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Ecommerce Shipping: How To Choose The Right Shipping Options For Your Customers

ecommerce-shipping:-how-to-choose-the-right-shipping-options-for-your-customers

Illustration by Diego Blanco

When it comes to shipping, customers want two things: they want it cheap and they want it fast. 

There are scenarios where that’s not entirely the case. But for the most part, think of the Amazon effect: people now expect to receive their items no later than the day after they ordered them. 

Shopping decisions are increasingly dependent on shipping times. So what can you realistically do? And what shipping options do you have to consider to keep buyers happy? 

You have shipping options—a lot of them. But a good shipping strategy doesn’t mean you need to offer every option possible. It’s about finding a balance between the options that are affordable, align with customers’ needs, and are doable when it comes to your ecommerce logistics

We’ll explore the different shipping options available and how to pick the best ones for your organization.

Determining shipping options starts with your customer

Whether you’re creating a new shipping strategy or revisiting your current one, there are a few routes you can take. Regardless, it’s important to understand a few things before you start choosing shipping options. 

You don’t want to offer customers every option possible. In fact, according to the paradox of choice, offering too many options can put a lot of cognitive load on the buyer and actually deter them from buying. People want cheap and fast—or, ideally, a combination of the two. 

Before looking at what shipping options to offer, you need to understand three things:

  1. Your customers’ expectations. What do your customers expect from your brand? Some may understand you can’t offer same-day shipping like Amazon. But you can meet their expectations by offering overnight shipping, two-day shipping, or free local pickup. 
  2. What your competitors are doing. Your competitors’ shipping strategies won’t entirely inform yours. Yet they can help you get a better understanding of the affordable options you can provide. 
  3. Your shipping goals. Do you want the most cost-effective strategy? Or are you willing to pay more to meet the demands of your customer base? Some retailers use shipping as a competitive advantage. For example, if your competitor offers same-day shipping with an added fee, you could offer overnight shipping for free. The latter takes a little more time, but doesn’t cost customers a dime. 

Different types of shipping options to offer

Let’s look at some common shipping strategies retailers are using and how to figure out if you can offer them too. 

Fast shipping options are in demand but come with a high price tag

“Fast” is a relative term. It depends on your geographical location and your buyers’ expectations. For example, if you’re shipping in North America, people are used to getting orders within a few hours. 

Many ecommerce organizations can’t absorb the cost of fast delivery. They have to pay someone to get in the car from the warehouse and drive a package directly to a customer’s house to get it there on time. It’s also a logistical challenge. 

A concentrated network of warehouses is a big requirement for offering fast shipping options like same-day delivery. In the United States, for example, 100 well-placed warehouses that stock the same items would be needed to cover all Tier 1 and Tier 2 cities, as well as some Tier 3s, like Portland, Oregon.

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Chances are you don’t have millions of dollars to invest in such a large delivery network. 

Unless you plan to build more warehouses to offer fast shipping options, consider working  with a third-party logistics provider (3PL) to manage order fulfillment. You ship your stock to their warehouses, then sync your store to their inventory. Whenever an order comes through, they’ll pick, pack, and ship the package to your customer. 

Same-day delivery

A “new normal” for delivery speeds has emerged that customers expect when ordering online. Enterprises like Amazon and Walmart have put strong pressure on retailers to offer faster shipping like same-day delivery. 

Same-day delivery combines the convenience of online shopping with the immediate gratification of purchasing a product in-store. Mass-market buyers have these high expectations, especially in the US, where more than half say they have interest in same-day delivery and will pay extra fees for it.  

Same-day delivery is ideal for customer segments that include young, urban, time-constrained consumers. These are the groups whose shopping decisions increasingly depend on shipping times.

Overnight shipping

Overnight shipping is the second quickest way, after same-day delivery, to ship orders. It’s also referred to as one-day shipping, or next-morning or next-day delivery. Names aside, overnight shipping guarantees that customers will receive their package on the next business day.

In the United States, popular carriers including USPS, FedEx, UPS, and DHL all offer overnight shipping. As customers become more attuned to online shopping, the demand for faster delivery and shipping is inevitable. Overnight shipping is a great option for most retailers who want to meet those expectations.    

Two-day shipping

Two-day shipping can offer a competitive advantage like same-day and overnight delivery. But people will expect it to be free. A National Retail Federation study found that 29% of people left a purchase behind because two-day shipping came at an extra cost. 

Expedited shipping

Expedited shipping is a vague term, but it means faster than your normal shipping time. If we were writing this post a few years ago, we’d recommend offering an expedited shipping option for customers who want to pay more for faster shipping. 

