Tips to Make Shipping Cheeper and Easier for Your Online Business

Shipping products can be one of the most frustrating parts of starting an online business.

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Tips to Make Shipping Cheeper and Easier for Your Online Business

It can also be one of the most important, since it’s often what keeps customers coming back to you instead of your competitors.

Online consumers increasingly want and expect their shipping to be offered for free. According to Shopify’s research, 59% of consumers say that free delivery improves their online shopping experience—while 67% of those in the United States say that it’s “crucial” to their online shopping experience.

For fast-growing brands, free shipping is an opportunity to both reduce cart abandonment and improve conversion rates. Here’s why free shipping matters—and how to offer it without eating into your profit margins. 

Why free shipping matters in ecommerce

In ecommerce, shipping is often one of the most expensive parts of the business. And customers now expect free shipping. To stay competitive, you need to find ways to reduce your shipping costs.

Not only do customers expect fast and free free shipping, they also look for brands who offer free return policies. This, however, comes with a word of caution: A 2020 study published in the Journal of Marketing Research found that free shipping combined with free returns promotions encouraged consumers to make “riskier purchases.” While this increased net sales volume, it resulted in higher reverse logistics costs and lost shipping revenue, “rendering these promotions unprofitable.”

Free shipping may lead to increased orders

In short, there is no "free" shipping. If the customer doesn't pay for delivery, then you will. If you absorb this cost correctly, you can increase your AOV and profit margin-particularly if you develop a threshold for qualifying for free shipping that your customers have to meet.

If you're convinced by this point, you can move on to our section on how to calculate free shipping thresholds below.

Free shipping builds customer loyalty

The promise of free shipping can be used as a carrot to get customers to subscribe to your email list, follow you on social media, or join your loyalty program if you aren't able to offer it on every order.

There is perhaps no better example of this than Amazon Prime, the company's loyalty program. Members pay a fee ($119) for perks including free shipping. Although it may seem oxymoronic, Amazon Prime's 142 million American members say otherwise.

It illustrates how exclusivity can only further increase purchase motivation even if a paid loyalty model like Amazon's is unrealistic for most ecommerce businesses. 

Should I offer free shipping or a discounted price on a product?

Getting something for nothing is why consumers love free shipping. However, given that "free" shipping still comes at a cost, you might be wondering which strategy is better: Would it be better to offer free shipping, but charge more for the products to make up for the difference? Or would it be better to charge for shipping and offer a lower price for the products?

It's impossible to give a definitive answer to this question, as it depends on a variety of factors. For example, if you sell exclusive or premium products with an intentionally higher price point, selling them at a discount can harm your brand.

If you're ready to do A/B tests to find what your customers prefer, there's one piece of research you ought to keep in mind: A Harvard Business School study found that shoppers are only tenth as sensitive to price increases as they are to shipping fees. 

Doubling your margins with a box

The numbers associated with container geometry and pricing are constantly changing, and generally not in ways that are helpful to your bottom line. Trying to keep up with the latest changes can feel overwhelming:

  • USPS's increased rates for shipments are at an average of 4.9%, depending on the size of the package
  • UPS increased rates by an average of by 8%, with the largest increase for oversized and heavy packages
  • FedEx also increased its freight shipment rates from $0.10 to $0.35- disproportionately affecting online sellers who ship internationally

While the rate hikes might not seem like much at first glance, they can really add up when you have low-margin offerings or high return rates—high-volume brands are increasingly focusing on flat rate shipping margin erosion.

A portion of their variable shipping costs will be converted into fixed costs, allowing them to better plan, manage, and execute.

By understanding how to get customers to add more items that fit inside flat rate shipping containers that allow you to:

  • Offer “free freight” on your terms
  • Fix and control shipping costs
  • Increase certainty and visibility
  • Test thresholds to find the sweet spot

It's all about geometry and optimal container usage; once you find the balance between your needs and the customer's, your data will let you know what to ship.

Optimizing average box size

Shipping costs are one thing you're trained to focus on, but size, weight, and zone considerations combine to create a myriad of options that can lead to analysis paralysis and make you think that it's next to impossible to game the system. You can compare real-time shipping quotes from a variety of freight haulers with tools, but you can simplify your orders dramatically by changing your mindset.

Consider container size instead of shipping costs.

It is also important to look at the shipping container sizes offered by your logistics partners, but that is not where your initial focus should be. Until you reverse the process and look at your own data, none of that data is relevant.

Creating your own free shipping program

Depending on how involved you are with fulfillment, you will need to start at a different place.

You're better able to perfectly match your product offerings with the number of available shipping containers if you view products and containers not as individual pieces, but as a number of parts that can be fit together in a variety of configurations.

Below is an outline of a process to get you started:

  • You can determine your average box size by leveraging your business intelligence platform or 3PL
  • For mix and match shipping container comparison purposes, assign a numerical value to each product
  • To identify inefficiency or unused space in shipping containers, compare products that are commonly purchased together with shipping container geometry
  • Adapt your offer to the average box size by promoting upsells and cross-sells, and offer free shipping

When you know your abscissa, you can quantitatively size your best selling items, the most lucrative combinations of these products, and how they best fit into flat rate boxes. Additionally, you'll likely have a new anabaissis that you can use as a basis to test new shipping thresholds and compare conversion rates.

Optimizing shipping by using Delivery Software and outsourcing to a 3PL

It's likely that you have identified the ideal free shipping threshold and are optimizing around it. The only way to get that box to your customers within two days is often to have a network of fulfillment centers scattered across the globe-or at least very close to the places from which your bulk of your orders originate or are being shipped.

Choosing to outsource your fulfillment to a 3PL and subcontract with their distribution centers will not only make you competitive with Amazon, but it will also allow you to boost your margins and keep your profits up.

Choosing a new delivery management software isn’t a decision to take lightly. The right one has the potential to save time, cut costs, and deliver better experiences to your customers—those that convince shoppers to return time and time again.

Put together your shortlist, evaluate whether your options have the essential features your entire team needs, and ask vendors for guidance on implementing the new Delivery Management Software.

It might take some time to get into the swing of things. But you’ll soon see the positive impact of storing all order-related data, and providing customers with real-time delivery updates within one centralized platform like Gomove.

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