Shipping can make or break your eCommerce website success and highly influence your profit margins.
It is so important to map out a defined shipping strategy for your online business. The world of shipping and fulfilment can seem complex when you’re not familiar with it, so below we’ve provided a short overview of the various options for you to consider.
The Four Types of Shipping Charge
You have four discrete choices for shipping.
No one likes to have to pay extras. You’ve added various items into your shopping basket and when you checkout find that shipping is an additional £15. Every customer loves free shipping.
Offering your customers free shipping is one of the best ways to reduce shopping basket abandonment.
You charge your customer nothing extra but naturally have to build in the costs of the shipping you get charged into your profit margin. Whilst this is very appealing for your customers, you need to be clever in implementing this to make sure you cover your own costs somehow.
To make free shipping work, you have a few options.
- Increase product prices to cover costs for shipping
(The customer still pays but the charges are effectively hidden)
- You pay the full price of shipping out of your margins.
- Increase prices of products slightly to cover partial costs of shipping
(both you and your customer pays)
- Offer a discount code to certain customers for free shipping.
Additionally, you can also try offering free shipping on a minimum order amount. This strategy can help offset the costs of shipping by helping to increase your average order size, but you’re still the one paying for it out of your margins.
Here you just charge a single flat fee for every delivery.
One item or hundreds, 1g or 50kg – it’s always the same flat fee to the customer.
Again, you need to be clever in implementing this to make sure you cover your own costs somehow. On some baskets you will make a little profit, some you will lose, so you need to know the average basket value, your profit margins, and the general buying trends of your customers.
Every item in your online store has a weight and the total weight of all the products in the basket can then be used to charge the customer accordingly.
Shipping can be calculated based on different bands of the total basket weight. Usually the heavier the basket, the more the customer will pay. This is the case because you as the store owner are also paying your delivery company more too based on the package weight.
This is the preferred option by most online stores as couriers will usually charge the store owner by weight when delivering for you, so it’s easy to pass on this cost.
Similar to weight, the total value of the basket is used to charge the customer.
This can be calculated based on different bands of the total basket value.
This can be better for higher value items, where weight does not affect the charge to the store owner.
Maybe as the basket value increase, your insurance cover also increase and you need to pass on that charge as part of the shipping.
You can combine shipping options to help find a more suitable charge for your customers.
You could offer free shipping if the customer spends more than £100, but below this value they pay by weight band.
Some stores may choose to invert this. free shipping up to a certain basket weight (for smaller items) and then customers pay by different bands above a certain weight, as the basket gets heavier.
The only additional caveat to the above is that products can also be assigned to an optional shipping class.
That shipping class can then be used to add on an additional shipping charge for say extra heavy items where your courier may charge you a premium for that extra heavy package.
If you have a physical shop or warehouse, you could also offer a customer the choice of ‘no shipping’ and allow them to pickup from your premises. You naturally need to be setup for this, for having customers come to your premises, and most likely will only attract people who are local to you.
Don’t forget though that you will still have to package the products, you are only removing the shipping charges by offering this option.
Location and Destination
On top of all of this you need to consider your location and the location of your customers.
Do you drop ship, or do you have the physical products on your premises (or a combination of both)?
If you are selling to a global market, you must understand the various tax and duty laws of your own country for export and the destination country for import.
Make sure that you understand the bands that will impose additional duties and make sure that you build these into your store process.
Think about your profit margin
To be successful at eCommerce, you need to keep an eye on your overall profit margins. Shipping represents a significant expense for ecommerce merchants, and if you don’t do your research, you could end up losing money when shipping your products.
Before you finalise your pricing and strategy for your eCommerce store, you should map out all of the costs associated with getting your products to your customers. Many eCommerce store owners can be amazed by how quickly these little charges add up.
The cost of the actual product to you; packaging; shipping; any tax or duty; credit card fees and then what profit margin you want to make.
Even something as simple as the price of each label you print and stick on a package, needs to be thought about.
You really need to think long and hard about your shipping choices and offers.
Think of it from how the customer perceives the additional charges. Will is stop them buying the basket full of products or tempt them to add a few more products to get free shipping.
Think of it from your business point of view to make sure that you are covering the actual costs of postage and packaging.
Whatever options you choose, remember to review your shipping strategy often.