5 Tips and Tricks for Defining Your Shipping Prices
For all the care you put into running your business — choosing and sourcing products, taking care of customers, building your brand and your reputation — you literally cannot afford to have shipping costs devouring your profits. Courtesy of Eleets 3PL, here’s how to calculate shipping prices and keep your customers happy without sacrificing your bottom line.
Consider Customer Psychology
Imagine that you visit your favorite online store for a new cell phone case. If the case costs $15 and the shipping costs $9, you’re likely to find another site. The obvious solution is for your customer to pay those costs. The challenge is figuring out how to get that payment without worrying about abandoned carts and lost sales. We’ve found that it’s usually best to split shipping costs between your product pricing and your shipping rate.
Consider All Costs
This is a common mistake we see among rookies and even some established businesses. It’s understandable; you’ve done your research into shipping rates, you understand your market, and you’ve diligently set your fees… only to realize you’re still losing money. Make sure that even bubble wrap, packing tape, boxes, and all the other myriad incidental costs associated with shipping are being factored into your pricing alongside the actual shipping rates.
What’s equally important is figuring out the weights of your products, and the distances over which they’ll be shipped. If you’re taking a flat rate approach, you can take shortcuts and average this out, but that’s not always a winning strategy.
Focus on One Carrier
Shipping rates aren’t set in stone; they’ll be determined in large part by your shipping volume. Splitting your shipments among multiple companies means you won’t build up volume, or volume discounts, with them. Therefore, it’s best to use a single shipper to the maximum extent possible. You can even tweak that volume by asking your vendors to ship incoming goods (shipping supplies, office supplies, and the like) on your account. This is an area in which outsourced logistics management can be helpful.
Competition among shippers is fierce. Use that to your advantage. Each of the Big Three, as well as a number of their smaller competitors, LTL, and last-mile shippers, offer business tools, advice, and assistance. It’s in their best interest to offer comprehensive solutions, since that’s what draws in and retains customers. Cultivate relationships with shipping companies’ sales reps, customer service staff, and delivery drivers too. Take advantage of their knowledge and expertise, because you never know when an offhand tip or remark can make a significant difference to your bottom line.
Beware Free Shipping
Selling online is frustrating enough, since customers tend to shop on price before all else. Unless your product is 100% unique and literally cannot be purchased in any other form from any other business, you’re already operating on thin margins just to stay afloat. Adding “free” shipping takes them from thin to razor’s edge. After all, it’s free to them, but not to you.
Free shipping is a calculated risk for some companies, which count on low prices and convenience making their products and services “sticky.” Then again, Amazon can afford to take losses on products and shipping on a daily basis. It’s easier to do when you’re pushing a one trillion dollar market cap. Small businesses don’t usually have the cash reserves to take that kind of risk.
If you’re going to offer free shipping, make it conditional based on factors like geography and minimum purchase. Also make paid shipping the better option. Convenience matters nearly as much as cost, after all, so if you spell out that free shipping is going to take seven business days and your customer sees expedited options, the upsell starts looking more attractive.
If you’re not careful about managing your shipping rates, you could be setting yourself up for failure. There’s too much at stake for this to be left to chance, so we invite you to explore end-to-end ecommerce solutions with Eleets 3PL. We’ll bring our extensive experience to bear on your shipping and ecommerce issues so you can keep all of your stakeholders — from your shoppers to the C suite — happy.