Enormous focus is placed on increasing conversions for eCommerce sites. We look at button placement, color, typography, and a host of other design aspects to improve the percentage of customers that complete the checkout process. However, some of the issues introduced in the checkout process are structural and based on the way we run our stores rather than based on design. A leading cause of cart abandonment is the surprise customers experience while checking out and being confronted with shipping costs they didn’t expect, which is why setting up effective shipping methods is important for your eCommerce store.
Most customers have no idea how much it actually costs to ship something, as it’s necessary to hide or decrease shipping rates in order to lower a barrier to purchasing online versus in person. Free shipping offers have also become ubiquitous, which reinforces the idea that shipping shouldn’t be expensive or added onto an order total. While I support the practice of lowering shipping rates to encourage customers to buy online versus in-store, doing so can be difficult and requires some consideration.
Here are some tactics you can use to set effective shipping rates for your store to improve conversions and customer happiness while limiting the financial impact on your business.
- Increase product prices to hide some shipping costs.
- This is a frequently recommended practice for eCommerce stores – simply increase product prices across the board by say, 5%, to account for some shipping costs, then lower shipping or make it free (we wrote about using this tactic for the holidays). Will customers pass you over for another store if your prices go up? Only if you underestimate the power of free. If you do this and offer free shipping, customers will more often select your store to take advantage of free shipping, even with increased product prices.
First, you can do this easily using WooCommerce, WPeC, and Jigoshop, as you can bulk edit product prices to increase them by a percentage or set amount (i.e., $5). However, I would throw out a word of caution before blindly accepting this practice. You’ll need to have good data on the frequency of product returns, as you can’t very well then back out the shipping costs from the returned product, so you may eat more than the product price on a return (especially if you sell something like apparel and offer free return shipping, too). Testing both approaches to see the impact on profits from increased return costs would probably be necessary before betting on this method to work.
- Free is a far more powerful motivator than a discount.
- Speaking along the same lines, free shipping is always better if you can offer it. Customers will more often choose free shipping over a $10 discount, even if the shipping costs would be under $10. “Free” makes them feel like they’ve gotten something additional, and more customers will take advantage of free over any other offer type.
Free shipping also eliminates one more customer decision and one more barrier to purchase. Customers have to first decide if they want to purchase a product at the price you set. However, if you add shipping costs into the equation, they then have to make another decision about whether the shipping costs are reasonable and worthwhile, which introduces a point of exit from your checkout process and can start to leak conversions that your store would otherwise have.
- Always disclose shipping costs as soon as possible.
- As we said above, customers don’t like to be surprised by the shipping costs once they’re ready to check out, and can sometimes upset them so much that they immediately leave the site. Don’t wait until last part of check out process to tell them what it will cost to ship their order. Include a link to your shipping policy in your hero image on the homepage or in a banner, and always be clear about order minimums, returns, or other nuances in the policy.
If you have offers, make them extremely obvious For example, you could use something like the Cart Notices extension for WooCommerce to inform people of free shipping offers and the requisite order minimum to take advantage of them. This serves the two-fold purpose of informing customers about policies and increasing average order value by encouraging customers to meet an order minimum. (Disclosure: the company I worked for developed that extension.)
Other companies make shipping offers obvious by placing them in the page header to inform customers that may not come to the site through the homepage. For example, check out the shipping policy notices for Nordstrom’s and Steve Madden:
Macy’s does something similar, but takes this idea a step further – they provide a link to a “deals” page, and include this link in the cart / checkout pages to show customers current deals. Not only does this keep customers informed, but it also keeps them on the site, which saves affiliate commissions. According to a statement from Macy’s, this practice increased sales “larger than we thought it was going to be” (source: Internet Retailer).
- Set free shipping minimums
- 75% of shoppers are willing to add additional items to their carts to meet required minimums for free shipping (source: L2), so you can both increase happiness by offering this perk and increase average order value by encouraging customers to meet a threshold.
The wrinkle in this approach is finding a sweet spot for the free shipping threshold. It should be above the average order value, but not too high to be ignored. For example, if you sell keychains, your average order value probably won’t be very high, so setting the free shipping threshold at $75 will simply cause customers to ignore it and could irritate them.
- Ship by weight, not order total or cost.
- Allowing free shipping may not be feasible for all stores (though I would strongly consider it and get creative if possible to offer it). If you can’t offer free shipping, you should try to make shipping rates as accurate as possible and determine what you can eat and what customers will have to pay.
Since your shipping rates as a merchant are determined by the package weight, you should set rates based on order weight if you want the most accurate shipping methods. With most eCommerce platforms, you can set weight tiers / table rates to calculate shipping based on the total order weight. This way, the costs you’re charging are in-line with what you’ll be paying to ship the order rather than simply reflecting the order cost, which usually has nothing to do with the cost to ship it.
- Integrate with fulfillment services or shipping providers for real-time rates.
- Another option if you can’t offer free shipping would be to integrate with a shipping provider, such as FedEx or UPS, to pull shipping rates straight from the provider for maximum accuracy when determining order shipping rate. Again, most customers are not aware of how much shipping costs, so this may not always be the best approach and they may think your rates are too high compared to other stores in the space.
When selecting a provider, you should consider pickup times and perks as well as shipping costs. For example, having set pick up times or later pickups without a premium may be more valuable to you than a slightly lower shipping rate. Also, if you have flexibility in locating your store or fulfillment center, you should know that being near a hub for your provider can save you money on rates and yield more favorable pickup times.
You could also use a fulfillment service like Shipwire to store and ship your products and to provide shipping rates for orders. Note that you’ll want to check which providers have integrations available with your cart system, as developing a custom integration will be an expensive venture.
- Test including a handling fee.
- Some stores charge a handling fee in addition to shipping costs to account for the man hours used in packing an order plus the shipping materials (boxes, tape, etc). Shopp includes the ability to add a handling fee to orders on top of shipping costs.
Note that I say you’ll need to test this approach, as its efficacy will vary based on store type. For less expensive products, customers can feel that they’re being nickel-and-dimed on fees, which makes online shopping less attractive. However, customers are more likely to understand handling fees for larger items, such as televisions.
- Estimate delivery date when possible.
- One of the things I love so much about Amazon is knowing when my order will arrive. Delivery times can be a deal-breaker for customers, especially when ordering gifts. Showing delivery estimates before an order is placed can save you a customer service headache later, which will suck up valuable time and resources (real costs to you!).
Shopp offers the ability to set estimated delivery times to display in the checkout in your settings, but you could include this on product pages with other platforms by tweaking your theme.
Jigoshop also offers a delivery period extension to provide lead times for order delivery.
- Being Redundant: Keep delivery costs low.
- To iterate much of what we’ve said already, it’s imperative that you keep delivery costs for customers as low as possible without obliterating your own margins. According to studies, 53% of customer abandon carts due to high delivery costs. From the same study:
Almost three quarters (65%) who abandoned at the checkout because they felt delivery costs were unreasonable went on to search online to see if similar products were available elsewhere from another retailer demonstrating that concerns about delivery can impact shopper loyalty. Just 8% went to a store to make the purchase afterwards and 1 in 5 (20%) made no purchase whatsoever.
–eDigitalResearch and IMRG
- This article from Shopatron describes some common mistakes shop owners make while setting up shipping rates.
- Site Tuners describes how to use shipping offers to increase sales.
- Cart66 posted this tutorial on how to set up store shipping rates.
- This Inc.com money-saving strategies guide provides a great overview of some cost-saving strategies for shipping.
- Entrepreneur Magazine provides pointers to consider when setting shipping policies and determining rates.