Today, you want to aim for your standard shipping to be fast: around two to four days for national orders. Expectations for delivery speed have dropped to 3.3 days, according to AlixPartners 2021 Home Delivery Report.

Affordable shipping options can lead to increased orders and higher AOV

If you know your costs are standard across all your product lines, you’ll have a solid understanding of how much it takes to pay for the shipping—especially if your shipping area is within a certain radius. Affordable shipping options like free shipping can help your conversion rates and reduce cart abandonment. 

Free shipping

Customers now expect free shipping and returns. In fact, 75% of customers expect deliveries on orders under $50 to be free. Unexpected shipping costs are also one of the main reasons people abandon their online carts

Despite the benefits free shipping offers to customers, someone has to pay for it. You can absorb the cost of free shipping by:

  • Factoring shipping into product pricing
  • Using free shipping as a promotional tool to drive sales
  • Focusing on upsells and cross-sells 
  • Improving customer lifetime value to earn more revenue over time 
  • Offering free shipping to loyalty club members only

You could also use free shipping for orders over a specific dollar or item amount—like free delivery on orders with more than two items. Shoppers will add additional items to their cart to qualify for free delivery. 

Shipping heavy or large items? Free shipping may not be the way to go. Those extra costs have a deeper blow to your profit margins. In most cases, it’s not worth offering it.

After migrating over to Shopify Plus, ONE Championship worked with creative agency 360&5 to bring its new vision to life. The first step: adding a free shipping bar to its website. 

Shoppers could see how far they were from free shipping, which made a big impact on carts for international markets. Using upsell and free shipping automations, the brand grew its cart size by five times on average

Flat-rate shipping

Flat-rate shipping means the price of shipping doesn’t rely on weight, shape, or size of a package. You are charged a single rate for shipping a package based on how much you can pack into a flat-rate shipping box. 

You can use a flat rate to set a per-item fee that doesn’t account for product weight. It’s also a simple way to add a free shipping option to your store. 

Flat-rate shipping is simple for customers to understand because they pay one price. It also can be a selling point to promote on your website. Use it for:

  • Small packages of merchandise where shipping is trivial to item cost, such as jewelry
  • Product lines where all items are roughly the same weight and size 

Flat-rate shipping isn’t recommended for international customers. Static checkouts using flat-rate shipping don’t account for any information about taxes, duties, or courier fees. There is no way of knowing the upfront fees, so international customers may be turned off by paying more upon delivery. 

Real-time carrier shipping

Real-time carrier shipping refers to including the exact shipping rate carriers charge at checkout for any order. These rates take order dimensions, weight, and shipping destination into account, then show the rate to the customer once they are at checkout.

Flat-rate shipping

Flat-rate shipping means the price of shipping doesn’t rely on weight, shape, or size of a package. You are charged a single rate for shipping a package based on how much you can pack into a flat-rate shipping box. 

You can use a flat rate to set a per-item fee that doesn’t account for product weight. It’s also a simple way to add a free shipping option to your store. 

Flat rate shipping is simple for customers to understand because they pay one price, and can be a selling point to promote on your website.  Use it for:

  • Small packages of merchandise where shipping is trivial to item cost, for example, jewelry.
  • Product lines where all items are roughly the same weight and size. 

Flat-rate shipping isn’t recommended for international customers. Static checkouts using flat rate shipping don’t account for any information about taxes, duties, or courier fees. There is no way of knowing the upfront fees, so international customers may be turned off by paying more upon delivery. 

Real-time carrier shipping

Real-time carrier shipping refers to including the exact shipping rate carriers charge at checkout for any order. These rates take order dimensions, weight, and shipping destination into account, then show the rate to the customer once they are at checkout. 

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Unlike flat-rate shipping, a real-time carrier means you charge customers exactly what the carriers charge you. It’s also a benefit for international customers so they can get an accurate rate from any location. 

With Shopify, merchants can choose to charge buyers the discounted shipping rates available through Shopify Shipping. And if they have their own pre-negotiated rates with carriers, they can connect their carrier account and charge buyers the pre-negotiated rates. 

Ecommerce shipping methods expand your markets and help build relationships 

Customers don’t always understand why you can’t deliver in one day. The pressure to offer fast and affordable shipping methods while competing with Amazon has driven ecommerce brands to get creative.

There are cheaper options for today’s fast-growing market volumes. Businesses can shift the rules of the game by using existing store networks for same-day shipping. 

