How to Reduce your Shipping Costs

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Shopping cart abandonment is a major concern of any online seller. You would think that if a customer has decided what they want and gone as far as to put the items in their basket that they would go ahead with the sale. However, thousands of customers then change their mind about their purchases and do not complete the transaction.

graph shopping cart abandoment According to this graphic by Forrester’s North American Technographics, the main reason why a customers might abandon their carts is when they get hit with shipping and handling rates that they deem inappropriate and their purchase no longer seems like a good deal. Either the customer continues with the purchase somewhat disappointed or they abandon their cart and leave your website to find the product elsewhere with more favourable shipping rates.

So how can you reduce shopping cart abandonment?

You will need to do some serious number crunching to work out what your profit margins are on your products, and determine what the best shipping option is for you. A strategy should be developed which allows you to not cut into your margins too much, but at the same time, is appealing to your customers.

Option One: Free Shipping

asos delivery options screenshot by ParcelBright

Obviously, the most attractive option to customers is going to be the “Free Shipping” option. However, this option can seriously cut into your profits and so has to be thought through thoroughly. Therefore, if you do offer free shipping, you need to ensure that this is clearly displayed on your website. Asos is a great example of free shipping rates, they offer free delivery depending on the amount you have spent. You get a “Standard Deliver” if you spend £20, but if you spend at least £100 you are suitable for “Next Day Free Deliver”. Segmenting your shipping options based on the amount spent by your customer, should help you increase the average order size and have extra profits to offset the shipping costs.

When considering the free shipping option, you will largely be dependent on the type of items you are selling and the industry you operating in. For example, if you are selling high-end items or perhaps one-of-a-kind products, then absorbing the extra shipping costs may not be so much of an issue for you. However, if you are in a very competitive market, then you probably already have very narrow profit margins due to keeping prices low to attract customers. Therefore, raising the prices of your products so that you can absorb the extra shipping costs may not be an option for you.

Option Two: Charge the customer the same you pay couriers

shopify shipping settings

One of the main reasons why customers don’t like seeing the additional shipping costs added on to their baskets just before they pay is that they feel that they are being ripped off by extortionate shipping costs. This is often the case with many online stores. Therefore, transparency can go a long way. On various eCommerce platforms, for example, Shopify, has a function that allows you to set up real-time shipping quotes, have a look at their Shopify’s shipping manual. This means that customers can see exactly what you pay the couriers to ship their products. Then, they can pay the exact same rates that you do and they know that these are reasonable quotes.

The way it works is that the customer will add a product to their basket and at the checkout, there is a shipping calculator that will work out the shipping costs for getting it to you. There are of course small discrepancies that occur during this estimation process, but most of the time you will just break even with what you collect from your customer and what you have to pay to ship the package.

By choosing this method, you are more likely to win the trust of your customers as it shows that you are not overinflating the shipping costs, nor are you increasing the prices of your items in order to cover shipping costs.

Whilst this option is not quite as persuasive as offering free shipping to your customers, it ensures that you are not losing out financially, but at the same time, your customers are still getting a good deal on the shipping.

On the downside, you might end up undercharging the customer and be left to pay shipping surcharges.

Option Three: Offer flat rate fees

You could also offer flat-rate shipping prices. This means either a flat rate per package or for a certain weight or order total. If you choose to go down this road, you will need to do some calculations to work out what the average cost of shipping a parcel is to you. This should be done anyway, for accounting practices and so that you are not overcharging or undercharging your customers too much.

After you decide to take the plunge with flat rate costs, you will need to decide whether you are going to charge per the order total or weight etc. Most couriers offer various sizes of boxes for flat rate items, so these could be perfect if you sell a lot of small but very heavy items. This can take advantage of shipping costs that are calculated by size and not weight.

Every single business will differ in what is best for them and the answer will only come after thorough research and testing. Statistics will need to be gathered on each of your products to find the best and most economical ways to ship them in order to reach the best strategic decision for your business.

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For all of the above options, it is important you ensure you get the best deals with couriers, ParcelBright offers you a one stop solution to quickly ship and track parcels and schedule returns. Our service can save you up to 60% rather than going direct but most of all it will save you time, so you can focus on running your business while we deal with the rest. You can sign up and get a quote for free by clicking here.

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  1. Pingback: 8 Tips to Improve a Customer's Shipping Experience - ParcelBright Blog

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