base your costs on your carrier’s rates, plus extra for the additional expense of shipping materials, warehousing, and labor.
Charge Flat Rates
Some sellers will offer one flat rate for all orders. Overstock.com has a version of this where orders under $45 cost $4.95 to ship. This option can seem affordable to your customers, and the fulfillment costs of even small orders are covered. However, an oversized or very heavy order can cause you to lose money. This choice works best for a seller offering smaller items that fit into standard-sized boxes. In that case, consider cubic pricing from USPS, which charges a rate based on the dimensions of the box, as long as the total weight is under 20 lbs. (UPS and FedEx offer dimensional pricing, which is similar, except they may still charge you by weight for heavier packages.)
Provide Real-Time Calculators
With this option, your customers will input their choices into a calculator that shows them the actual cost of their shipping option. This feature builds trust with your customers because they can see that they are only being charged the actual shipping rate. It also covers your cost for shipping large or oddly-shaped items. You will still need to cover your other fulfillment expenses either in the costs of your items or in a separate fee.
Negotiate for Lower Rates
When your business grows past a certain point, you can usually negotiate better rates from your carrier. With USPS, you can use their Commercial Base Pricing (CBP) if you sign up with certain shipping software packages. Commercial Plus Pricing (CPP), their best rate, is available when your business with them reaches a certain volume over time.
UPS and FedEx also offer contract rates for their clients who do enough business with them. Usually, you will need to contact them to open negotiations once you have become a regular customer.
If your business is not yet big enough for you to negotiate lower rates, or if you would rather focus your energy on other parts of your business, you may find it most profitable to work with an e-commerce fulfillment partner. A good fulfillment partner has already negotiated for the lowest rates, and the hours and cost they save you in warehousing, packaging, and labor may save you the most money in the end – savings you can pass on to your customers.
To find out how EWorld Fulfillment can help meet your fulfillment needs, call us at (888) 324-9464 or contact us here.