October 22, 2015
Posted by Alicia Baumann

Decisions based on data

When consumers buy products online, they typically don’t consider the price of shipping until their selection is in the cart. At that point, retailers want to ensure that nothing detracts from completing that buying experience. And yet shipping is still a leading reason why consumers abandon shopping carts. Furthermore, the ‘Amazon Syndrome’ has created an online buying culture built on the expectations that shipping is free, fast, or both.

In this environment, retailers must understand the cost side of the shipping equation at an order level, while controlling service levels, margins, and shipping options for each transaction.

It is only by using an aggregation of shipping data from the transaction level that online retailers can fully assess their shipping strategy and what shipping options to offer customers. Unfortunately, there isn’t a one-size fits all model for eCommerce stores due to the disparate nature of shipping, what levels of shipping are offered, and the diversity of the product inventory. Depending on the types of products available in the online store, there could be a mix between parcel shipping and freight shipping, which makes carte blanche shipping options even more complex to determine.

There are three ways for retailers to evaluate the cost of their shipping options at a transaction level.

  1. Create a shipping cost estimate based on the information collected from shipping their products—warehouse locations, carrier information, etc. Then build this estimate into the product listing price.
  2. Use actual shipping data collected over time for each product in order to find the average shipping costs, which can then be put directly into the prices listed online.
  3. Use a shipping solution, like ShipHawk, to ensure that you are not over- or under-charging your customer, which aggregates all the shipping data necessary to find the full cost of shipping. By building a solid understanding of what the markup should be to precisely cover those full shipping costs, gives the retailers the best opportunity to preserve their margins and satisfy their customers’ demand for free shipping.

Understanding the transaction level cost of shipping, enables eCommerce business owner to evaluate their shipping options that limit the impact on their margins and help define an effective and efficient shipping strategy.

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