How Shipping Affects Online Sales, and What You Can Do About It
Published: November 27, 2013
Author: Joe Stanton
Ecommerce continues to grow at a rapid pace both domestically and internationally, with shipping still being an important piece of the puzzle. Customers have expectations for the cost, timeliness, and options of shipping, and those expectations keep growing. Let’s take a look at what customers are asking for, and then we’ll examine three significant things a modern brand can do to meet and exceed those expectations.
Free shipping is the biggest enticement for shopping online
Commentary: This fact says it all. Why would you want to drive 10 miles and waste your precious time and gas, when you can have the same items delivered to your door with no shipping costs? We live in a culture of convenience; free shipping is a key motivation for your your to shop on their own terms while saving money and time.
Shoppers spend more when free shipping is available
Commentary: Average order value for online purchases without free shipping: $86.58. The same purchases with free shipping offered can be as high as $112.55. If you shop at a great store that you feel treats you well by offering you a free promotion, you’re going to reward that store with more of your business. Not only that, but your time is worth a lot. So instead of wasting it by sitting in traffic, you’re going to spend it wisely by trying to order more of what you need online, but only if the cost of shipping products doesn’t wipe out the time savings.
A majority of shoppers would like improved shipping options
Commentary: Options matter. The most requested features for online stores all had to do with shipping. Not only do shoppers want free/discounted shipping options, they also want 2-3 day delivery (43%) and overnight delivery (30%) options for a fee. This makes total sense especially when you look at holiday shopping. Someone needs to buy a gift but they waited a bit too long to get standard free shipping. They want to give the gift to someone special and it needs to arrive on time, so they are willing to spend extra to ensure that happens. If they know they can’t get it in time, then they won’t bother buying it at all, and you will have lost a sale. Don’t forget well-crafted return policies, as those can play a big role in happy customers too.
Shipping costs cause abandoned carts
Commentary: DON’T offer free shipping at your peril; shoppers abandon carts, primarily due to unexpected shipping costs. This is even more true for international customers. Imagine you’re trying to purchase something from a different country. They offer free domestic shipping, but to your address abroad? $37.25. And then you imagine what the customs charges will cost you, and without hesitation close the browser. That’s a very easy way to never want to shop online again.
People buy more to qualify for free shipping
Commentary: DO offer free shipping and your customers won’t just buy at higher rates, they will actually buy more so that they can qualify for the free shipping promotion. Think about it: how many times have you been shopping on a store or marketplace and wanted to buy something that cost you just shy of $25? The little notice pops up that says “add $3.28 to your order to qualify for FREE shipping,” and how tempted are you? Probably very tempted. You can buy something else you might need and it feels like you’re actually coming out on top. So free shipping not only makes shoppers more likely to buy from you, it actually makes them buy more.
International free shipping may matter most
Commentary: The world keeps growing, and many markets are growing even faster than the U.S., Canada, or Europe. There are millions of people who want to make a purchase online because a product isn’t available at their local store. But paying for international shipping and customs? No way. Shipping internationally, especially for free, is difficult, but imagine how ahead of the competition you would be if you were able to do it?
The conclusion? Shipping matters. Free shipping matters more. International free shipping may matter most.
But how do you do it? Here’s what Alex Ikonn, co-founder of premium hair extensions brand Luxy, has to say about this:
“For Luxy, free international shipping means many more happy customers than we would get if we were only shipping in one country. But you need to keep inventory closer to your customers so the free shipping option doesn’t break the bank!”
Luxy displays ‘FREE INTERNATIONAL SHIPPING’ prominently right at the top of their homepage, making sure that anyone who visits their site knows about this benefit of shopping there.
The challenge is that you can’t do this by doing shipping the old way. You have to think like a Fortune 500 company, even if your ecommerce store is just starting out.
3 ways to meet and beat customer expectations for shipping
1. Offer free shipping by locating inventory closer to your end customers
Remember this: locating inventory closer to your customers is the key to success in shipping. Not shipping discounts from a single carrier, not redesigning your packaging, and certainly not limiting yourself to only your domestic market. If you want to see for yourself, take a look at any carrier’s pricing calculator and check what a package sent from New York to San Francisco would cost for the same package shipped from Los Angeles to San Francisco.
Generally, you have two options to keep inventory closer. You can either open up a new warehouse or location in a new market, and sign a lease, hire staff, invest in equipment, and so on. Or you can partner with a fulfillment service.
The way a fulfillment service works is very simple:
1. You send some or all of your inventory to one or more warehouses.
2. You connect your Magento or Magento Go store to the fulfillment partner’s service. This allows the two platforms to communicate and be aware of incoming orders, inventory levels, and shipping rates.
3. When orders come in, your fulfillment provider picks, packs, and ships products directly to your buyers. Returns work the same way, and are sent right back to the warehouse and inventoried.
By doing this, you’re immediately lowering both the cost of shipping and the time required to arrive at the destination. If you already offer free shipping, it’s a win because your cost is lower, and if you don’t then it’s a double win because you get all the benefits of satisfying the customer demands we wrote about earlier.
2. Offer additional shipping options & exceed delivery expectations
By partnering with a fulfillment provider and locating inventory closer to where your domestic and international customers are, you will be able to provide free shipping promotions, but you will also satisfy the growing demand for additional shipping options. Take a look at what this might look like at checkout:
Free Ground shipping? Great! Expedited service for a fee if I need to get it ASAP? Even better. This is a great example of a store using a fulfillment provider and satisfying two of the customer demands we saw earlier.
What’s equally important to being able to offer a variety of shipping options, is the shipping and delivery accuracy that comes with partnering with a company specializing in doing only that. If you’re an ecommerce brand, chances are your strengths are in developing products and selling them, not in keeping logistics costs down and ensuring same-day shipping guarantees are met. By working with someone who does specialize in this, you can focus on what you do best and leave the rest to the experts, ensuring that your products arrive when your customers expect them.
3. Ship internationally – but don’t go all in
Being able to provide reasonable shipping rates and offers to international customers doesn’t mean you need to fill an entire warehouse with your products in a different continent. In fact, that’s exactly what you shouldn’t do. Instead if you’re not ready to fully move into a new country, you should see where the demand is coming from and send just a few items of inventory to that market. By sending a small amount, you can either test the new markets to see if customers will want to buy your product, or satisfy the existing demand even if it’s small.
The goal is simple: eliminate the hassles and uncertainty of ordering a product from an international retailer for your customers, and then see how well they respond to the product and whether they want to buy.
If you’re an international merchant offering free, or reasonably-priced shipping to any address, imagine the surprise and delight of your customers. This is what Luxy did, and it paid off: customers see that they can order a product and it will arrive for free and on time regardless of where they are in the world, and so they order more and tell their friends about it. This way Luxy has a leg up on their competitors and can continue to succeed both domestically and internationally.
Customer demands keep growing for the cost, timeliness, and options in shipping. All this is happening as the international ecommerce market grows faster than ever before, opening new opportunities to brands willing to take on the challenge. Smart brands locate inventory closer to their customers (wherever they are), and not only meet the expectation of their customers, but exceed them.