The cost of shipping is a major competitive differentiator in ecommerce. Shoppers will quickly abandon a cart or buy from a competitor if it means they will save money on shipping. To reduce shipping charges for your customers, you'll need to go beyond investing in cheaper dunnage or renegotiating with carriers for better rates. In addition to those strategies, here are some more holistic considerations for improving the cost efficiency and customer-friendliness of your packing and shipping operations.
Evaluate current packing materials and processes
From material and labor costs, to DIM weight optimization and customer experience – you may find there's a lot to "unpack" by doing a comprehensive review of your current approach to packing and shipping. Some useful questions to ask during this process include:
- How do factors such as total weight, dimensional weight, oversize charges, special handling, and the number of packages shipped per order affect your total average shipping expenses?
- What do your customer service and operations reports show about damages from improper packing or packing materials?
- What is the average labor cost on oversized items requiring special labor and materials to pack?
Consider the potential benefits of branding
Stylized packaging helps to create a memorable, positive experience for customers. When done well, customized packaging can improve your brand perception and boost your marketing reach through word-of-mouth and social media. Besides adding your brand messaging to packaging materials, interactive packaging inserts with social media instructions (“follow us at…”), post recommendations (“take a picture and tell us how excited you are to start using this product”), and hashtag suggestions are an inexpensive way to get more ROI from stylized packaging.
Right-sized packaging & kitting
Customizing your packaging to an optimal size and level of protection can save you money on shipping costs over the long-term. Right-sizing the cartons for each order will help get you the best DIM shipping rate every time. Customized dunnage that is lighter and less voluminous dunnage also contributes to getting better shipping rates. Depending on the level of variation in your typical order sizes, the best solution could range from onsite box-making equipment, to custom packaging and kitting services.
Free shipping is the most effective promotion you can offer ecommerce customers, hands down. However, not every ecommerce site has the ability to shoulder the shipping costs for 100% of their orders. Fortunately, there are many different ways you can have free shipping, and some cost less than others. Below, we go over some ideas you can use to offer free shipping at a reasonable cost.
Set a minimum order condition
Look at your product margins and calculate how much a customer would have to spend on an order to make free shipping easier for you to offer. You can help customers reach that minimum requirement by showing them either products based on their browsing history, or low-margin "add-on" products that cost just enough to make the order qualify for free shipping.
Reserve free shipping as a reward for repeat customers
In ecommerce, returning customers are your bread and butter. In fact, returning customers generate about three times more revenue than new customers. Invest in these customers by offering free shipping as a reward for actions like:
• Placing an order for the first time
• Signing up for your email list
• Participating in a survey or submitting other useful data
• Placing a certain number of orders over time
• Referring new customers
Try free returns instead
It may not be free shipping, but it can relieve customer anxiety about paying for shipping. As the next best thing to free shipping, a free and easy to understand returns process can be a great selling point that increases trust in your brand.
Negotiate with your shipping provider
Review your current shipping expenses to find the major cost factors, and research the prices from competitors to get a better understanding of average shipping costs. If your carrier can give you a better deal, free shipping may become a more viable option for you. At Fulfillment Works, we are always negotiating with carriers for the lowest price so we can pass those discounts on to our clients, which allows them to give better shipping rates to their customers.
Every order placed on an ecommerce site generates expenses for order processing, packaging, and shipping. But when an order consists of multiple units, those expenses make less of an impact on the seller because the added price margin of those additional units increases overall profit. Use these ideas to entice sellers into buying additional units – allowing you to offset shipping and fulfillment expenses and maintain competitive pricing.
Minimum Order Discounts
You can use other coupons or discounts in place of free shipping, but according to a survey from UPSPulse of the Online Shopper, 93% of online shoppers are willing to take action in order to qualify for free shipping – so it’s perhaps the most effective incentive (it’s also more directly related to the costs you’re trying to offset). Amazon.com’s famously successful “free shipping on orders more than $35” is a great example. If your ecommerce site sells lots of low-margin items, this type of strategy may work especially well because customers will have an easier time adding units without overshooting the minimum order requirement too much.
Add-ons & Upsells
Use personalization algorithms to offer additional units based on items that customers have just purchased, or purchased over time. If customer data is unavailable, the next best thing is to offer upsells based on seasonality, since seasonal items are more likely to have universal appeal. This strategy also works very well with minimum orders – adding a “suggested items” section to your shopping cart page can help customers find products they can add to reach the minimum order size.
Instead of asking your customers to add extra items to their carts, do it for them by bundling units together. Your ability to assemble product kits that appeal to customers will depend on the products you have to work with, but this is a common strategy for boosting multi-unit sales of nutritional supplements or other consumable type products.
Free shipping is a surefire way to increase sales numbers, but it can be a costly promotion if it’s an ongoing offer. Luckily, there are many different ways you can incorporate free shipping, and some cost less than others. Following are a few ideas you can use to offer free shipping at a reasonable cost. More...
If you find your ecommerce sales dragging, a new promotion or program is a great way to get your products moving again or stand out from the competition. To come up with a promotion that works for your situation, you should consider the makeup of your customer base, your products, and the logistics of your company. To help you come up with a great promotion, let’s look at some unique programs from a few well-known e-tailers. More...