With the establishment of Amazon’s 2-day Prime guarantee, shoppers are being conditioned to expect fast and free shipments. In fact, 63% of shoppers abandon their online shopping carts because shipping charges are too much.
In order to keep up with rising customer expectations, brands have to get creative about ways to afford free shipping. Here are 7 strategies to help companies drop the cost of shipping but still make a healthy margin.
1. Incorporate it into the Product Price
Amazon recommends this strategy for sellers that plan to use Fulfilled By Amazon. Instead of charging $25 for the product and $5 for shipping, price the product at $30 with free shipping. The profit margin remains the same, but the shopper is not put off by extra fees.
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2. Offer Deferred Free Shipping
Most shoppers are willing to wait 5-7 days for an online order if the delivery is free. Try offering free shipping for longer, less expensive wait time options.
3. Multiple DC (Distribution Center) Location
The shorter the distance a package has to ship, the less it costs to ship it. Having multiple DCs strategically placed closest to a company’s target market will allow a brand to deliver quick and inexpensive shipments to their shoppers. DCs are costly investments. Consider outsourcing your logistics to a 3PL (Third Party Logistics Provider) with strategic DCs already in place.
4. Limited Products
Offer free shipping, but only to products with higher margins that can absorb the additional fees. But be wary of which products are selected! Additional hidden costs like oversize charges, assembly fees, and insurance costs can cut too far into a business’s margin to still make a profit.
5. Add a Dollar Minimum
This is another strategy taken straight from Amazon. If a shopper doesn’t have a Prime membership, they can still enjoy Free Shipping by ordering a minimum of $49.
Best Practice: Set a dollar minimum close to a shopper’s average order value to encourage customers to add items to their cart. Too low and the brand will lose money. Too high and shoppers won’t be incentivized to spend more.
6. Parcel Invoice Returns
Late shipments, overcharges, and other common mistakes can entitle a business to receive money back from their carriers. Audit parcel invoices or hire a qualified freight invoice audit form to make sure shipping providers are not being overpaid.
7. Least Cost Package Routing
Finding the right carrier that will provide the fastest delivery at the lowest cost requires technology. Explore Transportation Management System (TMS) options or outsource to a 3PL to help find the optimal shipping costs for each package.
Keeping up with rising customer expectations doesn’t have to break the bank. It does however, require some creativity. Any of the strategies above are great ways to deliver a great buying experience while still retaining margin. Finding out which tactic works best for your brand will require testing. Test a free shipping promotion on select items against a minimum dollar for free shipping promotion. Monitor shopping cart abandonment rate, AOV, and conversion rates, and determine which strategy works best.