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Mastering e-commerce shipping strategies for profitable online businesses
5 min. read
2nd Jan, 2024
In today’s fast paced world of online selling and shopping, customers are increasingly expecting fast, free and secure deliveries. Additionally, they expect to be on top of their order tracking as well. Your shipping strategy is one of the last consumer touchpoints in e-commerce before they convert and it can often make or break the deal for you.
Just having a superior product is no longer enough for conversion. You need to also have an effective shipping strategy that makes your customer trust your business. Did you know that order tracking is regarded as a benefit by 90% of customers? In fact, most customers give the same level of importance to shipping and delivery like the product quality. This means an inefficient shipping strategy and experience can damage brand reputation just as much as a bad product.
It can be confusing for first time business owners to chalk out their shipping strategies which includes the costs, the carriers, the promotions, real-time tracking, hassle-free returns etc. However, an implementing an effective strategy can become a competitive advantage for your business. So, in this guide, we'll explore shipping strategies that can help you streamline your operations, cut shipping costs, and ultimately ensure you and your customers are satisfied. We'll dive into optimizing packaging, labelling, and selecting the most suitable shipping carriers. These strategies can make an impact on improving your e-commerce shipping process.
Just having a superior product is no longer enough for conversion. You need to also have an effective shipping strategy that makes your customer trust your business. Did you know that order tracking is regarded as a benefit by 90% of customers? In fact, most customers give the same level of importance to shipping and delivery like the product quality. This means an inefficient shipping strategy and experience can damage brand reputation just as much as a bad product.
It can be confusing for first time business owners to chalk out their shipping strategies which includes the costs, the carriers, the promotions, real-time tracking, hassle-free returns etc. However, an implementing an effective strategy can become a competitive advantage for your business. So, in this guide, we'll explore shipping strategies that can help you streamline your operations, cut shipping costs, and ultimately ensure you and your customers are satisfied. We'll dive into optimizing packaging, labelling, and selecting the most suitable shipping carriers. These strategies can make an impact on improving your e-commerce shipping process.
How important is a shipping strategy?
A well-executed shipping strategy is critical to the success of any e-commerce company. According to research, 90% of consumers would shop online more frequently if they could get free shipping. This number alone highlights the importance of having a well-planned delivery strategy to drive revenues in e-commerce.
What precisely is a shipping strategy?
In simple terms, your shipping strategy entails everything required to transport your product from your location to the customer’s delivery destination, while considering factors such as cost, speed, logistics partners and dependability. A well-planned shipping strategy guarantees that products reach your customers on time, at the right price, and without any damage. . It further entails choosing the right shipping providers, negotiating reasonable rates, and implementing an efficient fulfillment processes.
Advantages of a good shipping strategy:
- A well-thought-out shipping strategy has advantages. For starters, delivering a good and dependable shipping experience boosts consumer happiness. Customers who receive their products swiftly and without problems will likely become your brand’s advocates, recommending your store to others.
- Secondly, a well-planned shipping strategy can assist in lowering the number of customers who abandon their shopping carts. A majority of customers abandon their carts at the last minute due to extra costs involved like shipping, taxes etc. being too high. Having a fair price in relation to the product and the delivery distance is important to drive customer conversion.
- An effective shipping strategy can even help online store owners to encourage customers to build their carts and increase their average order value. They can incentivize customers to increase their cart size by providing shipping promotions such as free delivery on purchase of above a certain reasonable value .
- Furthermore, a well-planned shipping strategy can help the company save money. Shipment costs can be optimized by negotiating shipment rates with carriers and streamlining fulfillment operations increasing your overall profitability.
Why does your business need its own shipping strategy?
Shipping is an important factor in the success of any online business. A well-planned process ensures customer happiness and keeps you ahead of the competition. Let’s discuss why having a shipping strategy specific to your company is so important.
- To begin with, a customised delivery strategy helps you manage customer expectations. You establish confidence and openness by clarifying your shipping methods, delivery periods, and upfront pricing. This transparency about order fulfillment increases consumer satisfaction and subsequently loyalty.
- Furthermore, a tailored shipping plan allows you to streamline your operations while lowering costs. Examining your shipping data can uncover trends such as shipping destinations or peak periods. This essential information enables you to negotiate lower rates with carriers, optimize packaging operations, and reduce the possibility of errors during shipment. These changes result in cost savings and increased productivity, resulting in improved order fulfillment.
- Adjusting your delivery plan allows you to provide solutions that adapt to your customer’s interests and demands. Some people may put delivery first. Some people are ready to pay more for express services, while others may prefer more affordable options. You can improve customer satisfaction even more by fulfilling these varying requirements through shipping options.
As a result, an effective and adaptable delivery plan is critical for any e-commerce organisation. It ensures operations and substantially contributes to client retention and overall success.
The best shipping strategies
Now let's explore standard shipping strategies that can greatly impact customer satisfaction and your bottom line when running an e-commerce business: Flat Rate Shipping, Free Shipping, and Dynamic Shipping Costs.
1. Flat rate shipping:
Flat Rate Shipping refers to charging the same, fixed shipping rate for all your orders, irrespective of the order size/ weight or delivery distance. It is easy to communicate and appears to be transparent as this way, customers know the shipping cost upfront, avoiding surprises during checkout. Flat-rate shipping works well when selling similar products in size and weight because it offers consistency and predictability. Note that with this shipping strategy, shipping costs for some orders will not be covered fully but the same will be compensated for some orders where you will end up over-charging. However, be careful while selecting the right flat rate. It should not be so high (especially for lower ASP products) that the customer doesn’t see value in the purchase at all or perceives it to be very high for the weight of the product or the distance. And it should not be so low that you are unable to cover shipping costs, especially for the longer distance orders.
