Wednesday, June 22, 2011

Strategies for Online Retailers to Deal with Free Shipping

There are a number of good strategies to deal with the free shipping war going on right now in the online retail space. The bad news is there is no FedEx "Free" option that companies like Amazon know about, while you are stuck shipping FedEx Ground. The key is to manage your shipping costs while also packaging those costs in the right way to your customers so they can see the holistic value of your products and not make purchasing decisions based on just on the perception that the shipping is free.

- Free Shipping for a minimum purchase or on certain products: A key to being able to offer low cost or free shipping is to have enough margin built into your product to cover those costs. Knowing your margins and shipping costs can help you develop the right model to know the points in which your margins can support covering shipping costs.

- Flat Rate Shipping Options: For many online retailers, the shipping costs for their customer orders will be very different order to order. This is the result of weight, size, and destination being different depending on the product mix. With some analysis from your order fulfillment operation you can determine your average shipping costs and charge based on the average. Displaying shipping costs earlier in the check out process reduces cart abandonment and a flat rate shipping cost can make this easier.

- Shipping Clubs and Optional Upgrades: Many online retailers offer a service that for a one time fee you can receive free or upgraded service - see Amazon Prime or Shoprunner. Or consider on top of a flat rate price, the option to upgrade from Ground to Second Day Air for a small up charge.


Twitter: @kennethkowal