How Do You Charge for Shipping?
Today, many online businesses struggle when it comes to charging for shipping. It is common for online shoppers to abandon a shopping cart if they encounter higher than expected shipping charges. There are many methods of charging for shipping and handling of an online order and you want to get it right.
How shipping charges are presented to the customer is also very important in helping complete an online sale.
Calculated Shipping Charges
This is one of the most common methods of applying shipping charges. A customer who has added items to a cart will be required to enter their delivery address prior to checkout in order for the system to calculate the shipping charges to the delivery destination. While calculated shipping may appear to be fair, there are some concerns that this method can lead to higher cart abandonment than other methods.
When an online shopper is required to fill in numerous additional form fields prior to their finalizing the purchase, they may choose to not bother and leave. If they complete the necessary form fields and the shipping charges are presented, the customer will do a quick evaluation of the charges and if perceived to be excessive, again, they may leave before completing the purchase. Studies show that up to 30% of abandoned carts are due to the customer finding higher than expected shipping charges.
Another problem with calculated shipping is that it favours local customers who are close by and penalizes customers who may be a greater distance from the shipping point. Is it the customer’s fault that the shipping point is not in their local community?
Threshold shipping is where the online shopper is given the opportunity to reduce or eliminate their shipping costs by increasing the value (threshold) of their order. This is a leading method of increasing sales as many shoppers will choose to increase their order to secure free shipping, however the value must be within reason. It is unlikely that a shopper will increase their order size to save a minimal amount in shipping. Make it worth their while.
Threshold shipping offers store owners a great opportunity to increase sales. On the downside, the shipping calculation is usually required if the threshold is not met. This again can lead to cart abandonment.
Flat Rate Shipping
Flat rate shipping is a very simple method of applying shipping charges to your online orders. This method eliminates the need to collect extra information from your online customer prior to their completing a purchase. Flat rate shipping attempts to generate full recovery of shipping costs based on observed averages.
Here is an example of how basic flat rate shipping charges can be calculated. First, total the shipping expenses for a set period of time, typically annually. Next, add up the total number of orders (shipments) made in the same period. Determine the average cost by dividing the total expenses by the total number of shipments. Next, add an allowance for shipping cost variance or an order handling charge, if applicable.
Annual Shipping Expense: $9,000
Annual Orders/Shipments: 1,200
Average Shipping Cost per Order: $ 7.50
Handling Charge: $ 2.00
Target Flat Rate Shipping Charge: $ 9.50
One significant benefit of Flat Rate shipping is that since you know the rate, it can be presented to the customer up front, avoiding any potential unpleasant surprizes for your customer during the check out process.
Offering free shipping for online orders is an extremely popular strategy that is gaining greater momentum in the world of e-commerce. Free shipping does not mean an online store loses revenue; it simply means that the online shopper is not presented with a separate shipping charge for their order. In reality, average shipping costs are built into the price of the product so the customer never has to contend with unexpected shipping costs and therefore does not have the opportunity to re-evaluate and possibly cancel the purchase prior to completion.
Online shoppers love the offer of free shipping and this leads to increased sales and the lowest abandoned shopping cart rates.
To learn more about how Kitpak Fulfillment can help improve your e-fulfillment process, contact us today. We will be happy to answer your questions and provide information on how we can help you save money.
1615 Inkster Blvd.
Winnipeg, Manitoba R2X 1R2