Shipping Strategies 101

Finding the most profitable way to ship

[ace2000]

There are so many ways and means of handling one of the most stressful, complicated, and most expensive factors in ecommerce: shipping. The goal: Keep up the conversion rates without losing your shirt on the shipping costs.

How do you do it? Why?

1. Free Shipping on everything, higher-priced items.
2. Paid Shipping on all orders, lower priced items.
3. Flat rate. Say, $2.50 shipping on any order. (ie Overstock.com)
4. Free Shipping on orders over a certain amount (ie Amazon).

How about other ideas on how to make $ from shipping? Say, offering shipping insurance on each order for $1, etc.

Let's pool our ideas togehter.

[KevinC]

i offer free shipping on all orders over a certain dollar amount. I know free shipping can greatly improve conversion rates and many studies can back this up.

[jsinger]

There are so many ways and means of handling one of the most stressful, complicated, and most expensive factors in ecommerce: shipping.

I've been saying the same thing for years. We let our competitors give away free shipping; we charge for it. You don't see many print mail order catalogs offering free shipping. They usually make money on shipping. You think venerable mail order companies might know something?

Not only is shipping difficult and costly, it is our firms fastest rising cost. In fact, many of our own suppliers are adding fuel surcharges.

[Beagle]

You don't see many print mail order catalogs offering free shipping.

And when they do, it's almost always limited to something like "New customers only," rather than overall free shipping.

[HRoth]

I use flat-rate shipping on a certain category of widgets. People really like this and tend to buy more of that. I extend this to international shipments of that widget category, and the furriners like this even better.

On the other stuff, though, I use a varied rate. It is a PIA. I don't make any money on the shipping. It took me a long time to arrange the prices for shipping so I didn't LOSE any money.

I don't have free shipping on anything. My shipping costs are already less than competitors' because they are using UPS and I am using USPS.

[BradleyT]

"Rush Processing" that gets the order out the door that day or the next if all items are in stock for $.75 - $1.00.

Newegg does this and I always pick it even though I'd expect my order to be processed in 2 days anyway.

[chadmg]

Don't know if this helps, since I don't ship anything...

I just ordered some BBQ sauces online. Their shipping policy is a flat rate for 10 bottles, with each additional bottle costing extra. I've ordered from them a few times and each time I order 10 bottles. If it wasn't for that shipping policy, I'd probably order 5 bottles. Since it's more cost effective to order the max, I do it. I'll use all the sauce eventually, and they make a bigger sale. This may apply to some of you out there.

[grandpa]

We charge for everything. But, there are ways to make the customer feel good about that. One example is with Priority Mail service. UPSP offers a Flat Rate box for a flat rate fee, and in some cases it is less expensive to use that service. It takes a little extra time to determine the correct ship method (about 3 seconds..) but the customer is always happy to save a few bucks.

We stopped the Free Shipping if the order is $X, and few people complained. But it is a successful strategy and we may implement it again, with a higher value of $X, maybe just in time for Christmas.

[topher]

USPS is great - free supplies and flat rate boxes too.

Free shipping? Well, how heavy are the items you ship and what is your markup and profit? Can you afford to offer free shipping? Can you raise your prices to cover it? Will it significantly increase sales to offer free shipping? Answers to one or more of these questions should help guide YOU in YOUR decision.

My impression is that most who offer free shipping are either pricing their goods higher or have such huge volume that they can negotiate lower shipping rates - or they're making up for it in volume. But whatever the case it's costing someone.

Personally I wish Free Shipping would go away.

Ooops - almost forgot! I use flat rate tied to order subtotal. Yea, ancient and oh so "mail order", but it works for me! And hey, sometimes the customer "wins" but what I'm looking for is making a little ("handling") to help defray CODB.

[BradleyT]

Well you don't really need that much volume through UPS to get a discounted rate - all you have to do is not be afraid to ask them.

[Automan Empire]

Most competitors in my industry offer free shipping over $50-75. This is risky IMO because some of our products are heavy and low-markup. I am going to try to make a go of emphasizing "fast" over "free." Maybe I will set a cap on shipping, say $5 max on orders over $100.

Personally, the word "free" is a red flag, for I know that TANSTAAFL*. It tends to make me suspect that the cost is being made up in less-obvious ways, a game I have seen played from both sides of the board and which I really dislike due to the inherent dishonesty. That said, a hard-learned lesson has been that a majority of people seem to grab for the word free (or other illogical perk), and are so dazzled as to not notice the overcharge elsewhere. I have an ethical problem with minor dishonesty such as this, but a slightly bigger problem watching them flock to the free-shipping competition if it comes to that.
I wish free EVERYTHING would go away!
-Automan
*TANSTAAFL= There ain't no such thing as a free lunch! Thanks, Larry Niven (author)

[KevinC]

you guys need to go read some conversion studies. Its been proven time and time again that free shipping can greatly improve conversions. The reason is many users are scared they are going to get stung with high shipping charges during the checkout process, so they never bother.

If your margins can support it, offer it.

[internetpilot]

I advertise that I only charge actual shipping costs. The "freebie" that I give my customers is a nice box and packing materials, which if you buy in bulk from a local box manufacturer it results in very minimal costs. I will use a USPS box if I can. I can say from experience that customers appreciate a well packed, quickly shipped item, and are willing to pay actual costs for that.

I input the weight of every item into my shopping cart inventory system, which includes the weight of the shipping box. The customer receives a real-time shipping quote through my shopping cart by entering their zipcode. They can get this quote before entering any other information beyond the item(s) they want to purchase, so it's not much of an inconvenience (if any).

Sure, entering the weight in the system is an extra step, but I like to put as much information about the product as I can, and my customer who are researching the product appreciate it. You only have to enter all the information in once, and it helps to keep customers at your site for research, rather than going to someone else's site, losing you in their browser's history, and just buying it from where they found the most information.

I'm sure that free shipping does attract some more customers, but advertising that you do not fluff or overcharge for shipping is at least the second best method of getting more customers. As a customer, there's nothing I hate worse than flat fee shipping, where I end up paying twice the amount I should for shipping on a 1 lb item. The WORST is when you pay, say, $7.95 for shipping, and then the package arrives with $3.85 on the postage sticker. If you're going to charge more for shipping, at least make sure you check the box to NOT display the postage $ on the label!

[HRoth]

"If you're going to charge more for shipping, at least make sure you check the box to NOT display the postage $ on the label!"

Well, shoot. I didn't even know this was possible. You talking about click-and-ship?

[internetpilot]

It's an option when you ship via Paypal, which is a Pitney-Bowes thing. I'm fairly sure that you can do it with Click-n-Ship, too, but not entirely sure. I imagine that if Pitney-Bowes can offer it as a toggle, so can any other USPS gateway. We'd probably have to contact USPS to find out how.

[imstillatwork]

Yeah, If you ship USPS, don't print the price on the sticker :)

I added a report to my backend that keeps track of overs and shorts for shipping costs. AS orders ship, we enter the shipper and actual shipping cost. that way we can see if we need to make adjustments long term on our shipping rates. right now we are charging about 50 cents per order over actual, and thats too close to make any adjustments yet.

Shipping in my industry pretty much sucks. Candles are freaking heavy :) especialy when people buy several hundred dollars worth for weddings and such.

[longen]

For lower cost items give the product away free - and charge higher for post, packaging and ADMINISTRATION.

[CernyM]

Well, shoot. I didn't even know this was possible. You talking about click-and-ship?

I don't know if you can do it with click-and-ship.

We use Endicia and it has an option that allows it.