Did you know that 50% of Internet users leave the shopping cart when shipping costs are added? And yet, shipping and handling costs are still a creative way to set yourself apart from your competitors. That’s why, in this article, I’m sharing a few tips that will help you avoid frustrating your customers with astronomical shipping costs, without necessarily losing out!
Standing Out: Even More Crucial Online
Today, with over 24 million e-boutiques on the web, whether you’re selling clothes, cell phone cases, electronics or even cereal marshmallows, you need to differentiate yourself from your competitors more than ever.
In marketing, differentiation regularly refers to competitive advantage, perceived benefit, customer service and more. With the accessibility afforded by the Internet, you need to understand that it’s now easy for your potential customers to compare prices using tools such as Camel Camel Camel. Price differentiation is therefore no longer an option, and will prove a destructive method for you and your industry in the long term, especially for retailers, who have no direct influence on the product sold.
Despite this, without necessarily reducing your profit margins or directly attacking your selling price, it is possible to play on the perception of your potential and existing customers using various methods of displaying delivery prices. As a result, your customers will feel they’re getting more for their money, and will buy on a larger scale and more frequently.
A reserve price: what is that?
Before delving deeper into shipping cost allocation strategies, it’s important to take a moment to consider the notion of reserve price. You should be aware that we all have a maximum price we’re willing to pay for a product. This is different for everyone, and can be summed up in the following equation:
Reserve Price – Price – Shipping = Positive
In other words, if the result of a customer’s reserve price subtracted by your selling price and shipping costs is positive, this will result in a purchase. If not, the customer will either look elsewhere or postpone the purchase. This goes back to a fundamental concept in marketing: it’s not you who decides the selling price of your product, but the market.
Maximum Delivery Time: because there are always limits to our patience!
Delivery time is another factor not to be overlooked. The truth is, each and every one of your customers has a maximum amount of time they’re willing to wait before receiving a product. Even if the result of the above calculation turns out to be positive for your customer, if you don’t meet their maximum lead time, they won’t make the purchase and will go to your competitor.
It’s therefore important to understand the direct impact of delivery on online purchases, and it’s your duty to meet the above criteria in order to satisfy your customers.
BUT CAREFUL, I’m not saying that 100% of your customers expect you to deliver in 2 days.
As an indication, according to a Morning Consult survey from 2022, 31% of online shoppers in the USA would be willing to wait 2 days to receive their product, while 37% of buyers would not be willing to wait more than a day before paying to receive it faster.
It’s not easy to please everyone, is it?
So, the best solution to ensure a satisfied clientele is probably to adopt a “user pays” logic, with different delivery options at varying rates.
Now that you understand these two delivery concepts, let’s dive into the heart of the matter !
Let’s get down to business
As you’ve probably realized by now, your online delivery strategy has a direct impact on the conversion, satisfaction and retention of your store’s customers.
So you need to be meticulous in developing your strategy:
Take into account your customers’ restrictions (reserve price/delivery time, etc.) and also consider your competitors: do they offer free delivery? At what threshold?
Here are a few ideas for implementing a strategy that will increase your customers’ satisfaction without necessarily affecting your wallet:
Generally speaking, free delivery (on its own) is not a recommended solution. It charges all shipping and handling costs directly to your business, and is likely to cost you dearly in the long run. What’s more, your customers will get used to it, and it’ll be hard to go back when it’s no longer profitable for your store. For this reason, we advise you to opt for slightly more creative solutions, as presented below.
Free Delivery Through Special Offers
With all today’s marketing tools (Remarketing, Pop-up, e-mail marketing, etc.), it’s easy and inexpensive to offer your customers a limited promotion to increase their sense of urgency and encourage them to take action.
And why not?
In such a situation, reduced delivery charges can be an effective way of convincing your customers that you really are offering them the best deal.
Instead of offering them a 15% discount coupon… why not offer them free delivery on their first purchase? The same applies to your V.I.P. customers who buy regularly… Don’t forget to spoil them too!
Free Delivery With Minimum Purchase Amount
It’s not uncommon for retailers to require a minimum spending threshold before offering free delivery on a product. Indeed, this is an effective method often favored by giants such as Amazon, Walmart, Best Buy and many others. This option generally works very well, as it exploits a particular behavioral reflex:
The Power of Free
This concept, described in several books on the subject such as Predictably Irrational, explains the particular interest we all have in free goods. Indeed, offering free delivery at a threshold of X usually has the effect of encouraging the consumer to buy an additional item in order to reach that same threshold. In this way, the consumer has the impression of having received a discount on this additional item, and therefore of having made a gain rather than a loss by paying for delivery. Interesting, isn’t it?
But be strategic!
Ideally, when determining your minimum threshold, don’t forget to analyze the data from your e-commerce platform and Google Analytics, because you don’t want to cannibalize your current sales, but rather generate new revenue.
For this reason, it’s a good idea to evaluate your average basket in terms of different variables. For example, by evaluating your average basket according to the location of your consumers, you might decide to adopt a geographically different minimum threshold.
In any case, try to adopt a higher threshold than your average basket, as the strategy won’t necessarily have a positive impact on your sales if 98% of your customers were already reaching this threshold before the strategy was implemented.
Free Products with a Delivery Cost… Say What?!
You read that right!
This strategy, still very rarely used in Quebec, isn’t very conventional but seems to have proved its worth for many web entrepreneurs.
In fact, this technique is mostly relevant for niche “Dollorama-type-products”, which don’t cost much to deliver. In fact, it would be rather inconsistent to offer a free sofa with a $2,500 delivery. On the other hand, it can be rather tempting for a customer to get a product worth $10-20 “for free”, by paying only $10 for delivery.
And I do mean “free”.
The quotation marks are important, because these merchants are really just integrating the cost of the product into the delivery charge.
This method definitely doesn’t apply to all types of products and industries, but I challenge you to find a way to exploit it if you feel targeted!
Pick-up point or click & collect
Certain types of consumers are attracted by free delivery offers, where they can collect their products themselves, such as pick-up points or click and collect.
Consumers are increasingly accustomed to picking up the products they have ordered at relay points close to their home if they can benefit from free or low-cost delivery. This can be a strategy to prioritize high-traffic pick-up points to optimize delivery routes. However, with shared routes, delivery times can be longer.
Click and collect has also developed among online shoppers, enabling them to store online without paying delivery charges. This delivery tactic creates a bond with consumers by providing an omnichannel experience, while exposing them to new products and the opportunity to increase sales. However, it requires a collection point large enough to store online orders.
Discounts for Bulk Orders
Last but not least, you can offer a delivery discount on the purchase of a set and/or batch of products. Similar to free delivery with a minimum threshold, this option has the advantage of helping you boost sales of a specific product.
For example: You could take advantage of the buzz generated around one of your “loss leader” products (low-priced product sold at a loss to increase your brand’s visibility) to boost sales of a complementary, more profitable product.
Your time to shine
Delivery costs are an interesting way of setting yourself apart from your competitors and encouraging your customers to take action.
Unfortunately, adopting a single online delivery strategy for your e-commerce business isn’t easy!
That’s exactly why you shouldn’t be afraid to try out different techniques for presenting your delivery costs, and measure their impact on your sales, cross-selling and average basket.
Analyze your data, test, re-test and you’ll see, your results will eventually improve 😉
On that note, happy selling!