Online customers care about delivery times. Studies have shown that 41% of online shoppers consider same-day delivery as one of their top three concerns when shopping online. Slow shipping speeds can not only cause a customer to cancel an order but to seek out a site with a faster fulfillment process.
As Amazon has normalized the expectation for free two-day shipping, your eCommerce business should consider the benefits of an overnight shipping option. Offering this desirable service comes with additional expenses and logistics. However, nearly 90% of eCommerce customers are willing to pay more for the factor that matters the most to them.
In this guide to overnight shipping, we discuss:
- Overnight shipping and its benefits for an eCommerce business
- How much overnight shipping costs and what factors influence your business’s logistics
- Strategies for how to cost-effectively integrate overnight shipping into your fulfillment process
Define Overnight Shipping
Overnight shipping is an offer that carriers can make with businesses to have their merchandise delivered to customers by the next business day. To offer this service, carriers provide cutoff times and exceptions, which vary depending on their needs.
For example, merchandise may have to be ordered before a certain time of day to guarantee an overnight delivery (for instance, “Order in the next 2 hours to receive the item by tomorrow”). Amazon uses this daily cutoff not only to give carriers a chance to fulfill their orders but also to entice hesitant customers to meet the deadline.
Weekend orders may also take longer, depending on the carrier’s needs. Though it says “overnight,” communicating the limits of that term and the real date of delivery with customers is essential.
Benefits of Overnight Shipping
Adding overnight shipping to your fulfillment strategy comes with several benefits. With eCommerce sales predicted to top $500 billion by 2022, these benefits can provide an exponentially greater competitive edge.
Studies have shown that 19% of customers abandon a cart due to slow delivery times. Offering overnight shipping can accommodate these shoppers’ needs and increase conversions by preventing cart abandonment at the source.
Increase Basket Size
Since customer behavior is a factor in an eCommerce business’s profits, your buyers’ psychology can be used as part of your fulfillment strategy.
Overnight shipping is still a luxury in the eCommerce world. To pay for it, customer assessment studies have shown that customers will feel motivated to add more items to their cart to increase the perceived value of those shipping costs.
This is why many sites impose a minimum purchase limit on orders that are viable for overnight shipping. They hope to encourage this behavior.
Upstage Your Competition
The eCommerce titans – right now, they’re Amazon, Walmart, and eBay – offer overnight shipping options. Due to its expenses and logistics, many businesses forgo the option – only about 50% of online retailers offer same-to-next-day delivery options. These businesses could be members of your competition.
To upstage competition in your market, offering overnight shipping despite the additional costs can attract customers looking for the fastest available delivery method.
Increase Customer Value
“Customer value” describes how much each customer is worth to an eCommerce business over the course of their entire relationship. An unsatisfied customer is worth the cost of the one purchase they make (or less). However, a customer satisfied with an overnight delivery can become a long-term buyer.
For an eCommerce company competing in a crowded marketplace, establishing this credibility and consumer confidence not only increases conversions but also increases the lifetime value of each customer that converts.
Overnight Shipping Timeline
To fully understand what overnight shipping looks like, consider this timeline of events leading to a successful overnight delivery:
- An order comes in before the “order within” window expires. Your fulfillment team begins downloading and packing the order to meet their own deadline for the courier’s overnight delivery window.
- Your carrier processes your order after it is either picked up at your warehouse or delivered to the post office. This entails scanning, sorting, and routing the delivery.
- The package travels to the delivery hub that is located closest to the customer. Depending on how far away it is, air shipping may be required to meet the overnight deadline, which can increase costs as well as change timelines.
- After being processed at the delivery hub, the customer receives their merchandise the next business day.
This timeline is simply the ideal situation. To determine how much this strategy will cost to fulfill consistently, consider this breakdown of the expenses an eCommerce business must shoulder to offer overnight shipping.
Overnight Shipping Cost
Your business can calculate overnight shipping costs per carrier to get a basic idea of the total operating expense you can expect. Subsequently, the major factors that influence overnight shipping costs can also be broken down into categories (see “Cost Factors” below).
