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Published June 24, 2016
A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By Cindy Unger, WSBDC business adviser
“I am in the process of starting an ecommerce business. What advice can you give me about shipping options?” Randy, Casper
Shipping is fundamental to your customer experience and can make or break an online business in multiple ways.
Not only are shipping and packaging necessary distribution functions, but they also are an important element of your marketing strategy. Your website may represent the connection between your company and customers, but the shipping process connects products directly to customers.
Packaging must be the first consideration. Safe transport, weight, size, expense and image are all factors involved in the choice of packaging materials, and the many options available on the market today do not make these decisions easy.
The next consideration is customer shipping payment options.
In a 2015 survey done by UPS, 45 percent of shoppers abandoned their carts when the orders did not qualify for free shipping. The survey also found that 85 percent of respondents were willing to accept a five-day delivery time frame in order to get the free shipping. As a retailer, your choices in terms of providing “free shipping” are to increase product prices to cover shipping costs, cover the shipping costs out of your profit margins, or combine strategies by increasing prices slightly and cutting profit slightly.
If you are charging shipping, another strategy is to charge what you get charged. Having a real-time shipping cost calculator on your website can win a lot of trust from customers. This is an especially good option if you are selling heavy or oversized products that absolutely cannot ship for free. The final option is to offer flat-rate shipping. You can offer a flat rate for all sales or calculate flat rates for particular weight ranges. This alternative works best if you have a limited selection of products.
Both online and catalog merchants also should think about shipping as a marketing tactic. You want to encourage orders that will reduce shipping costs in conjunction with boosting the average dollar value of the sale. Amazon’s offer of free shipping for orders of $49 and up is the prime example of this strategy.
Subscription offers are another good way to increase sales volume while decreasing shipping costs. Once the first subscription product has been shipped to quickly satisfy the customer, the products necessary to fulfill the remainder of the subscription can be scheduled to ship on time via the least expensive method.
One of the most important secrets to successful ecommerce is to conquer the challenge of shipping profitably.
As your business grows, shipping from nearby warehouses and trucking packages to shipping points near the customer are alternatives that can reduce costs. Fulfillment warehouses may be the best solution. Extra expenses may be eclipsed by shipping costs that are far lower than anything a small business could negotiate.
If you are doing your own shipping, consider arranging to directly pay for inbound traffic. This tactic could greatly increase your volume with a shipper and result in lower negotiated rates for your outbound traffic.
Consider the alternatives carefully, experiment with different tactics, and be sure to re-evaluate on a regular basis.
A blog version of this article and an opportunity to post comments are available at www.wyen.biz/blog1/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email email@example.com, or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.