A lot of brands take a simplistic approach to shipping, especially when they start. Adding ecommerce staples like free shipping options, package insurance, and tracking may help your business stay alive. But without prior planning, these inclusions could burn a hole in your pocket.
Putting an effective ecommerce shipping strategy in place is one of the most important steps for growing your business online. Yet it requires coordination between multiple organizations.
In this guide, we’ll help you develop the best shipping strategy for your online business.
Why Fast Shipping Is Necessary
The order fulfillment industry faces unique challenges every day, but none are as influential as fast shipping. Initially offered by online retailers, like Amazon, same-day and next-day shipping have become the norm. Small businesses have to keep up with this trend to sell.
Customers are notoriously vocal when it comes to courier delivery issues. If your driver is late delivering your packages, they may lose their trust in you and never order from you again.
These same-day delivery statistics prove that fast shipping must be used in your strategy:
- 41% are willing to pay an extra charge for same-day shipping.
- Just over 50% of retailers are offering same-day shipping despite its need.
- 95% of consumers believe next-day shipping is “fast.”
- Only 20% of consumers forgive retailers for supply chain issues.
It can be difficult for small business owners to solve slow shipping issues without affecting their bottom line. To make 2-day shipping as cost-effective as possible, try the following:
- Use Ground Shipping: Ground shipping keeps costs low. But it only works if the fulfillment center is close enough to the customer. Ideally, your business would place fulfillment centers across the United States. If that isn’t possible, you could offer next-day or 2-day shipping to customers within a specified ZIP code.
- Partner with a 3PL Company: 3PL (3rd Party Logistics) companies help businesses with inventory management, warehousing, and fulfillment. If you can’t afford to build your own fulfillment centers, a 3PL can give you the tools and infrastructure you need to automate retail order fulfillment and sell to a broader audience.
- Membership-Only Shipping: Businesses can offer 2-day shipping and protect their bottom line by membership-only. While it won’t offset all of your costs, 2-day shipping can bring in more customers and help you scale, leading to a higher ROI down the line.
Many small business owners have to sacrifice some of their profits initially to make headway. But by adding next-day or 2-day shipping, businesses benefit from higher conversion rates.
Shipping Strategy 101: Getting Started
Before getting down to the nitty-gritty, it’s essential that you assemble the right marketing, Web design, fulfillment, and customer service team. Then define your shipping strategy goals.
Your shipping strategy goals may include:
- Decreasing costs
- Increasing order value
- Upping conversions
- Expanding your market
- Improving efficiency
Once you’ve determined your goals, you have to consider product size and weight, shipping destinations (domestic or international), and shipping options. You can get your shipping rates directly from the post office or carrier. With accurate weights, you can determine product cost.
Shipping destinations can be as crucial as product weight and dimensions for determining costs. You don’t want to offer specific shipping options if they dip into your bottom line, so be careful.
Top Ecommerce Shipping Method Options
With a team in place and a goal in mind, you can start weighing the pros and cons of each shipping option. Some of the most popular shipping methods include the following.
1. Free In-Store Pickup
Works for: Retailers with a brick-and-mortar location.
Strategy: Retailers can promote on-site pickup by turning off shipping rates for local customers. You can take this opportunity to increase brand affinity at your physical location.
2. Same-Day Delivery
Works for: Retailers selling perishables, time-sensitive items, or big-box retailers.
Strategy: Add a surcharge for people who want to use this option to make it profitable. Local florists or grocery stores should market this option exclusively to local customers.
3. LTL Freight Carriers
Works for: Retailers who sell large orders or ship internationally.
Strategy: Couple LTL freight carriers with live rates because it’s difficult to predict a flat rate for this method. Sell this option to businesses that order items in bulk or purchase large items.
4. Live Rates from Carriers
Works for: Retailers who can’t accurately determine the shipping price.
Strategy: Retailers with items that vary in size should primarily use this method. Promote this option to customers who want the best deal for their shipping rates every single time.
5. Table Rate Shipping
Works for: Retailers who want to sell to specific regions.
Strategy: UK customers seem to prefer table rate shipping over live rates from carriers’ pricing. Certain regions like to see a rounded-off number, like $5, over precise shipment costs.
6. Free Shipping
Works for: Retailers who can afford it.
Strategy: Offer free shipping when the subtotal hits a specific dollar amount. Customers will want to buy more from your website to earn free shipping, even if they end up spending more.
7. Flat Rate Shipping
Works for: Retailers who sell similar-weighted products.
Strategy: Promote flat shipping rates to customers who leave items in their cart without completing the purchase. As long as you’re profitable, a sale is generally better than no sale.
8. Mixed Shipping Strategy
Works for: Retailers with a varying customer base.
Strategy: Blending ecommerce shipping strategies can make standard shipping more attractive if you expedite shipping down the line. You’ll sell more if you offer more than one option.
How to Make Free Shipping Profitable
Regardless of what shipping strategy you use, you’ll likely offer free shipping to compete with other retailers. However, free shipping isn’t necessarily profitable for most businesses.
Amazon’s net shipping costs were over $1 billion per quarter in 2014, indicating they sacrificed profits for growth. There’s no doubt that those efforts paid off. Unless you have a large financial reserve, you can’t offer this service all the time. Or at all, in some cases.
That doesn’t mean that you can’t make it profitable if you consider the following:
- Consider your market sector: Some sectors don’t need free shipping. However, industries that compete based on product price will need this service.
- Offer free shipping to some regions: If you live and ship to the continental United States, free shipping is cheap, but shipping to Hawaii or Alaska isn’t.
- Take a monthly view of your profits: Instead of looking at shipping on a package-to-package basis, look at it month to month. If you aren’t happy with the result, change it.
- Show delivery times: Free shipping doesn’t equal fast shipping. If some people see how long free delivery takes, they may look at your other options.
- Surcharges and conditions: Many people will spend to get the item faster or pay towards free shipping. Don’t just offer the service because you can.
- Shipping promotions: Several retailers will offer free shipping as a promotion. If shipping certain goods is too expensive, exclude these items at checkout.
Using an ecommerce shipping solution is the best way to ensure a shipment reaches its destination. Shipping software focuses on the last mile, first mile, and every mile in between, making it easier for you to update your customers on fulfillment and delivery dates.
There’s no perfect solution out there. But with knowledge and the right partner, you can achieve what you need from your ecommerce store and continue to ship and sell products.