You are thinking about starting an eCommerce business. You have a product in mind, and you’ve looked at all the major eCommerce and shopping cart sites. Now you are trying to figure out how to handle shipping. Will you offer free shipping, flat-rate shipping, or deal with each package individually? It could make an enormous difference in your sales.
There are valid cases for all three shipping models. There are also some situations that call for utilizing all three to one degree or another. Unfortunately, there is no one-size-fits-all model that could be applied to each and every commerce operator.
1. Free Shipping
Free shipping is the easiest one to understand from the customer’s standpoint. Not only that, more and more retail customers expect it. According to a 2019 survey from the National Retail Federation, roughly 75% of the online buying public expect free shipping – even on orders worth less than $50. It is no surprise that the baby boom generation is the most likely to expect free shipping. Strangely, it’s millennials who least expect free shipping among the four generations we currently account for.
The advantage of offering free shipping is that doing so makes it easier to sell your products. A secondary advantage is not having to figure out shipping every time you make a sale. That is important if you are selling a lot of products on a daily basis. However, there is a big downside: potential losses.
Ultimately, shipping is never free. You are going to build the cost of free shipping into your retail price simply because it’s a cost of doing business. But if your prices are too high, you could lose business anyway. It is really a balancing act.
2. Flat-Rate Shipping
The flat-rate model charges a single shipping price on all orders. The best way to determine this is to create a number of fictional scenarios and, using your preferred shipping partner, calculate shipping costs. Then average them all together. In most cases, you should break even this way. But there is always the potential that you will lose money.
As an authorized DHL reseller, Preferred Shipping urges caution with the flat-rate model. It is still a good model if you cannot make free shipping work, but you must be incredibly careful about your calculations. You also have to consider shipping multiple items in a single package.
Customers often expect to see reduced shipping costs if they buy multiple products from the same retailer. The thinking is that all the products can be combined into a single package. Physically speaking, that may be true. But you could go broke offering the same flat rate on ten products as you would on one.
3. Per-Package Shipping
One way to guarantee you will not lose money on shipping is to utilize the per-package model. Under this model, shipping on each package is charged according to size and weight. It is a lot of work, but it’s also the safest way to protect your shipping budget.
One of the main downsides to the per-package model is having to either calculate shipping charges in advance or force customers to wait for some time after purchase while you calculate costs and pass them on. This doesn’t sit well with a modern consumer used to getting things on-demand. Perhaps that’s why eCommerce retailers rarely use this shipping option anymore.
Ecommerce operators certainly have choices when it comes to shipping. The goal is to find the option that makes most of your customers happy most of the time. Pull that off and you are a step ahead of the competition.