Cost by Carrier
We break down the costs and shipping procedures by carrier to give you a better idea of which service will most benefit your fulfillment process.
UPS offers three options for overnight shipping. They are called:
- UPS Next Day Air Early
- UPS Next Day Air
- UPS Next Day Air Saver
The main difference between them is the cost and expected delivery times. Air Early offers the quickest delivery (by 8 AM the next business day) but the highest prices. Air guarantees delivery by 10:30 AM. Air Saver costs the least and delivers by 3 PM.
FedEx also offers three shipping options for overnight orders:
- FedEx First Overnight
- FedEx Priority Overnight
- FedEx Standard Overnight
First Overnight guarantees delivery between 8 AM or 2 PM for remote delivery locations. Priority Overnight offers 10:30 AM deliveries or by 5 PM for remote areas. Standard Overnight, the cheapest method, offers deliveries by 3 PM the following afternoon.
USPS offers overnight shipping as a service called Priority Mail Express. For light packages, this guaranteed overnight delivery is the best option, with prices starting at $24.70 for 10:30 AM deliveries.
Which Service Should I Use?
For businesses that ship many light (<70 pounds) packages, USPS offers the most cost-effective overnight service. They also don’t charge more for weekend deliveries.
For heavier packages, the services offered by UPS and FedEx are far more cost-efficient, depending on the customer’s location and other factors, which we discuss below.
Aside from using a calculator with the carrier directly, shipping costs can be approximated using the main factors that increase the cost of overnight shipping.
The size of the package being delivered directly impacts the costs to ship it overnight. The smaller the box by dimensions (LxWxH), the cheaper the delivery.
This applies to the box’s weight as well. Most carriers set a limit for packages, above which the overnight delivery costs increase. Weigh the fully packed items you intend to offer overnight shipping for.
Many carriers offer shipping rates at a discount with merchants that frequently use them. Third-party fulfillment companies often have relationships with carriers that they can use to secure discounted shipping rates for their clients’ businesses.
These services receive the lowest shipping rates due to the extent of their production and their ongoing relationship with the carrier.
The location of the product and the delivery hub nearest to the end customer heavily impacts the shipping cost. Carriers use shipping zones to calculate these prices, which you can also do to plan your expenses.
As mentioned, overnight delivery can indicate a range of times during the next business day. Depending on how early it needs to be, shipping costs can go up.
How to Save on Overnight Shipping
Assuming the dimensions of the products and the shipping distance cannot be changed, here are some strategies to keep your business’s overnight shipping costs to a minimum:
Proper warehousing is a key factor in optimizing the overnight shipping process. By stocking warehouses closer to customers, businesses can save shipping time and expenses.
Warehouses located away from the coast can be advantageous. They may be farther from the ports. However, the real crunch when it comes to deliveries is not from the port to the warehouse but from the warehouse to the customer.
By using warehouses within reach of many shipping zones at once, eCommerce businesses can refine their entire fulfillment process.
Multiple warehouses can save a business time and money by putting more orders within closer reach of your customers. Of course, using multiple warehouses means shipping the products to separate storage locations.
However, freight shipping to warehouse locations can be cheaper than shipping individual orders if enough product is moved at once. While your business could never match Amazon’s fulfillment network alone, managing multiple warehouses can still result in a cheaper fulfillment process.
Negotiation can help you save on overnight shipping costs in several ways. One is a simple price negotiation. When choosing the carrier to manage your overnight fulfillment process, you can try to bring the price down.
A guarantee of overnight delivery can also be negotiated. Since your promise to deliver your customers’ products overnight depends on your carrier’s ability to do so, this guarantee is a vital part of any successful overnight delivery strategy.
How to Manage an Overnight Shipping Strategy
Managing the costs and logistics of overnight shipping can strain your fulfillment process. However, the offer can not only resolve a customer service issue but can also give your customers a unique, attractive option for items that they want in a hurry.
A third-party fulfillment service can use its carrier connections and its knowledge of order fulfillment to find the shipping methods that are most cost-effective for your overnight deliveries. This gives your business the freedom to offer customers better deals and increase not only your conversions by using overnight shipping as leverage but even increase the lifetime value of the customers who convert as a result.