How to handle ecommerce shipping rates

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If you have an ecommerce website, you should know (and be constantly trying to reduce) abandoned carts. Across ecommerce sites, cart abandonment rates can range from 50-80% and are worth 2-4 trillion dollars per year globally, across all industries (Source: Annex Cloud).

A key instigator of abandoned carts are customers being faced with high or unexpected costs – such as shipping rates – when they reach the checkout stage. Determining and handling shipping rates can be one of the most stressful aspects of developing and managing an ecommerce website, and are the source of many dynamic discussions amongst our clients. It is a delicate balance of assisting to cover the cost of shipping for the business, while also not putting off the customer, especially by only advising them of costs just prior to the payment stage. The shipping rates issues is often compounded in the wine industry, when dealing with a heavy and delicate product that must be transported by road.

What we find works best is to be clear and upfront with shipping costs, using flat rates where possible, and offering incentives for free shipping (e.g. minimum order size, loyalty benefits, free pick up).

When developing your shipping strategy, it’s important to:

1. Know ALL of your shipping costs (not just the cost of delivery). This takes into consideration your packaging, tape etc, along with any extra marketing or unboxing elements, and your (or your staff’s) time both to pack and fulfilled orders.

2. Look for opportunities to reduce the weight and size of products and packages, which often has a resulting reduction on shipping costs. This is an interesting area for the wine industry, where sustainability actions such as lighter or glass alternative bottles are also assisting with reducing shipping costs.

3. Research your shipping providers and look for who you may be able to use flat rate shipping with. Often these agreements will require a minimum number of monthly orders or similar, but it’s worth shopping around and asking the question.

4. Now it can be difficult where your product has an easily comparable RRP, but try to factor shipping costs into products if possible. Interestingly customers often prefer a higher priced item with free shipping, than a lower priced item plus shipping.

5. Provide incentives for free shipping, such as minimum order sizes, member or loyalty benefits, or through local pick up options. Analysing your sales data can help to understand your Average Order Value (AOV) which can assist with determining an appropriate value to offer free shipping from.

6. Clearly state your shipping rates to customers prior to checkout. Ideally on every page, such as the header or footer, or on a clearly accessible Shipping page. You may also wish to explain why your shipping rates are what they are, such a delivering precious cargo, or using sustainable packaging or fair labour.

7. Regularly review your sales and shipping to refine your strategy. Now you don’t want to be changing your shipping rates regularly, but make time every 6 or 12 months to review your total online sales and resulting shipping costs. Flat rate shipping options generally provide wins for some and losses for others, but ideally they should be at a level that even out over time, or ensure that you are making an overall profit on your online sales. Because that’s the point, isn’t it!?

If you have questions about your shipping strategy or understanding your ecommerce data, feel free to get in touch.

Further resources:

Shopify blog: How to reduce shipping costs for small businesses – 6 helpful ways

Shopify blog: The beginner’s guide to ecommerce shipping and fulfillment