Shipping cost strategy for online retail

Your shipping strategy and shipping costs are more important than ever for your online retail business, actual buyers want their products as soon as possible and  they don't want to pay big shipping fees for it. So it is crucial to find the best and most suitable way and amount to charge your customers for shipping. This can be vital element for the success or failure of your online store, as it will directly affect your conversion rates.

It can be a real challenge to pick the correct shipping strategy for your online store, that will have an effect on your margins as little as possible while remaining attractive for shoppers. In fact, according to the online news site “Business Insider”, the number one reason behind shopping cart abandonment with 58% in this study, was higher than expected shipping costs.

Online retailers cannot hope to charge all costs from order fulfillment and shipping from customers, or they stand to lose many sales.

Knowing the right and precise amount to charge your buyers is immensely important in this business. You don't want to charge too little so it affects your margins and profits, and also you don't want to charge too much because it will drive your sales down and make your less competitive.

There are several strategies to charge your shoppers for shipping, but let's take a look at the three most common and effective:

  • Flat rate shipping: In this  strategy you will need to calculate your average cost of shipping and. This average will need to be updated every now and then as it may vary over time, the key here is to be responsive. This is a great way to keep things simple for customers.

    A research performed by the wordpress ecommerce platform “Cart66” showed that the sweet spot when utilizing the flat rate shipping strategy is a $5.00 shipping price, that will improve the webstore conversion rate. Any price below that would not get you higher sales, and any price above that would start making you lose sales. Knowing your average shipping cost, you can take $5.00 off that price and increase the price of your product by the difference.

  • Free shipping: Offering free shipping is a proven way to get your buyer’s attention and also to increase your conversion rates and sales. This strategy will make sense depending on your margins and the products your offer. One approach is to cover the shipping costs by increasing your prices proportionally, but still give your customers the feeling of getting a great deal with free shipping. A survey performed by the online retail news and analysis website “Retail Dive”3, showed that 60% of the respondents expected free shipping when they shopped online while only 23% were willing to pay 10$ or more for shipping.

    There are are plenty of ways to apply free shipping: in orders over a specific dollar amount or if customers buy two or more items. It is up to you to decide which one is more suitable for your business.

  • Charge the exact cost: One possibility is to set up real time shipping costs, meaning your checkout will be connected with your shipping partner. Your shoppers will be presented with real shipping prices based on the amount of products, weight and size of everything included in their shopping cart. This is a very transparent way to charge shipping to your customers, and can bring positive results.

 

Every business is different, and only you can decide what is the best shipping price structure and strategy for your online store. The important thing here is to be able to balance your company's needs with your consumers needs.

OGOship has negotiated freight contracts that are always the best rates you can have. Outsourcing your logistics to OGOship ensures you the best freight prices globally.