Can Online Retailers Still Charge for Shipping in Today’s Market?
Online shoppers have sky-high expectations for every purchase they make these days. This has made creating a flawless customer experience the necessary goal for most online retailers. These expectations are largely the result of what’s known as the “Amazon Effect,” which has shoppers expecting ever-faster delivery for little or no cost.
E-retailers realize that to grow market share, they need to be able to meet these customer demands. Those that don’t are seeing climbing rates of cart abandonment and lost sales. Figuring out how to offer the right balance of cost and service is one of the biggest challenges for every online seller today.
Do Online Retailers Have to Offer Free Shipping?
What an online retailer charges for shipping has become a strategic decision. Now, sellers must balance the wants of consumers with the reality of a business needing to maintain acceptable margins. Someone has to pay for shipping — it is never free. But consumers often feel that paying for shipping is never acceptable, and they will seek out other websites to make a purchase based solely on whether a store charges for shipping.
Does this mean that sellers need to offer free shipping all the time to save sales? Or, do retailers need to charge for shipping to protect margins regardless of the impact on sales? For most stores, there is an identifiable middle ground, thankfully. But finding it comes with hard work and many considerations on the retailer’s part before deciding how to charge for shipping.
Do the Research
The first place to start when evaluating how and what to charge for shipping is to study top ecommerce companies, as well as competitors within your industry. A good first goal is to determine what’s normal in your company’s particular marketplace — because perception and what buyers are used to is important.
There will be patterns that emerge from the research, which likely fall under a few broad types of methods, including free shipping, flat-rate shipping, and shipping based on spend thresholds. These and others that are identified can then be evaluated.
When it comes to finding the right shipping formula for your business, the best way to start is with a test. The goal of the test is, of course, to identify the options that maximize sales and profits for the seller. An A/B/C test of different cost structures and shipping options will measure the impact of each strategy on sales and allow for analysis.
The data from the testing phase can then be used to determine which model works best for your customer and how to proceed to solidify your shipping strategy. Testing the different alternatives is the only way to quantify the impact that the shipping cost has on the customer and on the bottom line.
Roll It Out
The result of the exercise will be confidence that your shipping policy is optimized to balance the needs of your business with what your customers want. Better yet, doing so immediately puts you one step ahead of most competitors, because few, if any, will have done this amount of work on this make-or-break business decision.