Why you SHOULD NOT FIX your online store’s shipping prices

Posted by Catarina Fonseca
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Or at least, not yet.

There are many reasons to buy online. It could be because there are better prices online, for the convenience of buying from anywhere at any time, for the variety of products, etc. However, understanding the reasons why people buy online is only one part of the equation –it is also very important to have a clear understanding of why people don’t buy. And of the factors that influences a purchase, most of them are related to the logistics part of an online store. In fact, some of the main reasons for shopping cart abandonment are related to shipping prices.

 

Reasons Behind Shopping Cart Abandonment in 2017

Reasons for Cart Abandonment 2017

So, in order to have a better understanding of the impact that shipping prices have on an online store, let’s first take a look at the most common ways an eCommerce can play with their shipping prices at check-out.

  • Free shipping
  • Online stores contribute to shipping
  • Shipping paid by the customer

Free Shipping

Well, let’s start with a consumer’s favourite.

Although this option is more often than not used for domestic shipments, offering free shipping is one of the best ways to get a customer’s attention and increase the conversion rate of an online store. And this applies to the return process as well – 79% of consumers want free returns shipping.

To offer free shipping on all your items, whether high or low value purchases, your online store must either absorb shipping costs or increase prices to cover these costs. However, this option may have an impact on your profits.

Why?

Well, if you absorb the shipping costs, you’ll lower your profit margins. This may be a feasible option for companies with large margins or with deep financial pockets. However, if the online store in question has small margins on its products, this method will cut even further at those margins, which can become unbearable for an eCommerce.

On the other hand, depending on the market in which you operate, your competitors and the type of products you sell, by increasing the prices of your products, you can damage competitiveness of your online store and affect your conversion rate.

However, there is another possible option: offering free shipping for orders above a minimum order value. Free deliveries above €X is a fairly common practice, which often influences the conversion rate. It also increases the average order value of an online store, because the amount that entitles clients for free shipping is often chosen just a little above the average order value, to push customers to add more to their shopping carts.

But if you choose to offer any of these free shipping options, make sure you communicate it to your clients. Consumers love free deliveries.

Online store contributes to shipping

Another possible way to price your shipments is by contributing to shipping. This way, both you and the consumer pay for the delivery.

And how can you do this? Well, to start off, you need to choose a certain delivery price. For this, you’ll need to invest a little time to calculate the average price of a delivery. The time it will take to calculate this value will depend on the diversity of weights of your products, the products themselves, the areas to which you ship, among other factors.

Once you have this number, you decide how much of your margins you are willing to ‘give up’ in order to offer lower shipping rates. Or, in other words, to help increase the number of purchases in your online store.

A very important thing to keep in mind: there is no one rule that applies to all companies.  The relationship between the price of a delivery and the increase in the conversion rate depends on a number of factors. So, in order to reach that perfect balance, you’ll have to do an ongoing test to this value.

However, if you opt for this option, make sure you communicate this right away. As mentioned above, one of the biggest reasons for shopping cart abandonment is related to unexpected delivery prices. So, if your customers know from the start the price they will be charged.

Shipping paid by the consumer

Another of the most common methods of pricing is charging the shipping to the consumer.

The easiest way to define the price that your consumers will have to pay, is to define the shipping cost per country. However, there are several real-time price calculators, which enable online stores to drill down on this price and to consider many other different factors, such as the dimensions and the weight of the package, the possibility of tracking it, etc.

By presenting a real time price calculator, and by communicating it in the right way, you demonstrates total transparency in shipping costs, which influences the consumer’s confidence in your online store in a positive way.

However, one of the biggest problems in charging the shipping price to consumers is that buyers don’t know the final price of their purchase when they are viewing the products, only at checkout. And this can lead them to abandon the shopping cart at the time of purchase.

So if this option is something that interests you, communicate it straight away to your consumers. By announcing in a clear and concise way the existence of shipping costs right from the start, before reaching checkout, in addition to projecting the transparency of your store, you are also eliminating the element of surprise of these costs.

Conclusion – So what is the best strategy for your shipping prices?

These are the most common ways to set shipping prices and some of the advantages and disadvantages that each brings. And the truth is: there is no one, true answer that applies to every online store.

What works for one company, may not work for another. And what works for a specific country, may not work for another. You need to try different pricing strategies to see what works best for your clients and for your online store.

The one thing that each and every store needs to keep in mind is to clearly communicate how, and if, your consumers are going to pay their shipments. That’s it.

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