Offer Free and Discount Shipping Options
One of the many problems small to mid-size online retailers face is how to offer free or discount shipping to their customers while protecting their profit margins. You’ll often hear stubborn business owners say “I’m going to charge full price for shipping as always and nothing will change that”.
But the large online retailers are growing in popularity each year, and the shipping discounts they provide has been a contributor to that growth. Online retailers that don’t adapt to the evolving market will be left behind.
On the other hand, many business owners realize they need to offer more competitive shipping options in order for their businesses to survive. But instead of finding ways to turn it into an advantage they simply lower their shipping rates and accept lower profit margins.
Both strategies, or lack thereof, can and almost certainly will lead to failure.
You can offer free or discounted shipping to your customers and remain profitable.
In many cases changing the way you charge for shipping can actually lead to more sales and higher profit margins for your business. But it requires some time and effort. If you’re willing to put in some work in order to grow your business, you’ll want to keep reading.
Establish Qualifying Thresholds
The first thing to point out is that you don’t need to offer free shipping on all purchases. The big online retailers don’t do that for a reason- they don’t want to lose money. You need to set some qualifying thresholds.
Instead of offering free or discounted shipping on all purchases, set a minimum purchase amount to qualify for discounted or free shipping. Here’s a quick example:
• Purchases of $1-$49 receive standard shipping rates.
• Purchases of $50-$99 receive discounted shipping.
• Purchases $100 or more receive free shipping.
Now here’s the part that takes some time and effort. You shouldn’t simply set this up using the above example or something similar and leave it at that. If you really want this to make your business more profitable, you’ll need to do some testing.
When changing your shipping rate structure you should test the average purchase amount, conversion improvements or declines, and the net margin per order.
After you have enough data you should try a different pricing structure and test again. If you have the capabilities to do A/B testing, even better.
Once you have enough data from both tests it’s time to compare the numbers. It’s important to look at all of the data, not just the net margin per order. If your net margin goes down a couple points, but the conversion rate goes up 10 points, it may be more profitable to stick with that. But it all comes down to your numbers so take the time necessary to do the testing and math in this step to make an informed business decision.
Once you have your shipping pricing structure in place, it’s time to reduce your internal shipping expenses.
Package items carefully to avoid damage
A common mistake small businesses will make when reducing shipping expenses is to reduce the amount and/or quality of packaging materials they use. They’ll purchase cheaper boxes, use less bubble wrap and packing peanuts, and skip out on the extra insurance fees.
This mistake usually leads to even more expenses as the amount of damage claims increase. There are many ways to reduce your shipping expenses, however, this is not one we recommend. Instead, start with the mindset that your items will be packaged carefully to limit the amount of damage claims as much as possible. Once you’ve made that decision, start looking at your materials purchases and look for ways to cut those expenses.
For example, instead of purchasing packing materials of lesser quality- continue to use the quality materials and look for vendors that offer better pricing on those same materials. Don’t be afraid to call the manufacturers directly- in many cases they will sell directly to you and provide bulk discounts. If not they can refer you to their best vendors.
Avoid bringing the package to a carrier location (purchase and print online)
If you have been in business for a while and you’re well experienced with shipping out packages, this one probably won’t apply to you. But if you’re just getting started in the online retail world, you may be driving your packages to the carrier and sending them out there.
When you’re only making a few sales each week, who can really blame you? It’s quick and convenient. You may not realize, however, that it’s actually hurting your profit margins.
Carriers will always charge more for their services when your purchase in-store. This is because customers who come to their locations likely aren’t doing price comparisons; they go there for the convenience.
You’ll pay less by purchasing the shipping labels online and printing them at home or in your office. You can usually save even more by scheduling pickups- in some cases pickups are free. And even when they’re not free, they’re typically less than what you’d pay for gas and your time of driving to the carrier’s office.
Compare shipping rates from multiple carriers on an order-by-order basis
There are so many variables when it comes to shipping, and you’ve probably noticed that while one carrier may be cheaper for one order, they may be more expensive than another for the next order.
If you want to save even more on your shipping expenses, compare the rates of multiple carriers on an order-to-order basis.
How can you do this while not taking up a lot of time? By using our discount shipping service, Secureship.
With our service you simply enter the package details like destination, package weight, and dimensions, etc. and you can compare the rates from multiple carriers in one place. We also provide tools like package tracking, centralized invoicing, e-commerce integration, and more to make shipping easier and more profitable for your business.
You can make the switch to offering free and discounted shipping AND increase your sales and profit margins. Put in the time and effort necessary to do the testing up front, and then simplify the day-to-day processes by using our online shipping service.