One of the most essential aspects of running an ecommerce business is finding the right shipping strategy. Keeping shipping costs down is crucial for both your business and customers. The amount your customers are required to pay to receive their products can be the number reason why they do or don’t make a purchase.
To find the best shipping strategy, look at what your competitors are offering. Even the most loyal of customers can be tempted by potential savings on shipping, so offer something comparable or better.
Once you have the competitor research, read on to see which of the most commonly used shipping strategies for dropshippers will work best for your business:
Flat Rate Shipping Fees
Another method to simplify your shipping strategy is to charge a flat rate fee. This makes it easy to budget for shipping costs since your customers are all paying the same for shipping. The most effective way to determine your flat rate fee is to average the shipping costs of all the items you sell.
If you sell a wide variety of products with different sizes and weights, offer different flat rates by dividing your products into groups and assigning each group an appropriate rate.
When using the flat rate shipping strategy, you will lose money on some transactions and make money on others depending on what items were purchased. The goal of this strategy is to break even in the long run.
Actual Shipping Cost
Passing on exact shipping fees to customers is the best way to ensure you never lose money on shipping costs. To use this strategy, you will need to use a platform that calculates shipping costs for each product.
This method is challenging when customers purchase multiple products from different suppliers. This can get expensive for your potential customer quickly. Keep in mind that your customers don’t know that you dropship. If they must pay separate shipping for each product, this may lead to more abandoned carts.
If you are going to use actual shipping costs as your main shipping strategy, be sure to monitor your abandoned cart rate to see how customers are reacting to the shipping costs.
There is a lot of pressure for ecommerce retailers to offer free shipping these days. Amazon Prime has trained consumers to not see shipping as a necessary expense when shopping online. Of course, free shipping isn’t really free. It’s a strategy to get customers to buy more and feel like they are getting a good deal. In reality, most retailers, including those that dropship, include shipping costs in their final price so there isn’t a loss in profits.
Include the shipping costs in the price of the product and offer “free shipping” to encourage customers to buy from you while still maintaining positive profit margins.
Related: How to Make Free Shipping a Reality
Promotional or Tiered Shipping
This strategy uses all three of the above methods combined. It’s a great way to keep customers happy while preventing a loss in profits due to shipping costs. However, it’s only effective when you have substantial data and analytics to see what strategy works the best for each scenario.
Using promotional strategies like free shipping on orders over $50, or free shipping on all T-shirts for the month of January, allows you to offer great deals for customers when it makes the most sense for your business.
Optimizing shipping costs is clearly a challenge for retailers, especially those with dropshipping businesses. It’s easy to get caught up watching every penny you gain or lose on shipping costs. Use a strategy that keeps your customers’ satisfaction at the forefront, but also doesn’t hurt your profit margins. Be calculated and consistent with your approach and you will have satisfied customers and a healthy bottom line.