Shipping costs are a significant part of eCommerce. Over 74% of online customers consider shipping to be essential to their purchase decisions.
Since shipping costs carry so much weight, it has become common to offer free shipping in dropshipping stores. Dropshippers often employ free shipping as a marketing tool to increase sales.
However, it is not always advisable to provide free shipping.
This article dives into the nuances of shipping for your dropshipping store and the strategies you can use. You will also understand when free shipping is a good idea and when it isn’t.
With dropshipping, you don’t ship the products to customers yourself. However, the suppliers do charge you shipping costs. Here are a few shipping strategies you can adopt for your dropshipping store.
1. Free shipping
Free shipping is the holy grail of eCommerce. Occasionally, your supplier will offer free shipping, which you can, in turn, pass on to your customers. 93% of customers are more likely to buy when you offer free shipping.
In case the supplier does not offer free shipping, you could still include it in your costs or charge it to your customers, depending on your business profits.
You can offer free shipping in these ways;
Cover shipping costs with your profits. If your products produce high profits, you can offer free shipping to customers and cover the costs with your profits.
Increase the price of the products. If you cannot cover the shipping costs, you can still charge free shipping but increase the products’ pricing to cover shipping. This strategy still works because it eliminates the shock of unexpected costs. At the same time, it doesn’t affect your profit margins.
Why you should offer free shipping
· Reduce cart abandonment
Shipping costs are the number one reason for abandoned shopping carts—sudden shipping costs cause sticker shock.
Sticker shock occurs when customers encounter drastically increased prices.
Customers often get discouraged from buying and thus abandon the cart. Offering free shipping is, therefore, one of the best ways to reduce cart abandonment rates.
· Competitors offer it
In some industries, free shipping is common. To be competitive, you must also offer free shipping. When most of your competitors do not offer free shipping, having it in your store could give you a competitive edge.
Consumers search for several stores before deciding where to buy. Free shipping is an attractive factor that could determine whether they buy from you or a competitor.
· Increase sales
Free shipping can tremendously increase sales to your dropshipping store. Customers are more motivated to buy when you offer free shipping than when you don’t.
In cases where you offer free shipping for a particular threshold, it could increase the Average order value. In this case, upsells can be very useful and help increase sales.
· Your supplier offers free shipping
Sometimes, the suppliers offer free shipping or E packet. You bear little to no shipping costs, so it makes sense to offer free shipping and reap the marketing benefits. You may only include your markup and still earn your profit.
· Increase profits
With affordable or free shipping, your products appear more buy-worthy to customers. When they purchase more, it better positions you to make higher profits.
· Increase Average Order Value
Using free shipping with order thresholds helps increase your average order value. In this case, you offer free shipping, but the customer must order goods of a given amount, e.g., orders above $50, to access it.
If your goods are affordable, this method may increase the number of products per order, thereby increasing sales.
· Enhance repeat purchases
Customers are more likely to return to your store and even spend more when you offer them free shipping. They are also more likely to share your store on social media.
Why you shouldn’t offer free shipping
Low product margins
Some products bring in low profits. In this case, it may not make financial sense to provide free shipping. Otherwise, coupled with advertising costs, your dropshipping business might end up in debt.
When it is expensive
In some cases, it may be expensive to offer free shipping. High expenses could be because of the distance. Sometimes, it could be the desired speed of shipment.
Express delivery, for instance, attracts higher shipping costs.
Similarly, shipping to other countries requires transportation by sea (which can take a long time) or air (which is very expensive).
2. Flat shipping rate
This method is where you charge a single shipping rate regardless of the weight, shape, or size of the item. You can set a flat rate for all products based on average sales and profits.
Calculate a flat rate by estimating the orders you will receive in a period. Then, add up all the supplier’s shipping fees and divide it across the number of orders. That should give you the rate you need to charge on each order to cover your shipping costs.
For example, if you are expecting 10 orders at a total cost of $12 for shipping. That would be an average of $1.2 per item in shipping costs. This means you will indicate that that flat rate shipping fee for each item is $1.2.
To keep customers informed and prevent surprise costs, indicate that any orders come with a flat shipping rate.
3. Per item shipping rates
Per item shipping rates involve different rates for different items. These rates help to cover shipping costs for larger orders and prevent losses.