Retailers are also turning unused retail space, known as “dark stores,” into fulfillment centers to offer click-and-collection pickup, while cutting fulfillment costs by up to 30%.

Click-and-collect commerce in the US, including curbside pickup, is forecasted to top $64 billion by the end of 2021.

Popular click-and-collect shipping options include:

  • Local delivery. Customers buy products online and you deliver it to their homes.
  • Curbside pickup, or buy online, pickup in-store (BOPIS). You allow customers to place an order online and pick it up at a local store.
  • Ship to a friend. Customers place an order online or in-store and you ship it to their friend or loved one.
  • Buy in-store, ship home. Customers place an order in-store, then you ship it to their homes. 
  • Locker pickup. Self-service kiosks where customers can pick up their orders when it’s convenient for them. 

Learn more: How Allbirds’ omnichannel conversions soared by using buy in store, ship to customer

Shipping best practices

Entering the race for fast and cheap deliveries can be hard. Often retailers will fall short on volumes required for operations and be stuck with high delivery bills and low ROI. Yet there are ways to shift gears and succeed in shipping and fulfillment. 

Outsource fulfillment operations to a local fulfillment network

Fulfillment centers are expensive to build. Retailers are working with 3PLs to utilize their fulfillment networks and ship items faster. The demand for 3PLs is set to double by 2025, reaching a market valuation of $408 billion

Work with a 3PL with a large network of strategically placed fulfillment centers in areas you want to ship to. This lets you stock merchandise at the right locations so orders can be shipped more efficiently. 

Look for a fulfillment partner that:

  • Has a strong set of last-mile partners that allow seamless deliveries 
  • Has urban fulfillment networks within two-hour drive time from customers
  • Recommends which inventory to store in which warehouse
  • Fulfills orders with custom packages that create memorable unboxing experiences
  • Offers late cutoff times to ship more same-day orders

3PLs are continually working to provide greater efficiency and optimizations for Shopify Plus businesses. As a shipping partner, they can help you meet last-minute delivery deadlines and customer expectations with fast and cheap shipping options. 

Note: If you’re selling in the US or Canada, Shopify Fulfillment Network (SFN) automates your fulfillment so you can offer consistently faster and more affordable shipping. We do this by smartly distributing your inventory across our North American warehouses, so it is closer to your customers. 

Automate inventory management

Inventory management is key to improving shipping efficiency. Your inventory system should be fast and integrated, giving you full transparency across all warehouses and stores. 

Aim to have a direct transfer of order data between your online and in-store fulfillment. Use prioritized picking logic to allow fast tracking and delivery of shipping orders. This will save time, speed up fulfillment, and reduce shipping costs.

Make returns easy

As you grow online sales, returns are unavoidable. In fact, return deliveries in ecommerce are forecasted to cost $348 billion by 2023. But it’s not all bad news: returns give you the chance to collect customer feedback and provide unsatisfied customers with a better experience. 

  • Considering 92% of shoppers say they’ll buy again if the returns process is easy and positive, it’s worth the investment in optimizing yours. 

Ecommerce automation lets you cut inefficiencies in the returns process. You can automate returns by:

  • Instantly giving customers credit or refunds
  • Pre-filing return labels
  • Supporting self-serve returns
  • Segmenting and tracking serial returners

Some apps you can use to make this process easier are:

Protect your profit margins by encouraging customers to exchange products or accept store credit. This saves you on restocking fees and shipping expenses, and helps retain customers. 

Read more: The Plague of Ecommerce Returns and How to Maintain Profitability

Prepare for holidays and events

US holiday retail sales, defined as November 1 through December 31, reached nearly $800 billion in 2020. That’s up 8.3%, despite the pandemic. 

When it comes to planning for the holidays, preparing shipping logistics couldn’t be more important. 

Start early and execute a series of activities rather than do everything at once. Set up inventory tracking to monitor stock levels through the busiest season. Run a free shipping campaign if you aren’t offering it already. 

More than any other time in the year, shoppers are likely to abandon their carts if they can’t receive their order before December 25. Communicate estimated delivery times on your checkout and product pages. This can help increase conversions and align with customer expectations. 

Read more: Holiday Shipping and Fulfillment Strategies

Making the most of your shipping experience

If there’s one thing the above article shows us, it’s that fast and cheap shipping options aren’t a nice-to-have, they’re a must. The future of your company’s growth depends on it. 

Investigate your options and find the type of shipping your customers want (or need). Whether that’s same-day Amazon-style shipping or flat rates, use their insight to plan your ecommerce shipping strategy.

This originally appeared on Shopify Plus and is made available here to cast a wider net of discovery.