How to Develop an Effective Shipping Pricing Strategy for Your eCommerce Business - Part 1

Online shopping is growing a significant amount each year, meaning your eCommerce store now has increased access to more customers, higher revenues and the opportunity to expand your business.

In fact, in a previous blog, we discussed figures from Canada Post that found 80 percent of Canadians now make online purchases, with the number of online consumers increasing 58 percent from 2016 to 2018.

The increase in online shopping means new eCommerce businesses are constantly entering the space, making competition for customers more fierce than ever. Attracting visitors to your website is vital, but how do you ensure your shopping experience converts them?

A new study from Canada Post - titled ‘Is the price right? Designing an effective shipping pricing strategy’ - has discovered just how important your company’s shipping pricing strategy is when it comes to converting online customers.

In this blog, we have listed some of the key takeaways from the report. We look at how exactly your company can change its shipping pricing strategy to convert more customers.

Why is a shipping pricing strategy so important?

We know that shipping and your company’s order fulfilment process plays a direct role in your customer experience (CX), but how much does your shipping pricing strategy affect customer conversion?

According to Canada Post’s new whitepaper, the answer is a lot. In fact, the study found that 64 percent of shoppers abandoned their carts in the past due to “shipping costs [being] too high.”

On the flip side, 70 percent of shoppers would shop more often with a merchant if they were offered free shipping with a minimum purchase order.

It’s clear that if eCommerce store owners are to succeed, they must recognize that their shipping pricing strategy is a major driver of the success or failure of their business. This includes asking themselves questions, such as:

  • “What is the optimal minimum purchase threshold for my business?”
  • “Can I increase the shipping fee by even $1 or $2 without significantly increasing cart abandonment?”

Business owners in the eCommerce space must find data that answers these questions, and they then must use it to ensure the conversion of customers.

By understanding exactly what their customers want, eCommerce owners can adjust their delivery pricing to maximize conversions and, in turn, boost profits.

What were the key takeaways?

The report found four key takeaways. These were:

Free shipping is a table stake: Conversion rates drop by as much as 50 percent when free shipping isn’t offered.

Free shipping with minimum purchase can increase average basket size: Around 40-60 percent of shoppers are willing to top up their cart to receive free shipping.

Shipping can be used as a promotional tool to drive sales: Online shoppers wait for promotions such as free shipping before buying a product.

A shoppers’ willingness to pay for shipping is influenced by: The value of purchase; availability and accessibility of in-store pickup; and the availability of the product and the customers’ affinity to merchant or brand.

Why free shipping seems like a no brainer for your eCommerce company

Expectations around delivery costs are changing rapidly, and many consumers now expect free deliveries from the eCommerce companies they buy from. In fact, when free shipping isn’t offered conversion rates can drop by as much as 50 percent.

This doesn’t mean your business needs to completely absorb the cost. It’s possible your company can increase the price of your products, allowing you to share the cost of shipping with your customer.

Stay tuned for the second part of our blog! We will take a deeper look into the Canada Post study and how different shipping prices directly affect the conversion of online customers. If you have any questions about eCommerce shipping, please contact our team of experts today.

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