How do we get better shipping rates (and how you can get it too)?
As online stores customers, we have all gone through that moment when we get to the checkout, about to finalize our purchase and then the shipping costs appear. Suddenly there is silence. Questions begin to emerge: what to do? How long will the delivery take? But, above all, how much will the shipping cost?
You feel identified, right? Well, so does your customer. And that is why this moment is one of the most important turning points in the buying process, for both the consumer and the seller.
The Importance of Shipping Rates during Checkout
Why do we say that it is one of the most important points? Because this is where you can often set which rate you will see increase:
- The conversion rate or the abandonment rate.
Of course, there are many factors that can influence the abandonment of shopping carts, but the truth is, 44% of consumers abandon the cart because of shipping costs. And this is a big lost for the seller. Can you imagine, after all the work and effort in the selling strategy, losing your potential client in the very closing moment? That’s why it is extremely relevant to take shipping into account.
But then, what the solution to this problem would be? Many online stores also consider, in their sales strategy, to offer free shipping when reaching a certain purchase volume or price in the cart. But this is not always an option, neither for customers on the one hand – because they don’t want to buy more; nor for many sellers on the other, who cannot afford to face the cost of free shipping.
The harsh truth is, sometimes, online stores cannot even afford to lower their delivery rates not even by a few cents, since the rates that they offer to their customers is the same they pay their shipping partner – the carriers. And that is why it is important to start off by understanding how carriers set their prices in the first place.
It’s all about the volume.
Ok, maybe it is not ALL about the volume. Some different factors influence the shipping prices you will get when it comes the time to negotiate your rates with a carrier. Of course, it is not limited to these, but there are normally three main elements that shipping companies take into account when setting the price for an online store:
- The weight of the package.
- The destination to which it is sent.
- The volume of monthly shipments of the store.
Probably this last one, the volume, is one of the main factors of them all. That’s because the higher the volume, the higher is the negotiation power of the online store for shipping rates.
Why? Because, for carriers, it is generally more convenient to load their means of transport (trucks, planes, boats, etc.) to the fullest when delivering products than having them half loaded or less than half. It is not only more convenient, but cheaper for them to do it this way. That’s because carriers must consider all the logistics that delivering a product involved, like the cost of human resources management, time costs, gasoline costs, administrative costs, etc. And if they use a full loaded truck in a delivery round, it helps them to save up considerable in their logistics. Obviously, there are other factors surrounding this topic which would need to be considered but that could lead us to a whole new article, so we won’t get into that right now.
Getting back to shipping volume, it is interesting to think that, if an online store sells more products, it will increase its shipping volume, which will help to get better shipping rates. The amusing part is that most of the times, for an e-commerce, one of the ways to sell more products is exactly by having (and offering) good shipping rates.
And that brings us to two situations.
On the one hand, many companies, usually large ones, have no problem when negotiating the prices of their shipments because the volume with which they work is very large, and this allows them to have greater decision-making capacity during negotiations.
On the other hand, there are many more cases where this does not happen. Small and medium enterprises, some of them start-ups, that need some help in their logistics sector, cannot grow as much as they would like to, and most of the times it is due to the volume-price factor.
As a result, online stores with low volume of shipments struggle to get rates that are convenient for them, and in many cases cannot even afford to negotiate. They have to accept the reality that is presented to them, that is, very high shipping costs, which can lead to a harder time in selling their products and, consequently, increasing their shipping volume.
How We Get Better Shipping Rates
A possible solution? Combining the shipping volume of all those small and medium businesses. The sum of all of them will increase the total volume, and therefore the possibility of negotiating to get more accessible prices for shipments becomes a real option for everybody. And that is exactly how we get better shipping rates. Then, we pass those negotiated rates to small and medium online stores or, as we call it, our clients.
We reached this conclusion a couple of years ago here at Shiptimize and decided that it was an entrepreneurial idea that was worth all our effort. That way, we can help sellers and entrepreneurs in the eCommerce sector that have a harder time than big companies when it comes to integrating the shipping process into their daily activities and to get good rates for their deliveries. Maybe they cannot opt for better shipping rates, but we can.
So, we get the best possible shipping rates for our customers, gathering and grouping the largest possible volume of shipments thanks to the sum of all. Then, we created a free shipping management and optimization platform in which any eCommerce can register, gather all their shipping information in one place and, of course, access our rates. From here on, it’s a matter of easy math: more clients equal higher shipping volume. And higher shipping volume leads to better rates to us and to our clients. So, everybody grows together.
Did this article get you wondering how exactly low our shipping rates are? Ok, we can tell you. But, since this number depends on other factors like weight and size of the package and where is it going to be sent to, we suggest you answer the following questions so we can send you an exact number. 😉