Since the Covid-19 pandemic, there has been a massive growth in online sales worldwide. Global retail eCommerce sales in 2022 have reached $5.7 trillion, which is only expected to rise over the next few years. In fact, by 2026, retail eCommerce sales are projected to grow by 56%!
This proliferation in online sales has massively increased competition between eCommerce vendors, who all struggle to satisfy customers’ expectations for delivery while maintaining adequate profit margins.
Offering free delivery is the current trend amongst larger eCommerce businesses, but this is difficult for smaller businesses to match. Whilst delivery might be free for your customers, it will be costly for you! Finding a shipping strategy that is quick, reliable, and cost-effective for both your customers and your business is possible, and we are here to guide you.
Here are our top three shipping strategies for eCommerce businesses:
Free shipping
Free shipping is never really free; it just means that the cost has been transferred from the customer to the vendor. That being said, there are ways in which you can meet the market’s demand for free shipping whilst maintaining your margins. Here’s our advice on how to do so:
- First, check that free shipping is financially feasible Free shipping should never be a burden on your business. For free shipping to be feasible, you need to be aware of the cost to ship an order and your profit margins. For a rough estimate, look at your average order value (AOV) and the average cost for shipping your most commonly ordered products.
- Integrate free shipping into your pricing strategy If free shipping is necessary within your niche or will give your business a competitive edge, you could integrate the cost when pricing your products. This way, your customer will not incur an additional cost added to their basket at the point of payment, and you will not be responsible for shipping costs.
- Offer periodical free shipping Year-round free shipping might not be viable for your business, particularly at busier times like the winter season. You could use free shipping to promote sales and clear out old stock at quieter times of the year.
Flat rate shipping
When a flat rate shipping strategy is employed, each customer is charged a standardised delivery charge, irrespective of their order’s weight or size. This strategy helps to simplify the fees that you charge your customers.
You can either charge a fixed flat rate for all shipments or make the flat rate conditional on factors such as location and speed of delivery.
To determine your flat rate, you should consider both the average cost of shipping orders and what your customers would realistically be willing to pay.
Some benefits of applying flat rate shipping to your eCommerce business include a more straightforward pricing strategy, more clarity for your customers, and, hopefully, an increased cart conversion rate!
Charge exact shipping costs
Another shipping strategy you could use is to charge your customers exactly what it costs to ship their orders. This method gives your customers more options for delivery and increases transparency so that your customers know that they aren’t being overcharged.
You can increase the shipping options available to your customers with exact-price shipping. For example, a customer who wants to receive their order by the next day can pay more for the cost of priority delivery, whereas a customer who is happy to wait can pay less.
This strategy will be especially beneficial to your eCommerce business if you are shipping internationally or to more remote areas where delivery is more expensive.
The drawback to charging exact costs is that you will have to invest in software to calculate shipping costs in real time, which could be pricey.
Which is the best strategy for your business?
Striking a balance between which strategy is best for you and your customers might be challenging, so it could take some trial and error before you settle for one. You should aim for a strategy that yields the highest profit without sacrificing customer service and quality of delivery.
Free shipping is by far the most favoured by consumers, so if you can, try to implement this, even if it’s seasonal or only for specific products.
If you would like advice on your shipping strategy, reach out to us via the button below and one of our gurus will pick it up with you.
