Shipping is a crucial part of the online shopping experience. The shipping options presented to your customer during the checkout will have a major impact on whether they complete their purchase or abandon their shopping cart.
There are many factors to consider when designing your shipping strategy. How much is the customer willing to pay? What will be the cost to your business? How can you enhance your customer experience with better shipping? Answering these questions will help you put together a shipping strategy that is effective to grow your own business and creates a better experience for your customer.
Cost of Shipping
The total cost of shipping is determined from the combination of costs from packaging the product, sending the product, and adding special features along the way. By understanding the full cost to your business for shipping your product, you can understand what an appropriate shipping strategy is to protect your profit margins.
Packaging (Size, Weight)
A difference in packaging can mean more or less money spent on shipping. Keeping packaging as dimensionally tight as possible is a priority in order to avoid unnecessary size costs. The weight of the product will make up most of the package’s mass, so try to keep the packaging as close to the product’s original weight without packing the lbs. on.
Carrier and Labelling
Choosing a carrier to ship your items is usually a balance between cost and time. The type of product you are shipping is important in choosing a carrier, as many carriers have specific rules concerning products like food or perfumes. When choosing a carrier, pay close attention to the size, weight, and special services that they offer, as well as rates to areas you ship most to.
The hard, cold truth is that packages get lost, misplaced, or stolen every day. Purchasing shipping insurance can eat into your margin but it may save your business tons in lost merchandise costs. Shipping insurance is almost a necessity if what your business is shipping is an expensive item. A lot of carriers will hold themselves liable for packages of value up to $100, so low-value purchases may be already covered. Shipping insurance can be purchased through your chosen carrier, but you can look into third party shipping insurers to see if you can get better rates.
There are a couple of costs associated with cross-border shipments. A country’s ‘de minimus value’ is the value of a shipment at which no duty is charged below this value. If your business is charged for duties or VAT (value added tax), it is calculated a percentage of the combined amount for the item, the insurance, and the shipping.
Pricing Your Shipping to Customers
Depending on what you are selling, if your business eats all of the shipping costs it could be subtracting from your margin. Alternatively, you need to know how much your customer is willing to pay for shipping if you were to offload the cost to them. There are mainly three different ways to price shipping; flex, flat, and free shipping.
A flex shipping cost is offloading the entire cost of shipping, no matter the product, onto the customer. If the sunglasses you sell cost your business $3 USD to ship to the customer, the customer will pay $3 USD. If the same item would cost $30 USD to ship, the customer would then pay $30. Flex shipping is again based on the total amount from size, weight, insurance, tax, and duties. Great! Your business doesn’t have to pay a cent, but keep in mind that customers have a maximum propensity to shipping costs. If the shipping costs are too high, when customers add items to cart, you may see customers turning down the purchase due to shipping costs.
Getting to know your customers’ maximum shipping cost threshold could benefit your business. Charging this rate as a flat fee can bring down the maximum cost of shipping that a customer might have to pay. With the flat rate, some customers get charged higher for shipping and some get lower rates, depending on the cost of shipping. Flat cost shipping might deter customers from purchasing a low amount of product but may also become a motivator for a higher purchase amount.
Free shipping is your business’s way to purchase better customer service. In this pricing model, your business eats all of the costs of shipping but in return, can provide a better customer experience. Zappos.com, the popular shoe e-tailer has had enormous success by focusing on a customer-centric business model, including free shipping.
Customer Experience in Shipping
Even if your company doesn’t offer free shipping, customer service is a cornerstone of a great shipping experience. Going the extra mile in service and presentation in shipping can say a lot about your business.
Branded vs Non-branded Packaging
Packaging is customizable, especially when your company fulfills its own shipping. When the customer receives a package, seeing your custom packaging and personalization can be a step-up in creating a great customer experience. Using generic packaging can cut costs. Packaging can be customized from the box to the package protection filler, to the tape, and even the design.
Package tracking uses a tracking number to communicate with the shipping service to update the status and destination of the customer’s package. Many carriers include package tracking to a certain point. Third-party package tracking businesses can be purchased if your shipping provider doesn’t. If your business decides to offer package tracking as an add-on, your customer’s uncertainty is lowered leading to fewer complaints.
It is important that you manage your customer’s expectations when shipping. If your company chooses a shipping method that takes longer to get to the customer, then make that clear with them. Longer shipping times don’t mean unhappy customers, as long as the customers can expect a longer shipping time at purchase.
The length of time it takes to ship to a customer depends on your shipping method, origin and destination countries, and your carrier.
What’s the Best Way to Ship?
The best shipping method is that in which best suits your business’s goals and your customer’s experience. Deciding what goes into your shipping affairs is a decision on the balance between costs and service. The price and margin of your products are one of the biggest factors in determining the best way to ship for your business. With higher costs, you may need to provide better customer service.