Not so long ago, you had to pay extra to get your purchased item delivered faster. These days, consumers expect free two-day shipping for just about anything they buy online. But the cost of expedited shipping isn’t gone, it’s simply made up elsewhere. With so many shipping options to choose from, it’s important you pick the best one for your business.
This eCommerce shipping guide has everything you need to balance shipping methods and customer shipping expectations that you can afford as a business.
Is Free Shipping Better Than Fast Shipping
Is it better for merchants to offer their customers fast shipping or free shipping? Merchants have been seeking the answer to that question for years, but the answer is always the same, give the customer what they want.
To find out what the customer wants, we turn to the latest research, which showed that the primary reason digital shoppers abandoned their carts in 2019 was high shipping costs.
That fact would seem to suggest customers value cost over speed of delivery. Yet, that same research reveals 23% of digital shoppers who cited “estimated delivery time was too long” as their primary reason for cart abandonment.
Though somewhat contradictory, these facts reveal two things. The first is that customers value free AND fast shipping, no choice necessary for merchants. The second is that a failure to meet or exceed customer shipping expectations often results in lost business.
How To Offer Free and Fast Shipping Without Hurting Your Business
Despite their importance, it’s possible for a brand to offer fast AND free shipping to every customer, on every item, everytime. According to The Wall Street Journal, companies spent a record $1.5 trillion dollars on shipping costs in 2017, continuing a trend of rising shipping costs that even Amazon couldn’t escape.
“The company stated in its earnings report that it spent a massive $9.6 billion on global shipping costs in the third quarter of 2019. That’s roughly $0.5 billion more than the e-commerce giant spent on shipping costs during 2018’s holiday quarter…” (Quartz, 2019)
In the face of rising shipping costs and customer expectations, merchants are left with little choice but to figure out how to offer free shipping without going bankrupt. Fortunately, there are a few methods that merchants can utilize to offer free shipping, reduce delivering times, and stay in business.
Offer More Shipping Options For Greater Control Over Shipping Costs
Though faster shipping methods are more costly, they enable your customer with more options, and therefore greater control over cost. A merchant could, for example, offer base shipping but allow customers to select a faster or premium shipping method at their expense.
By doing so, they not only cover the cost of shipping (or nearly so), they also enable the customer with the level of control and transparency that builds trust and loyalty. Besides simply eating the cost of shipping, offering different shipping methods, and baking the cost into the sales price is the most straightforward option.
Offer Free Delivery and Shipping Options with Minimum Purchase
One way to minimize losses on smaller orders is to offer free shipping with a minimum purchase. The key to this method is to ensure the minimum purchase amount is slightly higher than the average order.
Let’s say, for example, the average order is $25. A merchant could offer free shipping on all orders greater than $30. By doing so, they not only encourage the customer to add another item to their cart, they also boost conversions, and increase average order value.
Offer Faster Delivery as an Upgrade
A surprising number of retailers and merchants do not offer faster shipping methods and premium shipping to their customers. A merchant could, therefore, frame their faster shipping options as an upgrade from the slower shipping option offered by a competitor. Should the customer choose the faster delivery option, the merchant simply adds the total cost of shipping to the final sale price.
Include an Add-On Shipping Option for Faster Delivery
One way to offer free shipping to your customers is to offer an add-on option. Add-on options enable customers to order the items that would be too expensive to ship if purchased alone. Use add-ons to incentivize customers to quickly add high margin items that qualify for free shipping. Add-ons are a win-win for you and your customer because they can always charge for shipping if customers choose to buy a cheaper item alone.
Launch a Loyalty Program for Faster Shipping and Delivery
When most people think of loyalty programs, the first one to come to mind is likely Amazon Prime. Fortunately, you don’t have to be retail-giant to mimic their strategy. The idea is simple enough – customers pay a month or yearly fee to receive free shipping with fast delivery times and that subscription fee covers the cost of delivery, which encourages repeat business.
Offer Free Shipping Only When Margins are High
When margins are high enough to cover the cost of shipping and still make a profit, then there is no reason not to offer free shipping to the customer. Remember, you don’t have to offer free shipping until it’s profitable to do so, and you can always set conditions like a minimum order value to ensure sure you’re always profitable.
Make the Shipping Process Less Expensive For You
Obviously, the best way to mitigate the costs of offering free and fast shipping and delivery is to implement Strategies for Reducing Supply Chain and Logistics Costs. Though every company is likely to have a different understanding of what qualifies as a logistics cost, they typically include procurement, storage, labor, packaging, transportation, and the administrative costs of transporting products from one end of the supply chain to the other.
In most cases, these costs are typically paid to logistics industry vendors (freight carriers, fulfillment centers, warehouse space, etc.) but may also include the cost of logistics software, warehouse equipment, automated shipping, and fleet maintenance. Also, providing tracking information, improving delivery times, and offering multiples shipping options are ways to improve customer satisfaction.
It’s these hidden shipping costs that are baked into sale prices, and eat away at profit margin and. The best way to avoid them is to outsource warehousing, shipping and logistics to a 4PL, like Flowspace. With a nationwide network of over 1000 warehouses and fulfillment centers, Flowspace can help you minimize the high shipping fulfillment costs that lead to lost sales, lost customers, and lost profits. Contact Flowspace today for more information.
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