In the world of e-commerce shopping, there is a boogeyman that haunts both shoppers and suppliers, and its name is shipping costs. If everybody, except for mail carriers, had their way, every product you buy online would be offered with free shipping. However, it costs money for a vendor to send products across the country, or even the world. These companies have two options when they plan their business; they charge users in order to cover the cost of shipping, or they eat the cost of shipping and don’t charge the users at all.
Neither of these options is ideal. On the one hand, shipping costs can be very demoralizing to a prospective shopper. Paying an extra 10 dollars for shipping on a 20 dollar order is an awful feeling, and for some people it’s enough to make them rethink the entire purchase. In fact, the leading cause of cart abandonment in 2016 was prohibitive extra fees, including shipping costs. If you charge a lot for shipping, then the revenue you lose to cart abandonment may not outweigh what you save by charging for the shipping.
On the other hand, shipping costs can really eat into your profit margins, especially if you deal in large or unwieldy products. Depending on the transportation service you are using, you might be losing more money than the product is even worth.
This leaves e-commerce vendors in a catch-22; lose money to shipping companies, or lose customers. To charge for shipping, or not to charge? Thankfully, the reality is actually more complex than simply picking one of those two options. By taking a look at your business, customer base, and other considerations, you can prevent users from jumping ship, while keeping your own overheads down.
One choice that many vendors take is to offer conditional free shipping.
This means that they are willing to ship their products for free, but only if the user fulfills certain conditions. Most commonly, this means offering free shipping if the user spends a minimum amount on their order. This saves the vendor a good amount of money, because the profit gained from a large order outweighs the shipping cost.
It makes more sense to pay 10 dollars to ship a 50 dollar order than it does to ship a 12 dollar order. This option actually helps you sell more, because many users will actually buy extra products in order to get that free shipping.
Conditional free shipping isn’t limited to spending minimums. Another option is to offer free shipping on select items. The sort of product you want to use this offer for are the ones that offer the most profit, for the least cost of shipping.
Jewelry, for example, is usually very cheap to ship when compared to how much it is sold for. If you are selling small items for upwards of 100 dollars, paying a small fee to USPS to send it is a good economic choice. If your inventory is entirely items like this, then offering unconditional free shipping is not only viable, it’s preferable!
There are other reasons to offer free shipping as well, depending on what your business model is.
Take a look at what your competitors are doing. Do the majority of them offer free shipping? If so, then you probably should as well. You don’t want to be the only vendor in your field who makes their clients pay for shipping, unless you are significantly cheaper than your competition. Even then, there is a not insignificant number of shoppers who would rather pay more with free shipping, even if the final price tag is actually larger.
Similarly, if none of your competitors offer free shipping, then that might be a sign that you should. That same willingness to accept steeper prices in exchange for free shipping can work in your favor, and can be a significant boost to word-of-mouth advertising. If you can garner a reputation as an e-commerce store that does everything the competition does, and also offers free shipping, you might find yourself with a sudden upswell in new customers.
Of course, there are circumstances that will make offering free shipping impossible.
If you sell bulky items like furniture, free shipping is simply not economically viable in any fashion. That doesn’t mean that you should just bite the bullet and charge your customers out the wazoo to cover the costs. There are alternatives to keep your overheads lower for you, and allow you to offer affordable options that won’t scare your customers away.
No matter what you plan on charging, you should always be on the lookout for ways to reduce your own shipping costs.
An easy way to do this is to use shipping rate comparison software. These computer programs, which can be purchased at affordable rates, help you figure out which carriers have payment models that work best for your business. They can even help you select packages within a single carrier to best suit whichever product you are trying to send at the moment.
You can also outsource your shipping to a fulfillment company. You will have to pay them out of pocket, but most of them have heavily discounted rates with most major mail carriers. Paying a fulfillment company to handle your shipping can usually help you save on overall costs, which let you charge your users less to get their packages.
A good middle ground between charging the full cost of shipping and offering it for free is to instead use a flat rate for all purchases. This option encourages customers to buy more, because they pay just as much in shipping for five items as they would for one. While it isn’t as tempting as free shipping, flat rate shipping is a great choice if you expect to sell your products in bulk.
There’s no getting around it; shipping is the most frustrating aspect of any e-commerce site. It’s not fun, sexy, or glamorous, it’s just hard work, with a high price tag. However, you owe it to yourself, and to your customers, not to take the path of least resistance when it comes to getting them their packages. By assessing your options, you can find a way to keep your overheads down, and encourage your customers to trust you to get them the best goods for the best price.