Implementing the right shipping strategy for your business

Order Management

You likely toil for hours over your pricing strategy, trying to discern the perfect price point that will win sales from customers while also helping your company stay in the black. However, do you pay the same attention to shipping costs? Are you charging too much for shipping? Not enough? Are you losing money from free shipping initiatives, or are they worth the cost?

Shipping has become a central issue to running successful eCommerce operations. The nature of shipping is always changing. New developments, such as same-day shipping, continue to revise how customers perceive online shopping, and you need to evolve with new shipping trends to remain one step ahead of your competitors.

Ineffective shipping processes can make or break sales. One report from Jupiter Media, as cited by Multichannel Merchant, suggests as many as 63 percent of customers have been turned off of a purchase because shipping prices were too high. At the same time, many merchants have based their business models around charging slightly higher shipping fees to offset lower product prices. The same Jupiter Media report found that 45 percent of companies make money off of shipping fees.

The right shipping strategy for your business
There are four considerations that you must make when it comes to planning a shipping strategy: Calculated shipping, flat-rate shipping, profitability and free shipping.

Flat-rate shipping is beneficial for retailers that have costs under control, Multichannel Merchant explains.

Ineffective shipping processes can make or break sales.

When prices are steady or declining, flat-rate shipping allows companies to make profit over time at the cost of enduring some periodic losses.

Calculated shipping, on the other hand, ensures that companies never lose money on shipping. "In order to figure out your shipping costs you need to calculate them," the source adds. "Before you start selling products, measure their weight, dimensions, and other factors that could impact how much it costs to ship them … Round these numbers up to the nearest whole number."

The difference between those two options lies in whether you want to profit off of shipping. You must treat shipping like any other business function and carefully plan out your approach, particularly if you want to profit off shipping practices.

Finally, you could even consider free shipping. Companies that do this tend to eat the fee by raising product prices across the board, with the end result being an increase that's hardly noticeable. However, once again, the strength of this strategy revolves around how you approach business, and which option you choose depends on your eCommerce website's current situation.

As is the case with many business strategies, there is no "one size fits all" shipping program. Some merchants enjoy the lift in sales from free shipping initiatives, others prefer the control over costs provided by calculated shipping. Entrepreneurs just need to realize that shipping is an important consideration that must be made as you evaluate other business functions.