Free shipping has become the bane of many an online retailer’s existence. Thanks to marketplaces such as Amazon, eBay, Etsy and others, the majority of consumers expect to be offered free, or deeply discounted shipping options with their online purchases.
While we all know that free shipping isn’t free – even the consumer knows this – the addition of shipping costs at the end of the purchase cycle is the #1 reason for shopping cart abandonment. This expectation for free shipping is putting a strain on those who are feeling the need to absorb shipping costs in order to compete.
In many cases however, free or discounted shipping is not out of the realm of possibility for independent online retailers – but it does take a determination to understand customer needs and put processes in place to minimize shipping costs based on those needs.
In addition to marketing activities around free shipping offers, such as minimum thresholds, charging an annual fee, or baking the price of shipping into an item, below is a list of three things you need to understand in order to control or reduce the cost of shipping for your organization.
1) Use shipping carriers to your advantage
If you’re using multiple carriers, then you know that you have a lot of options when it comes to shipping services, free packaging, and cost of delivery. Each of the carriers (FedEx, UPS and USPS) have their strengths and weaknesses and you need to understand them in order to use each carrier to your advantage. For instance, FedEx is best for day and time definite deliveries, while USPS is best for small to medium-sized packages weighing under 20 lbs and going to a residence. Whether you compare carriers manually or use a shipping platform that allows you to define shipping rules, you need to be able to accurately choose the least expensive option based on your needs and the customer’s expectations.
2) Understand dimensional weight and accessorial fees
Dimensional (DIM) Weight refers to the billable weight for any sized package shipped via the private carriers, and it uses either the package’s actual weight or its dimensional weight (package size), whichever is greater, to calculate the base shipping price. The private carriers started using DIM weight because they want to be able to charge more for packages that take up a lot of room in their trucks or planes.
Keep in mind though that the base price is typically not the final price you pay when using the private carriers. Even when paying DIM weight pricing, there are over 30 fees and surcharges that the private carriers can add to your final monthly invoice. These fees include residential delivery fees, address correction, invalid account number correction, return charges and extended area delivery surcharge for rural areas. It’s imperative that you understand how DIM weight and accessorial fees affect the final price you pay so you can make informed decisions on what to charge (or not charge) your end customer based on the carrier used.
3) Use rate shopping tools
Real-time rate shopping is an essential tool for any multi-carrier shipping workflow because, as the name implies, it compares rates for parcels across multiple carriers and mail classes. Real-time rate shopping tools take into account the effect of dimensional weight and any added fees or surcharges. Then, based on rules you apply, the tool will select the lowest cost option for each package based on how fast the customer wants to receive it and how much they are willing to pay.
Taking the time to understand your shipping choices and putting tools in place to help you automate your shipping workflow, can give you a competitive advantage in your ability offer free, or discounted shipping to your customers.
Amine Khechfé is Chief Strategy Officer, Stamps.com and co-founder, Endicia. Contact him at 650.321.2640 or a@endicia.com
