How to Structure and Optimize Your Shipping & Handling Fees for Conversion

Why do 58% of customers abandon shopping carts before purchasing? According to a new study by UPS and ComScore, because they get frustrated when the cost of shipping exceeded their expectations for the price of the merchandise they were purchasing.

With almost 3 in 5 Americans now viewing shipping as one of the biggest reasons they abandon their shopping cart (Click to Tweet). This is something that must be addressed.

While it would be nice to walk over and personally hand all of your customers the merchandise they want, this is just not possible. Unless you really like walking.

That is why below I give you some proven solutions to fight the shipping and handling conundrum, so you can increase your conversion rate at your shopping cart.

Shopping cart abandonment

First, let’s help you reduce the number of shoppers who leave your store at the shopping cart.

Fortunately, Shopify has a number of great apps to help you achieve these goals.

One of the best apps is Sticky Exit Offers. to reduce shopping cart abandonment. This tool allows you to set up offers that give the user a special offer before they leave your shop.

14% of all ecommerce stores now use exit offers to reduce abandonment. Some eTailers have seen a 10% increase in conversions from using these offers.

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As you can see from the image above, Stick Exit Offers lets you set up an exit offer in three easy steps.

One offer that does very well with consumers is offering them free shipping. 61% of online shoppers today will abandon the shopping cart unless you provide them with free shipping.

This could be a good, final effort to keep them buying your products before they leave your site.

Remember that if a customer leaves your site there is a much higher likelihood they will never return to finish their transaction. Keep them on your site, so you can increase your conversion rate. In 2014 alone, cart abandonment accounted for over $4 Trillion in lost sales. (Click to Tweet)

The more you can get them to not only purchase items this time, but also get customers coming back a second time the more you can recoup some of those lost conversion money.

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Free shipping or similar discounts work wonders.

Part of the reason this is successful is because 56% of shoppers abandon shopping carts when the shopping cart has too many confusing options.

Instead, think about how to make it simple.

Amazon’s Prime members- which I’ll discuss further below- are a large part of the reason the company is now a $74 Billion ecommerce juggernaut. One click shopping makes purchases impulsive.

The easier you make the shipping and fee structure, the more likely customers purchase your products immediately.

However, preventing shopping cart abandonment is only one part of how you can structure ecommerce shipping.

A solid shipping policy in the first place helps you recoup some of those lost sales. Let’s look at three different solutions to help you structure your shipping and handling fees.

Solution to shipping

Option 1: Provide free shipping. Nothing sells like free shipping. According to recent statistics, 73% of buyers single out free shipping as the number one reason why they purchase.

However, for ecommerce merchants free shipping can be harrowing to deal with, now that FedEx and UPS have raised their prices again in 2015.

To help, I want to provide you with three ways merchants successfully provide free shipping to their clients.

First, offer discounts to people who pay a certain dollar amount.

For instance, Best Made Cos. provide discounts on their knives and other products when customers spend over $150 in the store.

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Lazy Fruits, conversely offers free shipping to customers who spend $68 or more on their order. They promise delivery ties of the next day when you purchase over $40 in fruits.

Both of these companies figured out what minimum worked for them before they included free shipping.

The good news is that 93% of their customers purchase more in order to qualify for free shipping (Click to Tweet). This is one reason that many companies like Best Buy raised their minimum free shipping amount from $25 to $35. They wanted additional revenue.

Second, provide a membership that includes free shipping in the price. As I alluded to above, the biggest memberships that provide free shipping is Amazon Prime.

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One of the biggest reasons customers keep shelling out $99 per year for Amazon Prime is for the 2 day free shipping guarantee for Amazon Prime members.

With close to 40 million Prime members in the United States, it is well worth the price of admission for consumers.

Amazon profits greatly from this relationship. That is because on average, Prime members spend over $1500 on Amazon every year compared to average non-Prime customers who spend close to $625.

The third way you can provide free shipping is to include it in the price.

Creative company Fifty Three provide free shipping to US and Canadian customers who are about to abandon the transaction. A great example also of an exit offer.

All other clients pay the original shipping rate. It is part of the cart retention technique.

