Lillian Anselmi is part of Modalyst an online distribution platform specializing in dropshipping for independent brands. Their technology allows e-commerce stores to easily add products, receive real time inventory level updates, and automate the ordering process. With their Shopify App, online stores are able to manage hundreds of suppliers from all over the world.
Recently she wrote an article on the Modalyst Blog about choosing the right shipping strategy for your online store and I thought it would be helpful for some of you who may be struggling with this decision.
If you are an online retailer, you better get your ship together or you will certainly lose customers.
In all seriousness, shipping should be considered as one of the most crucial elements in your online strategy and should be analyzed like any other business decision. A customer’s experience is influenced as much by the products you are offering as it is by the shipping costs associated with those products.
In fact, a UPS study shows that shipping is the number 1 reason customers abandon their carts. Say what?! Yep, the number 1 reason. So lets get down to business.
How do you determine which type of shipping policy is going to keep your customers interested but not at the expense of your business? Let’s go through some different scenarios.
#1 ) I am an experienced online retailer with a loyal customer base and predictable sales
Firstly, congratulations. Not an easy feat. This allows you some flexibility and creativity with how you want to deal with shipping. This is a great opportunity to offer free shipping. Of course as a business, nothing can actually be FREE, so be sure you are making up for it in another way.
For example, Wild Dill, a successful online baby boutique, offers free shipping when you sign up for their newsletter or follow them on Instagram. While the store will likely lose money on the first transaction, they have captured the customers information to use for direct marketing campaigns making the chances of a return visit very likely.
Another popular e-commerce site BOUTQS, offers qualified free shipping. For example, if a customer purchases $100 or more in products, they will ship for free. No doubt this incentivizes the shopper to add more items to their cart, so this can be a win-win. However, the key is to know the difference between your average order size and your free shipping threshold. For example, if your average order size is $75 and you need an order of $100 or more to cover free shipping, it seems likely you can get them to buy $25 worth of additional items to reach that threshold.
#2) I sell one of a kind / unique items to a niche demographic
If you are in the business of selling novelty items, you have one major advantage that offers you a guaranteed win on shipping. Due to low competition, you have relative flexibility in your product pricing. This allows you to embed the cost of shipping into your MSRPs and still offer “free shipping” while making sure your costs are covered.
#3) I offer a variety of products / price points to a wide audience
In this case, you may want to be careful. If your orders are unpredictable (in terms of type of products and price points) it will be difficult to devise a strategy that works site wide. In this case, calculated shipping is likely your best option. Try embedding a shipping calculator on your site so the rates are accurate and you can avoid cutting into your margin as much as possible. Otherwise, simply charge what you pay to ship the item. This requires a little more work as you will have to price out the shipping for each item but is well worth it.
#4) I am a specialty store selling similar size products
If you are a jewelry site, for example, you are most likely sending the same size box to each customer. Use this predictability to your advantage and offer flat rate shipping on all orders. Choose a standard box size that fits a certain amount of your average size items so that unless they choose an unusually high amount of products, you should be covered. Customers will like the transparency and easy to understand policy. Don’t forget to always adjust rates based on current pricing outlined by each carrier.
For example, HERE is a great guide on the new pricing announced by USPS for 2016.
In conclusion, there is no one size fits all for shipping policies and it is best to take a deep dive into your customer base and understand what will work for them and for your business.
If you are interested in joining Modalyst, please sign up for a FREE TRIAL here. Modalyst is offering the Scaling Retail community a discount on membership so mention Scaling Retail in your sign up form to be eligible. Email Lillian@modalyst.co with any questions.