The True Cost of Shipping
Passing the buck to your customers may seem like a smart financial decision. But the truth is, adding even a few extra dollars to your customers’ orders also comes with a cost.
In this post, we’ll look at a few lesser-known consequences of charging customers for order shipping, and highlight a better alternative to shrink your shipping costs. Let’s get started.
How Are Shipping Costs Calculated?
The way that shipping costs are calculated is complex. Factors like package weight, delivery urgency, and distance traveled all have to be considered to determine the price. But to compensate for all of your costs, shipping insurance and handling expenses must also be factored into the total.
How Do Shipping Costs Impact Your Business?
Including all these small charges in your shipping cost can quickly nickel and dime your customers to a price they aren’t happy with. But the question is: how does that impact your bottom line? Let’s look at two important ways.
Cart Abandonment
The last thing you want is to nurture customers all the way to the checkout page and have them leave. Unfortunately, this happens all too often when retail and eCommerce businesses tack a shipping surcharge onto an order at the last minute.
In fact, Baymard Institute found that 49% of customers abandon their shopping carts because the shipping cost is too high.
That percentage is sobering. Not only because immediate revenue is lost, but because customers are less likely to come back if they have a poor experience with your brand.
Customer Loyalty
Even if your customers power through the unexpected surcharge, they won’t be happy about it. And since poor customer experiences can lead to 17% of customers churning immediately and put 59% of customers on the road to churning, this can be devastating for your business.
At the same time, it can also throw a wrench into your long-term growth strategy, as unhappy customers are more likely to spread the word about a bad experience with your business.
The Solution? Free Shipping
Unsurprisingly, to improve your customer acquisition rates and retain your customers, you need to remove shipping costs altogether. You need to offer free order delivery and make the checkout process as transparent as possible.
But going the free shipping route can bring new challenges to retail and eCommerce businesses, like:
- More expenses, particularly related to fulfillment
- Longer order cycle time
- More complex fulfillment processes
Fortunately, by partnering with a third-party logistics provider (3PL), you can effectively negotiate better shipping prices for your business. In fact, by working with Radial, you can hand off the negotiations altogether. With 30 years of experience and a strong network of carrier relationships, we have what it takes to get you the best shipping rates on the market.
