Effective Cost Management On Shipping

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How can you create a cost management plan that will take into account the dynamic day-to-day challenges of running a webstore? A strategic cost management plan can help you know when to use which delivery service. Taking the time to crunch the numbers might cause a small headache in the short term, but figuring out your company’s shipping strategy will be time well spent. It will reduce confusion later on and help streamline your business’ shipping strategy so you can focus on delivering great customer service and great value to your customers.

Figure out when to offer free shipping and when to charge.

It is important to remember that there is no such thing as “free shipping.” You might offer to absorb the shipping charges for your customers, but someone will always end up paying for shipping. It will either be you or your customer. You might wish to drive sales of items with high profit margins by offering free shipping on those items. Calculate how much the free shipping offer will eat into the profit margin for that item and, if the remaining figure is something you and your company can live with, implement that free shipping offer.

Consider using flat-rate shipping.

Flat-rate shipping generally benefits those shoppers who purchase more. When a shopper realizes that they won’t have to pay more for shipping if they add an extra item to their cart, they might be incentivized to spend more at your store. The flip side of that is that someone who is coming to your store to make one simple purchase of a relatively low-price product might be turned off by the fact that your flat-rate shipping is equal to (or God forbid, more expensive than) the item’s price. According to a study by the Forrester Research Group, shoppers expect shipping prices to be no more than 10 percent of the order total. Are most of your customers bundling a lot of similar items together in large purchases? If your store sells items like t-shirts, towels or picture frames that can easily fit into a USPS flat rate box, this is something you should seriously consider.

Offer free delivery with a minimum order.

This is similar to the free shipping offer when customers purchase one of your goods that has a high profit margin except this is based solely on the order total. Under this system, you decide on an order total that, when reached, will allow the customer to receive free shipping. The idea is to entice the shopper to buy more because once they reach that level, they will be saving on the shipping cost. Let’s say you decide $100 is the threshold for free shipping. If your customer is about to order $90 worth of goods from your store and then they see that they only need to spend $10 to save $8 on shipping and handling, there is a good chance they’ll go ahead and spend that extra money.

Utilize UPS SurePost or FedEx SmartPost

Both of these services utilize the United States Postal Service for final delivery of your customer’s delivery. FedEx or UPS handles most of the legwork and logistics but USPS uses their extensive residential delivery network to get your package where it needs to go at a reasonable price. Both of these services save you money by combining UPS and FedEx efficiencies with the huge USPS residential network.

Working out the most efficient way to ship your goods can be a very effective way to create a cost management plan. Knowing when to offer free shipping, what items to offer it on and knowing which shipping services to utilize can take a lot of the guesswork out of running a web store and can help ensure your company’s success.