If you run an e-commerce business, whether it's your own site or sales through channels like eBay or Amazon, you know that optimizing and minimizing shipping costs is essential.

This is because shipping is not only a logistics issue, but with the growth of online sales it has become a powerful marketing lever, able to influence sales and customer loyalty.

Setting shipping methods means deciding how to handle product shipments, choosing the best possible carrier partner, and defining the packaging to use, with the goal of keeping your customers satisfied: no complaints, positive reviews, and an increase in orders will depend on your choices!

Shipping costs

In so-called "indirect" e-commerce, i.e., the sale of goods at a distance, shipping represents a significant expense; and often not all the variables that make up the total shipping cost are properly considered. You can also make a bold marketing choice, initially accepting losses on shipping to increase customers and orders, provided you are fully aware of it... and able to negotiate with the carrier for better shipping rates as your sales increase.

What happens when shipping costs are paid by the customer?

In Europe, 56% of incomplete purchases are due to shipping costs being too high; and 70% of Italian e-commerce stores offer free shipping (2018 research commissioned by the Netcomm Consortium).

When a new customer chooses to order on your site, they select a product and add it to the cart. But at confirmation, the final price increases because of shipping costs and the risk rises that the disappointed customer will abandon the purchase.

Shipping costs are the number-one reason for cart abandonment among potential buyers

Free shipping therefore seems like the only solution for increasing the conversion rate of visitors into buyers. But what customer wouldn't want free shipping? The rise of Amazon and its Prime service has put enormous pressure on merchants. Yet free shipping is impractical for many business models, especially for those just starting out who cannot benefit from discounted carrier rates.

Shipping costs and abandoned carts

If, on the other hand, high rates were offered, you would risk losing potential customers, increasing the cart abandonment rate and losing competitiveness.
The real goal is therefore to determine the best combination of shipping rates that is still attractive to customers without eroding your profit margins too much.

The main shipping strategies you can adopt

Below we summarize the advantages and disadvantages that adopting the most common shipping methods brings to online stores that use them:

Always free shipping

Pros: attracts customers' attention; increases conversion and sales; reduces the number of abandoned carts

Cons: can reduce your profit per order; can lead to increasing product prices to partially offset these costs.

Free shipping for a limited time

Pros: in addition to the above, it allows you to leverage the persuasive scarcity mechanism based on temporary free shipping, for example during key moments of the year (Christmas, Black Friday, Valentine's Day, etc.).

Cons: the same as those indicated above for always free shipping.

Free shipping for registered users or a special group

Pros: encourages registration; increases conversion; leverages the exclusivity effect of an elite service; increases loyalty among the most active buyers; further reduces the impact of shipping costs if it is associated with a fee (e.g., Amazon Prime)

Cons: the same as those indicated above for always free shipping.

Free shipping with a minimum order value

Pros: increases the average order value and spreads shipping costs, reducing the impact on the unit cost.

Cons: can reduce your profit margins per order; can still lead to some abandoned carts.

Free shipping with the purchase of specific products

Pros: shifts customers' attention to specific products or combinations and allows sales to increase, for example to clear inventory.

Cons: basically the same as those indicated above for always free shipping.

Free shipping for prepaid payments

Pros: lets you collect payments immediately via bank transfer, credit card, or PayPal; reduces the costs of failed delivery, typically higher with cash on delivery or deferred transfer.

Cons: reduces profit per order due to commissions and still requires you to cover shipping costs.

Free shipping for customers who leave carts pending

Pros: recovers abandoned carts and increases sales

Cons: may encourage certain customers to delay purchases

Free shipping on the first order

Pros: encourages purchases from new customers and incentivizes site registration.

Cons: can reduce your profit per order.

Free shipping based on the number of units of a product

Pros: increases the average order amount; shifts customers' attention to specific products or combinations and allows sales to increase, for example to clear inventory.

Cons: basically the same as those indicated above for always free shipping.

Free shipping based on the number of products

Pros: increases the average order amount.

Cons: the same as those indicated above for always free shipping.