Under per item shipping rates, you categorize the products into groups, each having the appropriate shipping rate.
If a customer buys items from different categories, all the shipping rates are combined at check out to give a total shipping cost.
Per item shipping rates have several advantages such as:
- You can charge accurate shipping rates on your products.
- The rates can completely offset shipping costs, thus preventing losses.
However, this strategy can get tricky when a customer orders from different categories. Your store must be transparent enough to show customers how you compute your shipping fees.
Top considerations for free shipping
Can you afford it?
You must calculate whether your business revenues and profits can support free shipping. Account for all the other costs that your business incurs. After the marketing costs, taxes, etc., does your dropshipping store make enough to offer free shipping and still be profitable?
Furthermore, consider the initial costs of the products vs. the shipping:
In one scenario, your shipping costs might be higher than the product’s cost, but you can charge a higher markup. If the profits are enough to cover shipping and advertising costs, then you may offer free shipping.
In another scenario, the shipping costs may be higher than the product’s cost, but the product attracts lower prices. If the profits are not enough to cover both the shipping and advertising expenses, free shipping will not make sense.
An example: if your goods cost about $6 and shipping costs about $12. The total costs come to $18. When you include marketing, the costs increase this figure significantly. Depending on the item’s value, it may not be profitable to offer free shipping since the price goes beyond what customers may be willing to pay.
Do you plan to use it for marketing?
Free shipping is widely used as a marketing strategy in ecommerce. If it is part of your marketing strategy, it doesn’t make sense to offer it regularly. When customers get accustomed to free shipping from your store, it may no longer work as an incentive for them to buy.
Therefore, think of your long-term strategy and what role free shipping will play. If you plan to use it to drive sales in a given period, then keep it exclusive to that period.
Pro tips for shipping in dropshipping
Offering free returns
Some products do not provide room to offer free shipping. Instead, you may consider offering free returns. It works as well since it acts as a guarantee to the customer.
Retail studies indicate that offering customers free returns helps boost sales. They also show that return policies foster customer loyalty and that customers are more likely to spend when a store offers free returns.
Furthermore, free returns cost significantly less than free shipping. If your products are of good quality, you can expect few to no returns. So, your profits are not affected, and yet you provide customers with an incentive to buy.
However, this method is limited to a few industries like apparel, where customers may occasionally need to return the items.
Order sample products
It is advisable to buy some products to get a feel of how your supplier handles shipping. You do not need to order every product, but just a few, maybe one in each category.
Observe how long it takes to process your order and ship it out. When the product arrives, analyze how the package looks– if damaged or stuffed with promotional material. See how long it takes to process your order.
These processes will help you know which suppliers will do the best shipping job and who you should work with.
The E-packet option is one of the most popular and fastest options for international shipping.
It offers low shipping costs, which you can leverage to provide free shipping to your customers. It is mostly used when shipping items from China. Unlike sea options, E packet guarantees delivery in about 30 days.
Using E packet comes with various benefits like
- Faster delivery times
- End to end tracking at no extra cost
- A cheaper option to other methods
However, it is only available in limited countries.
With the right customer support, customers may be willing to wait for their purchases for as long as they need to.
Keep close communication with the customer, offer tracking details, and regular updates. Doing so assures the customers that you are doing your best to get their package to their door.
You must be open with your customers and provide them with accurate shipping information. Setting realistic expectations will save you from tons of complaint emails and refund requests.
Therefore, even if the delivery times are long, let the customer know. You can create sections with shipping details so that the customers stay informed about shipments.
Furthermore, set more realistic delivery windows. For instance, “delivery takes 7-35 days” sounds less legit and convincing than “delivery takes 20-30 days.”
What is the best shipping strategy?
There is no clear answer. The statistics indicate that free shipping drives more sales, reduces cart abandonment, creates a competitive advantage, and increases profits in the long run. However, free shipping is not always practical.
Best practices suggest testing which shipping strategy works for your store. Do customers respond more to free shipping or conditional shipping? Which method generates the most sales and profits? Use A/B testing to find out.
On some platforms like Spotify, you cannot automate this process and you must do it manually.
Based on your customer reactions, you can offer free shipping, paid shipping, or conditional shipping.