Shipping is a major cost for online sellers and how it’s handled has a direct effect on both sales and the bottom line. In a perfect world, customers would cheerfully pay the actual costs of shipping orders. But, thanks to the internet’s largest sellers, online shoppers now expect free or very low-cost flat-rate shipping fees every time they shop.
So, it’s no surprise that studies name high shipping charges as the leading cause of dropped carts. If you charge for shipping, there’s no doubt you’ve experienced this in your online store. But these lost sales can be minimized by offering customer-friendly shipping options. Done right, you can even boost order values and minimize the hit on profit margins. ShippingEasy’s multi-carrier shipping rate comparison tool is a great place to start.
Let’s take a look at four popular shipping strategies to see which fits your selling needs.
Popular Shipping Options for Online Sellers
Want to make your customers happy? Offer free shipping. Customers love it (and frankly, expect it), plus it’s a great marketing tool. The best strategy for small businesses tends to be free shipping at a certain order value, like Free Ground Shipping for Orders Over $50. In fact, that’s the shipping strategy I used in my online stores for years.
Free shipping is, officially, a loss on every shipment, but there are other factors to consider. If you offer it at an amount just over your average order value, you’ll likely see an increase in your average order size. We ran an average $45 order value, but with Free Shipping on orders over $50, our average order value increased to around $58 because customers added one more item for free shipping. That extra item’s profit usually covered most of the shipment’s cost.
If you offer Free Shipping, it’s important to compare rates on each and every package you ship to pay the lowest rate every time. ShippingEasy’s multi-carrier rate comparison tool is perfect for this. Plus, you can save even more with their super-low US Postal commercial and Flat-rate Green shipping rates.
Flat Rate Shipping
Here’s another shipping strategy I used with great success over the years. Flat-rate shipping is just that, a flat rate, no matter the order size. For the customer, flat-rate shipping takes the guesswork out of shopping. Let’s say you charge a flat-rate of $6.95 for orders. State that prominently on your site, in the masthead or sidebar. That way, the minute shoppers hit your site, they know that whether an order is $10 or $300, they’ll pay $6.95. Studies show that flat rates are the second most-preferred shipping fees of online customers. That’s probably because a flat-rate is clear and simple, with no surprises at checkout. Believe me, simplicity during checkout is something customers appreciate, as is proven in fewer dropped carts.
Flat rates are great to pair with Free Shipping. In fact, that’s the tactic I used with great success. We charged a flat-rate of $6.95 for orders up to $50 and orders over $50 shipped free.
Table-based shipping assigns a flat rate to orders of certain values, like this:
Total Order Value
And so on…
Table rates are another simple, no-surprise way to structure shipping charges. They give you more room to cover costs on smaller, less-profitable orders, plus customers still know their shipping charges up front. Like flat-rate shipping, there are no checkout surprises and you can easily pair it with Free Shipping above a certain order value, too.
Most ecommerce platforms and shipping systems like ShippingEasy integrate with UPS, FedEx, and the USPS to figure shipping rates for orders as they’re placed. The benefit here is that your customer pays the actual cost to ship orders, saving you money. But there’s a downside: Most online shoppers have no clue what it really costs to ship an order. Often, real-time shipping leads to the highest cart abandonment rates. That means lost sales for you.
But real-time shipping has its place. If you sell an in-demand line or brand and have little competition, customers will pay the shipping fee. But in a competitive market, it’s not an ideal choice.
Here’s another thing to consider. For real-time shipping rates to be accurate, you must enter weights, sizes, and oftentimes shipping box sizes too, for every single item in your online store. This is fine if you sell 30 items, but what if you sell 300? That’s a task. Plus, it might backfire when customers add several items to the cart. This can generate a whopping charge that’s not realistic. Many times, these multi-item orders are packed more efficiently, and shipped more cheaply, than item size/weight numbers indicate.
That said, real-time shipping rates are right for some sellers. When they are, Shipping Easy makes it especially easy to manage them through seamless real-time rate integrations with many top ecommerce platforms.
The internet’s largest players — Amazon, Wayfair, and WalMart to name a few — set the standard with free shipping and fast transit times for most orders. Online shoppers now expect this from every online seller. To compete, small sellers can consider a number of tactics. Free, flat-rate, and table-based shipping are customer-friendly options that help reduce dropped carts and increase order value. Real-time puts nearly all of the shipping cost on the customer, but can lead to sticker shock.
To stay on top, online sellers should test different shipping tactics and track costs/loss ratios, changes to order value averages, and cart abandonment rates. In those figures, you’ll find a balance that makes financial sense and keeps shoppers coming back.
Krista Fabregas is an eCommerce business founder, startup consultant, and staff writer for Fit Small Business. When not helping small business owners launch efficient eCommerce operations, she enjoys managing her home and lifestyles website, SimplySmartLiving.com, writing fiction, and riding horses and motorcycles. Connect with her via LinkedIn or via email at firstname.lastname@example.org.