For an eCommerce business, shipping is a critical business function. So, you have to pay serious attention to devising your shipping and delivery strategy and formulating your shipping pricing model. Only if your customers believe it to be reasonably in their best interests, will they continue to buy from you.
A critical point to remember is that even if ‘Free Shipping’ bears a universal appeal, it’ll be favourable within a very limited context, but it doesn’t work in a local eCommerce operation where you have to ship orders of varying values to the destinations far and wide and also in an international eCommerce operation.
A better option would be to provide your customers with multiple delivery options to your customers from home delivery to store pickups.
1. Free Shipping
For local eCommerce businesses whose customers live in the same vicinity, free shipping is certainly a favourable shipping option. There’s significant research evidence that 90% of customers prefer an online shop that provides free shopping services over one that charges for shipping.
If your profit margin is good, free shipping is preferable for local orders where you ship normal products which don’t require packaging or extra care in delivery, because the cost of shipping is minimal in such a case. While it may chip away at your profit margin, the upside is that it’ll make you a preferred eCommerce operator in your region.
Now not all local eCommerce operators can afford to allow free shipping; only those of you who have a profit margin big enough to absorb the cost of shipping can implement it. But, the very fact that as many as 90% of the shoppers prefer an online store that provides free shipping puts you immediately at a major advantage over your counterparts. So, you can use this with your marketing campaigns and make shoppers flock to your site. If what you offer them satisfies or better still delight them, rest assured that they will return to your online store again and again.
Also, you can allow free shipping for orders above a certain value, say, US $100. This can spur them to spend more and purchase more because they won’t have to pay for shipping. You can define this limit based on your sales revenue targets. You can even activate this option from time to time. But all these decisions must be perfectly aligned with your overall business strategy and rooted in solid reasoning.
You can also engage multiple delivery partners for each locality to keep your shipping and delivery cost at a lower point.
2. Cost as per Spending (Variable Rate Pricing)
You have to run a business and turn a profit, keep the costs down and the service quality good, serve your customers fast, pay your shipping partners and so on. The shipping cost does impact your operations, so one option before you is to charge a variable rate for shipping.
As we mentioned earlier, free shipping may work with domestic orders, but it’ll get increasingly costly when you ship products to multiple cities or countries.
If your eCommerce business belongs in this category, charge your shoppers just your shipping cost (what you have to pay your shipping partners for delivering the order ‘X’). But, we’d recommend against your plans to profit from it, if you consider it at all. Why, because it’ll make your products more expensive for shoppers, which will prove advantageous for your competitors intent on capturing your market share.
What we advise you to do is improve your service quality through your shipping facility.
3. Flat Rate Pricing
The flat rate shipping method is commonly used when you want to ship products to your customers and charge them with fixed rates as per product quantity, count, weight, location, carrier, etc.
For instance, suppose you are a fashion retailer and you charge a fixed shipping price of £20 for London on each cart checkout. Likewise, you can charge it by quantity/ count or weight, etc.
It is a fine shipping strategy if you know how much each checkout will cost you and what will be the right flat rate amount to charge from your customers.
4. Allow Local Pickups
This is a popular shipping strategy adopted by the eCommerce stores which have their offline stores too. A survey had found that 57% of the customers had used this shopping option at least once in their lives. Here is how it works:
Suppose you have a pastry shop and online store too. Now, there must be plenty of customers who are capable of picking their order on their own but willing to place the order online. What if you let them pick up their order from your shop and give them some discount for this?
You can certainly do that because local pickup spares you the cost of shipping and the efforts it would otherwise involve. When you lower the price, passing the cost savings to the shoppers, that will encourage them to buy more.
5. Additional Charges Per Product (for Bulk Purchases)
Occasionally, the cost of shipping one product is equal to the cost of shipping ten products. These counts are just hypothetical, but this scenario may be similar to what you experience in your eCommerce store. For instance, there won’t be much cost difference if you are shipping 5 units or 20 units of the item ‘X’ to the same destination.
For such cases, it is good to fix a minimum shipping price and step it up slightly as per the number of items.
Shipping is an integral business function of your eCommerce operation, which affects customer retention rate, quality of service and customer satisfaction rate. Therefore, you must always choose a shipping method that’s beneficial for you and reasonable for your customers. Remember this rule of thumb: never over-burden your customers or your business in the process.