Turn Small-Business Shipping into a Profit Center
If shipping is eating a hole in your company pocketbook, it doesn't have to. By changing your shipping strategy and using it to your advantage, you can offset your costs by bringing in business and converting more customers.
With these shipping and product pricing tips, you can reach more customers at less cost, improve your product conversion rate and potentially gain revenue.
Reduce your shipping expenses
The core to saving on shipping costs starts from the ground level. If you can reduce how much you pay while keeping the amount you charge your customers for shipping consistent, you'll gain a profit from the difference.
- Review your carrier agreements and adjust your shipping charges. Companies that successfully profit on their small business shipping strategy review their pricing structure with their carriers every six months and adjust their product prices and/or the shipping fees they charge their customers to accommodate for increased costs. They also know the importance of building relationships with carriers who may be willing to negotiate prices and reward loyal business.
- Strategically disperse your inventory. The shorter the distance between your product and your customers, the less costly the shipping fees. Consider storing your products in multiple warehouses to decrease the travel time and shipping costs.
- Use economical parcel shipping. Depending on the distance from pickup to delivery, some ground shipping is as fast as expedited shipping. By using ground shipping for your shorter-haul shipments, you can save on costs while optimizing your markup on shipping charges to your customers.
- Scale your shipping to take advantage of lower costs. If you normally ship individual packages using a parcel service, you can save on shipping costs during periods of high-volume sales by bundling packages that are bound for the same location to ship via less-than-truckload (LTL) freight.
Convert more customers with attractive shipping options
While nearly 50% of consumers prefer to shop at stores that offer free shipping, only 27% restrict their shopping to those stores.1 If you choose to charge for shipping, the challenge is to attract the other 73% of online shoppers willing to pay for it. You'll have to decide whether paying for shipping on your own or sharing the costs is a better strategy for gaining loyal customers. Here are some options:
- Add the shipping costs into your product prices. With this strategy, you could gain revenue on individual purchases of multiple items if, collectively, they fall within the weight range for shipping. The challenge, however, is losing sales to comparison shoppers looking for the best price. Unless your product is unique, you could lose sales from consumers who comparison shop if your prices are too high.
- Apply a minimum order requirement. Shoppers who want free shipping may be willing to add more to their shopping cart to reach the threshold. You'll pay the shipping costs, but you'll gain more in revenue. On the downside, you could lose sales to customers who want only a particular item and are unwilling to pay for shipping. This strategy might also increase the chance for returns if customers are only purchasing additional items to make the threshold.
- Offer free shipping to promotional offers. When you're introducing a new product or highlighting an existing one, consumers will be more inclined to try it out if they're not paying for the shipping costs. While you'll lose on shipping costs for the initial sale, if your promotional item is a big hit, you could benefit from repeat business.
- Qualifying items. Use free shipping to move excess inventory on specific items that might otherwise be sitting on a warehouse shelf. Another approach is to offer free shipping only on popular items with a higher profit margin.
- Loyalty program. Rewarding repeat and/or high-volume customers with a loyalty program can increase conversion rates and incentivize shoppers to purchase more on your site. In fact, 36% of shoppers return to a site where they earn loyalty benefits, and 63% consider free shipping to be the top reason to join a program.2
- New customers. Get the attention of online shopping browsers with an offer of free or discounted shipping and let them know of your loyalty program to keep them coming back. You'll boost your conversion but not get tied down to offering unlimited free shipping.
- Flat-rate shipping. Add money to your shipping coffer by charging a flat fee for shipping. Not only will you cover your shipping costs, but the overage you collect can also help pay for any extra fees and surcharges. You may need to do some A/B testing to identify the tipping point when shoppers consider your product price to be too high.
Maximize your shipping strategy
Shipping doesn't have to eat into your profits. In fact, any of the tactics listed above may boost your business and increase sales. Worldwide Express can help you optimize your shipping strategy to turn shipping from a cost center to a profit center. Contact us for a free consultation today.
1Brophy, Meaghan, "31 Online Shopping Statistics You Should Know for 2020," Fit Small Business. Sept. 30, 2020.
2UPS Pulse of the Online Shopper, 2019.
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