Commentary
How shipping options influence retail customer experience in e-commerce
Jake Rheude, marketing director at Red Stag Fulfillment, explains why retailers should give equal consideration to how they ship to the people that keep them in business and the pros and cons of the various options.
October 3, 2018
By Jake Rheude, marketing director, Red Stag Fulfillment
It's not the sexiest part of your customer's experience, but order fulfillment is one of the most important encounters a customer will have with your brand and your product. You put a lot of thought into everything, from the CRM to connect with influencers to the targeted ads run on Facebook, and you should give equal consideration to how you ship to the people who keep you in business.
These three types of shipping options will each lead to different outcomes and expectations with customers:
- Free shipping
- Express paid shipping
- Local pickup shipping
Let's take a deeper look at each and see what motivates a customer's preference and the effect it has on your business.
Free shipping: Slow and very cheap!
Free shipping is the game-changer in e-commerce, but it's up to you to determine the cost/benefit of factoring in free shipping to your pricing and whether swallowing the cost of shipping pays out in the long run. Let's look at the pros and cons:
Pros
- It will increase your conversion rate. Free shipping makes customers more likely to buy.
- Conditional free shipping will increase your average order value as customers add more to the cart to qualify.
- On average, customers are 10 percent happier with products they received that were shipped free.
- If planned carefully, free shipping can be profitable for you — it is slower, but it's also cheaper.
Cons
- It is SLOW. Most customers know this and are prepared to wait, but they may not be entirely realistic about how much longer it will take.
- If you don't plan it correctly, you could end up losing money.
- When you add the shipping cost into the product cost to recoup your money, it can't be subtracted from the cost if the customer wants a refund.
Let's say you've decided to offer free shipping, but you don't want to do it unconditionally. You look at the numbers and you see that your average order is around $30. If you want to increase your average order number and sales, it could make sense to offer free shipping for orders over $50. Because you're shipping all the items together instead of separately, you'll be able to bring the shipping costs down — just do your research and make sure your margins are wide enough to take a hit on the shipping.
Express shipping: Fast and not so cheap
Sometimes people just need to have something right now — or overnight. When that's the case, price clearly ceases to be the deciding factor in their decision-making process, and convenience and urgency take the front seat. But is it worth it?
Pros
- The customer is much less cost-conscious. Make sure your shipping processes are perfect, and you will make a profit.
- With that in mind, in terms of profitability, express shipping is probably your best bet.
Cons
- When the customer has a swift deadline, your primary concern is to ensure you are able to meet next-day or same-day order fulfillment deadlines 100 percent of the time.
- If you make a mistake, that refund for a late shipment will hit you where it hurts.
If you decide to offer express shipping, you need to perfect your processes. Two basic ways of doing this are to locate your inventory as close as possible to the bulk of your customers, and to have absolutely seamless integration between your e-commerce store and your inventory management software — otherwise, you're wasting precious time before an order has even been placed. Time is money, and if someone is willing to pay dearly for their time, you'll make a pretty penny as long as your deliveries aren't late!
Locker pickup or click and collect: The hybrid option
A shipping scenario that involves a hybrid style of shipping — going to a central locker, paying online and going to a brick-and-mortar location for pickup, etc. — fills an interesting niche in the customer mindset.
Pros
- Your customer may see this as more convenient, maybe because of proximity to their office, kid's school, gym, etc.
- By skipping the last-mile stage of delivery and going to a central location, they may get their package faster without paying any extra.
- In the case of click and collect, a customer might streamline his to-do list and go to a brick-and-mortar location to pick up a product purchased online as well as something he needs to buy in person.
Cons
- They may not show up. Unclaimed Amazon Locker orders are returned after three days and refunds are issued, which hurts your bottom line.
- Yet another channel to integrate.
If you decide to enable click and collect, it may be a small hassle to integrate another channel into your fulfillment operations. However, the chance for a customer to buy additional merchandise from you, and get that increase in customer satisfaction that comes with an intangible benefit like convenience, could make it more than worth it.
What sort of shipping options do you offer your customers, and which ones fare the best? I'm curious to know what works for your business.