The price of the shipping is already reflected in the price of their custom made styluses, so they can provide free shipping to customers without taking a loss.

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One final note on free shipping. While it might be all the rage with clients, it can sometimes cause massive headaches for ecommerce store owners if you do not have exact costs for your products.

Remember that shipping out a stylus from Fifty Three or a book from Amazon is not expensive when compared to a flat screen TV or refrigerator.

You can send a stylus to a client in a small box or envelope. The image of you trying to stuff a refrigerator into a flat fee pack from the post office would be a bit silly.

Do you have a product that would lend well to free shipping? If so, why or why not?

Option 2: Offer real time shipping quotes. While free shipping is great if you can do it, some companies cannot afford to use free shipping.

Another option is to use real time shipping quotes tied into a service like FedEx or UPS.

Take iPad casemaker DodoCase. Their shipping information is tied directly into FedEx’s system, so they can provide you with a real time quote.

By having clients choose what shipping options they want, they determine how much they pay for shipping. You are taking the blame for the increase in price off of your shoulders, and putting it squarely on your shipping company.

The downside to this approach is that too many shipping options sometimes confuse clients and reduce your conversion rate. Simple is better, but if you have one specific product like DodoCase this can work.

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However, some companies have trouble estimating the full shipping costs for each product until they are out. Take Mannequin Madness. This business shipping might seem still life, but they have over 10 different drop shipping companies they work with in addition to their own factory.

Therefore, they do not have the luxury of charging a flat fee. Their items are big and bulky, and spread out across multiple manufacturers.

Their customers understand that their products are expensive to ship, and a shipping calculator is included to make it easy for the customer to determine the price..

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Flat fee ecommerce companies might want to use the Shopify app Refund Retriever to reduce their expenses even more. This app connects to your Shopify site, and protects your customers and you from mistakes from the big shipping companies.

For example, sometimes shippers include extra charges or make mistakes with the shipping dates and delivery. When that happens, Refund Retriever works on your behalf to get you that money back.

They do not charge you upfront for this, but ask for a percentage of the refund back every month. However, can you imagine the great credibility you could get for sending a client a check for their shipping refund?

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Option 3: Offer a flat rate shipping. I discussed above how real time shipping can be confusing when too many options are presented. If free shipping is out, then flat rate shipping is your next best option.

Before you offer flat rate shipping, do your homework. This works best when you can calculate your exact costs for shipping a product.

Take LeatherHead Sports. They include the cost of shipping with their product. Since most of their products shipping go by weight, they know exactly how to price it per item.

For instanced, their line of leather baseball glove all weigh the same amount. Therefore, their line of gloves all have the cost of shipping included in the price of the glove.

They do not even put shipping prices on their website. Why confuse customers when you can include the shipping in the price of the glove?

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If you do charge for shipping then look at simple model like Dollar Shave Club. They do not charge shipping for their 4x and Executive level blades. Therefore, their product proposition is that you get 4 or 6 stainless steel blades along with free shipping.

Their humble twin blade costs $2 for shipping and handling. Simple and easy to understand.

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Even more impressive is that flat rate shipping can add additional revenue to your shopping cart.

Jim Novo, who was the Vice President of Product and Marketing at the Home Shopping Network (HSN) in the 1990’s, talks about how flat rate shipping was a huge boon to HSN, because customers knew that “it doesn’t cost any more” in shipping to add more products.

This same philosophy he argues works today with most ecommerce stores. When you have a flat rate, customers are not concerned with their bill getting out of hand.

You can also increase prices to meet some of these extra shipping costs, and then have the flat fee fill out the rest of the costs. Study your average margins and shipping costs to test how well this works.

Conclusion

Does shipping throw your entire pricing model off?

You are not alone. Shipping products can be a daunting task for any ecommerce business. That is why it is so important for you to make sure you understand your costs when shipping goods to customers.

You therefore optimize the value you provide to your customers and yourself. Discover the easiest way to set up your shopping cart to avoid shopping cart abandonment and fulfilling your customers needs.

If you experienced the troubles I discussed in this article let me how I can help? Better yet, were my recommendations in this article helpful? Comment below what challenges you had with shipping products through your ecommerce store.