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Warehousing & Fulfillment

eCommerce Shipping: The Key to Customer Satisfaction and Bottom-Line Growth

Warehousing & Fulfillment
April 29, 2021
7 min read
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Find out how optimizing your ecommerce shipping solution for nationwide 1 to 2-day delivery can simultaneously drive top-line and bottom-line growth to create measurable outcomes for your ecommerce business.

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Customer Expectations for eCommerce Shipping

When Amazon first introduced the idea of free 2-day shipping, it felt like a luxury and quickly  drew subscribers to Amazon Prime. Fast forward to today, and 1 to 2-day delivery is now a consumer expectation for ecommerce shipping across the board, and businesses of all sizes must offer it in order to compete. In fact, consumer survey data shows that 37% of consumers expect small to mid-sized businesses to ship faster than their big box competitors.

When O2 Recovery Drink shifted their focus from retail sales to direct to consumer shipments, they realized that they had to deliver on a new promise to this new set of ecommerce customers. They relied on their flexible outsourced fulfillment partner to ensure the nationwide 2-day delivery their customers expected.

Four Common Pricing Strategies for eCommerce Shipping

The challenge for ecommerce sellers is to meet consumers’ delivery expectations without degrading their unit economics or inflating the cost of their product until they’re no longer price competitive. Ahead are five common pricing strategies for ecommerce shipping and the advantages and disadvantages of each strategy.

1. Charge a flat rate anywhere in the US at checkout:

Many ecommerce sellers will average their shipping costs across their previous orders to set an average cost per item. This is a risk-based pricing exercise designed to not alienate large existing or potential markets. For example, if you are based in the northeast, and California or Texas are large markets for your products, those customers would pay the same for shipping as as a customer right across town. 

Merchants decide to go with this strategy because they are experiencing high shopping cart abandonment rates in more lucrative markets. However, taking this route risks alienating those closer markets with shipping prices that are optimized for cross-country delivery. You also risk degrading your unit economics if demand spikes in more remote markets and causes you to over-index on long-zone shipments or overnight air. Typically, when customers see a flat rate shipping charge at checkout, they’ll go on the hunt for alternative options that offer free 2-day shipping.

2. Pass shipping costs on to customers in the form of higher prices:

Obviously free shipping is never free for the merchant. Many merchants will choose to offset their margins by increasing the cost of their product. This tactic is really only feasible for retailers with strong brand affinity and little to no competition.

3. Offer free shipping after a spend threshold:

This strategy is an interesting study in human behavior with a built-in reward mechanism. It can prompt some consumers to spend more and increase the average order value (AOV) or it can cause abandonment from new or return customers that want to buy your product but are not interested in a large purchase at that time. In the latter instance, the reward and dopamine response backfires and produces an undesirable outcome. While spend thresholds have the potential to increase AOV and improve your unit economics, it may be more prudent to focus first on converting those new customers who are just dipping the toes in the water of your brand and introduce spend thresholds later.

4. Absorb the cost of free shipping:

Using this strategy, you won’t raise the price of your product; you’ll fully absorb the cost of shipping yourself. This is the best option for most emerging brands and those in a highly competitive space. The only way to achieve this without damaging your unit economics is to lower your cost to serve by positioning your products closer to your end customers. This can be achieved by distributing your inventory across a nationwide warehouse network, targeting the areas of highest demand concentration. This enables nationwide 2-day ground coverage, eliminating the need for next-day air and costy long-zone shipments.

Learn how Ware2Go can help you offer free 2-day shipping

Ware2Go’s eCommerce Shipping Services

Ware2Go simplifies ecommerce warehousing, fulfillment, and ecommerce shipping with a fully-integrated technology platform that connects all sales channels to your fulfillment network. The platform automates processes like order management and delivery tracking and allows full visibility into inventory levels across platforms and warehouse locations.

The technology is supported by a distributed warehouse network to enable nationwide 2-day ground shipments, and all warehouses offer the same rigorous SLA’s, including same-day fulfillment and 99% on-time fulfillment rates. 

When YBell Fitness launched their BigCommerce store, they knew they needed an ecommerce shipping solution that would fully integrate with their current internal processes. Ware2Go created a custom integration that gives them a low-touch fulfillment solution. That way their team can focus on driving sales knowing that their customers’ expectations for delivery are being met.

ecommerce shipping

Advertising eCommerce Shipping Guarantees

Ultimately, 2-day shipping guarantees not only increase customer satisfaction but drive consumer demand. To realize all of the advantages of a fully optimized ecommerce shipping network it’s important to advertise shipping promises at the top of the sales funnel. Google Shopping’s Free and Fast annotations are an excellent way to advertise free 1 to 2-day shipping at the very beginning of the buyer’s journey, and Google’s data shows that these annotations increase conversion rates by up to 9%.

ecommerce shipping

You should also advertise your shipping guarantees on your homepage, in banner ads, and in paid social campaigns. If you haven’t yet established a nationwide 2-day footprint, begin growing top-line revenue in the markets where you do offer free 2-day shipping with geo-targeted ads.

How eCommerce Shipping Can Grow Your Bottom Line

Optimizing your ecommerce shipping network for free 1 to 2-day delivery can simultaneously grow top line and bottom line revenue. By strategically placing your inventory closest to your largest customer bases, you lower your overall cost to serve in your most profitable markets and increase the profitability of every shipment. 

eCommerce shipping can also drive customer satisfaction and retention, with 84% of consumers reporting that they would not return to a brand after a poor delivery experience. Studies show that acquiring new customers costs up to 25 times more than retaining existing customers, so by reducing your customer acquisition costs with 2-day delivery, you further improve your margins and ultimately your bottom line.
To learn more about how Ware2Go is helping ecommerce merchants improve drive sales and improve their bottom line, reach out to one of our ecommerce shipping experts.

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