While it's gotten easier for small business owners to set up an ecommerce site, fulfilling orders can seem like a daunting task. Once a customer reaches checkout, how do you prevent them from shying away from completing their order once they see the shipping and handling fees? Studies have shown that shipping and handling fees are the number one reason for cart abandonment so it's crucial that you put in place small business shipping solutions on your ecommerce site that boost your conversion rates without eating into your profit margins.
The Lure of Free Shipping
With the rise of goliaths like Amazon, it's no surprise that many online shoppers have come to expect free (or very cheap) shipping options. Depending on your customer base—their geographical location, typical order size, order volume, etc.—free shipping may or may not be a viable option for your business.
If you can make free shipping work with your company's budget, this can lead to a significant boost in conversion rates and make your business look very appealing to customers, especially in comparison to competitors who charge more for shipping. But with free shipping comes the caveat that the extra cost. If you bake shipping costs into the price of your products, you're essentially betting that the customer will value free shipping over the higher price. If they can find your products elsewhere (and for less) online, this might not be the best idea. Of course if you just eat the shipping costs, your bottom line will take a hit. Luckily, there's a simple way to go about this decision: talk to your customers. (It's crazy how often that works!)
There are ways to incorporate free shipping practices into your online store that allow you to reach a middle ground though, too. Free shipping on domestic orders is one such option, which can work if your domestic carrier(s) of choice offer shipping services that fit your budget. Another way to go is to offer free shipping once a customer's order reaches a minimum total cost or number of items. This can be advertised as a promotional, limited-time offer, and can be a great way to attract new customers and retain a loyal customer base. A good rule of thumb for calculating the minimum order threshold for free shipping is to take the average order amount and choose a price that's 10-20 percent higher.
If you decide to give free shipping a try, make sure to keep a close eye on sales volumes, average order amounts, and customer ordering behaviour in general, so you can figure out whether or not it will be profitable for your business going forward.
Find a Fair Flat Rate
With the goal in mind of making shipping as affordable as possible for your customers without carving up your P&L statement (and still being able to deliver your product within a reasonable timeframe), a flat shipping rate may be the ideal solution. You can work out a flat rate to charge on each package, or a rate for a certain weight range, depending on the types of products you sell and whether your customers tend to place single-item or multiple-item orders.
Every business is unique and there will be different carrier options available to you depending on where your business is based, so make sure to do your homework and check out the rates offered by various carriers, whether it's FedEx, UPS, the US Postal Service or whichever domestic carrier applies to you.
Use a Real-Time Calculator
A cost-effective solution you can use to find a fair shipping price for your customers is a real-time shipping calculator. This is a tool used to generate shipping and handling quotes in real time based on the carrier(s) you use, and is a good way to build customer trust (they know you're not gouging them on shipping/handling costs) while remaining budget-savvy.
Whichever real-time calculator you decide to go with, or if another shipping practice is a better fit, make sure to find out whether this solution can integrate with your existing ecommerce platform and accounting system. And it bears repeating: make sure you find the small business shipping solution that will be most attractive to your customer base, without sacrificing your company's finances.