2. Free shipping:
Offering no-cost shipping has become increasingly popular in the e-commerce industry and is almost a standard today. And this is for a reason. Customers are more likely to complete a purchase when they know they won't have to pay extra for shipping. While covering the shipping costs may seem challenging, you can adjust your product pricing accordingly. In a survey we conducted among 300 customers, 66% said they would rather pay more for a product and opt free shipping than pay for delivery.
But don’t worry, you don’t need to offer free shipping for all purchases. You can use this strategy smartly to offer free shipping only above a certain cart value. Set an order value to qualify for free shipping, and this can be an effective strategy to increase the average order value on your website.
If you are just looking to start your online business, consider creating your website with SmartBiz by Amazon. Not only can you create your website in minutes without needing any design or technology skills, but you can also set up flat rate shipping or free shipping promotions, including free shipping over a certain cart value, within 2 clicks! It’s that simple! If you would like a demo, fill up our interest form here and use SmartBiz for free until March’24!
But don’t worry, you don’t need to offer free shipping for all purchases. You can use this strategy smartly to offer free shipping only above a certain cart value. Set an order value to qualify for free shipping, and this can be an effective strategy to increase the average order value on your website.
If you are just looking to start your online business, consider creating your website with SmartBiz by Amazon. Not only can you create your website in minutes without needing any design or technology skills, but you can also set up flat rate shipping or free shipping promotions, including free shipping over a certain cart value, within 2 clicks! It’s that simple! If you would like a demo, fill up our interest form here and use SmartBiz for free until March’24!
3. Dynamic shipping costs:
This refers to dynamically calculating shipping costs based on package weight, dimensions, and destination and gives customers an estimate of their total expenses. This strategy is particularly useful if you sell products of different sizes and weights. By integrating a shipping calculator into your website, customers can enter their location details, allowing the system to generate a cost estimate for their shipment. This approach ensures accurate charges for shipping while avoiding overcharging or undercharging customers.
How do you protect your profits/ margins?
Preserving profitability is crucial for any business, and you need to consider your margins not only when you are pricing your products but also when you are deciding on your shipping strategy. This is especially because shipping represents a significant expense for e-commerce businesses. Here are some practical suggestions to protect your profits while guaranteeing customer satisfaction.
• First and foremost, it is crucial to analyse your shipping expenses. Calculate the costs associated with packaging materials, labor, and transportation to determine the cost of shipping methods. Negotiating rates with shipping carriers can also contribute to cost reduction.
• Another effective strategy for maintaining profitability is optimising your inventory management. You can avoid excessive stock or running out of popular products by predicting demand and stocking inventory levels. This helps prevent storage costs and missed sales opportunities.
• As your business scales, you can also study your demand patterns and identify pockets of high demand. You can opt to store your inventory closer to these regions where you get higher number of orders from. This will not only reduce your overall shipping costs but also delight your primary customers due to faster delivery times.
• Consider offering attractive shipping options on orders that meet a minimum value requirement. This approach encourages customers to add items to their cart to qualify for shipping, ultimately increasing the average order value.
• It can also be beneficial to have a shipping system or a last-mile delivery software in place. By offering fast shipping at optimum costs, customers can choose the level of service that suits their needs. This gives them flexibility, allows you to charge fees for expedited shipping, boosting your profitability, and keeping your margins intact.
• First and foremost, it is crucial to analyse your shipping expenses. Calculate the costs associated with packaging materials, labor, and transportation to determine the cost of shipping methods. Negotiating rates with shipping carriers can also contribute to cost reduction.
• Another effective strategy for maintaining profitability is optimising your inventory management. You can avoid excessive stock or running out of popular products by predicting demand and stocking inventory levels. This helps prevent storage costs and missed sales opportunities.
• As your business scales, you can also study your demand patterns and identify pockets of high demand. You can opt to store your inventory closer to these regions where you get higher number of orders from. This will not only reduce your overall shipping costs but also delight your primary customers due to faster delivery times.
• Consider offering attractive shipping options on orders that meet a minimum value requirement. This approach encourages customers to add items to their cart to qualify for shipping, ultimately increasing the average order value.
• It can also be beneficial to have a shipping system or a last-mile delivery software in place. By offering fast shipping at optimum costs, customers can choose the level of service that suits their needs. This gives them flexibility, allows you to charge fees for expedited shipping, boosting your profitability, and keeping your margins intact.
Summary:
Shipping is a core function of e-commerce businesses and planning your shipping strategy is not only important for your profitability but also for customer conversion and thereby, business growth. By implementing best-in-class shipping practices, you can ensure customer satisfaction, reduce unwanted expenses, and enhance your business profit.
FAQ's
1. What is the role of "Standard Shipping" in an e-commerce shipping strategy?
2. How can I offer free shipping without hurting my profits?
You can absorb shipping costs by adjusting product prices or setting a minimum order value for free shipping, ensuring profitability and customer satisfaction.
3. Can you explain the basics of calculating shipping cost for e-commerce businesses?
The calculation of shipping fees for e-commerce businesses is based on a variety of factors like packaging dimensions, weight, delivery destination, value of the contents, and shipping carrier being used. However, it’s important to negotiate pricing and delivery SLAs with your shipping provider in a way that suits your customer and product needs.
4. How does a well-planned Shipping Strategy contribute to 'How to Make Money in e-commerce'?
An effective shipping strategy enhances customer trust, reduces cart abandonment, and drives repeat business, ultimately boosting e-commerce profitability. Additionally, since shipping is a big expense for e-commerce businesses, managing it effectively can help reduce operational costs for your business, thereby, impacting your bottom line.
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