Free shipping for returns

Pros: attracts customers' attention; reduces resistance to completing an order and overall increases sales

Cons: increases the risk of returns for purely commercial reasons

Carrier costs paid by the buyer

Pros: the amounts charged to customers cover product shipping costs (by weight, volume, etc.); showing carrier rates signals transparency and inspires trust in the site;

Cons: can lead to an increase in the number of abandoned carts, especially if, for the same products or locations, your competitor offers more competitive rates.

Flat rates

Pros: based on the calculation of average shipping cost, it should allow you overall to break even and cover shipping costs; you can create multiple flat bands based on criteria such as packaging dimensions or the weight of certain product types.

Cons: can still lead to an increase in the number of abandoned carts, especially if, for the same products or locations, your competitor offers more competitive rates.

How to choose the best carrier?

If you can estimate the number of shipments you expect to make, you can contact carriers to agree on services and rates.

Probably choosing just one, as long as it is reliable, can significantly lower your costs, giving you access to more favorable rates.
However, testing more than one, at least initially, can help you gain experience and understand who to rely on in the long term. A first selection can be based on the quotes you request.

The main carriers operating in Italy:
BRT, SDA, Poste italiane, DHL, UPS, GLS, TNT, Nexive

Many of these also offer integrations with their management systems for bulk generation of waybills based on received orders.

Some aspects to consider when choosing a carrier:

Destination

Italian carriers such as BRT and SDA offer the best rates for domestic deliveries, while for international deliveries they may rely on international partners with higher costs than those of their competitors.

Type of goods

Certain product categories (fragile goods, very bulky items, valuables, etc.) require specialized carriers.

Additional costs

In addition to the basic shipping costs, in some cases other fees may apply, such as fuel, storage, pre-delivery phone call to the customer, cash on delivery, delivery to upper floors. Depending on the type of item you ship, you may need to plan for insured shipping. Many carriers already include insurance in the flat price.

Delivery times and order tracking

The quality of the shipping service influences the customer's experience and overall impression.
An important service to offer to reassure the customer after purchase is shipment tracking.
Providing the tracking number increases consumer trust because it lets them monitor the shipment status through every step and stay up to date in real time.

The importance of packaging

Customizing your packaging is essential to offer a pleasant purchasing experience, reduce the risk of damage during shipping, and increase the likelihood that your customers will order from you again.
In this case too, as with the carrier, it is important to rely on the right supplier.
Bubble wrap rolls, packing peanuts, polystyrene fill, padded envelopes: there are many options available!

Shipping with cash on delivery

A service that is often appreciated by your customers is the option to pay upon physical receipt of the package, with the so-called cash on delivery method.
Upon delivery of the goods, the recipient will have to pay the amount indicated on the waybill, i.e., on the transport document, according to the selected payment method (bank check payable to the sender, check payable to the carrier, or cash).

Strategies you can adopt with Open2b e-commerce software

There are multiple strategies used by online stores for shipping, and an e-commerce software like Open2b provides the features needed to set them up:

• Free shipping, always, only for certain customers and/or as a time-limited promotion
• Variable fees based on the weight of products or their number
• Variable fees based on location or country for international shipments. Usually the world is divided into macro areas: Italy (and provinces), EU Europe, non-EU Europe, Africa, Asia, etc.
• Fees divided into bands based on customer spend. This strategy allows merchants to apply free shipping only when a certain spending threshold is reached, so they can absorb the costs.

When a customer is about to complete an order, based on the strategy you adopt, they proceed by accepting the proposed shipping method or evaluating another among those available, based on cost and delivery times. In the e-commerce software used, each method will have a configurable table to define how shipping charges are calculated. If the shipping method is insured, it will also be possible to indicate the insurance fees to add to the shipping cost.
Shipping charges will therefore be calculated automatically based on the products in the cart and according to the table associated with the shipping method chosen by the customer.

To offer free shipping or a time-limited discount on shipping, you can use the Open2b shipping method promotions. They allow you to apply both percentage and fixed discounts, with or without discount coupons.

All that's left is to try the Open2b e-commerce software and choose the shipping strategies best suited to your business!