Published on December 06, 2013 Choosing the right shipping strategy for your shopping cart
One of the main reasons that a potential buyer will abandon their shopping cart before completing checkout is that they find that the cost of shipping the item to their location is not what they expected. As a shopping cart website owner, what can you do about this?
There are no set rules about what the actual cost of delivering your products to your customers will be, but you should make sure that you understand your business’ costs before you finalise on your product pricing. Without this information you could potentially over-price or under-price your products.
What drives delivery costs?
Your actual shipping cost will depend on:
- the average size of customer orders, the frequency of those orders and the products that are ordered
- the shipping provider you use for actually sending your items and the pricing methods they use
- your physical destination relative to the pickup points for your shipping provider
- the type of shipping services that you want to offer – items with tracking or express post will cost more than untracked methods
- what kind of packaging methods that you use and the size of your packages – are they box sized items or palette sized?
- how frequently will you send packages, to what location and what size are they?
- are you buying your products in and holding them in stock and are you holding them at your home, in a shop, or in a storage facility, or is your supplier is sending them out directly to customers (drop shipping)?
- what is the weight of the package? (this will be the biggest factor)
Package weight – actual weight vs cubic weight
Shipping providers around the world charge for postage based on the weight of the package being sent, as well as it’s dimensions. For smaller packages the actual weight from the scales (“dead weight”) is used, but for larger packages, the “cubic weight” of the package is often used to determine your shipping charges. At Australia Post, the cubic weight of a package is calculated for parcels over 1kg in actual weight and compared to the weight on the scales. The largest figure is used to determine your postage cost.
What is cubic weight?
Cubic weight is an industry standard mathematical formula that works out the effective weight of a package based on its dimensions and the assumption of a standardised actual weight for the package contents – instead of what it weighs on the scales. It is used by freight companies to apply a minimum charge for the space that a package takes up in their truck, plane or container. It means that light, bulky packages pay for all of the space they use up in the freight company’s cargo. It also means that small, heavy packages are charged appropriately as well.
This kind of charging makes it more economical for freight companies to carry more packages to more destinations. This is why online shipping calculators like Australia Post’s online calculator ask for package dimensions to work out your shipping quote.
Cubic weight is arrived at by taking into account the width of a package, the length of a package, and the height of a package. It is calculated by simply multiplying the length in centimeters by the width in centimeters by the height in centimeters (the volume) by a factor of 250.
An example – to send a package that weighs 4kg on the scales from Sydney to Perth via Australia Post:
Sending in a box sized 30cm x 25cm x 16cm:
If the dimensions of the box are 30cm x 25cm x 16cm then the cubic weight of the package is (.3 x .25 x .16) x 250 = 3kg. This is smaller than the actual weight of the contents 4kg, so the 4kg contents will be used by Australia Post to calculate the weight.
In the Australia Post calculator, this results in a charge of $22.65.
Sending the same items in a much larger box sized 50cm x 25cm x 16cm:
If the dimensions of the box are 50cm x 25cm x 16cm then the cubic weight of the package is (.5 x .25 x .16) x 250 = 5kg. This is now larger than the actual weight of the contents 4kg, so the 5kg cubic weight will be used by Australia Post to calculate the weight.
In the Australia Post calculator, this results in a charge of $25.45.
Increasing the box size but without changing the contents increases the total cost of sending your item due to the fact that the cubic weight is now being used by Australia Post, so the package sizes that you use are important if you are sending parcels. You need to think about this carefully when planning your shipping strategy for your online store.
Don’t forget to check out what established competitors in the industry you are moving in to (or already compete in) charge for their products. This will give you an idea of what your end customers will expect. This is not to say that you must do the same as them, as the type of products or your costs may be different depending on the volumes that you sell and where your customers largely come from. If you are largely an exporter for example and your closest competitors sell only in Australia you will have different types of shipping costs to take in to account. If you are exporting, don’t only consider your closest competitors that you can find in Australia. Look at who is selling those or similar products in the local market.
Many online businesses forget to take into account substitute products for the items they sell. Not doing this means that you could discount potential competitors that could take market share away from your growing online store, but it also means that you may not look for potential ways that you could sell your products as substitutes to other things. When you are putting together the products and pricing strategies for your store, don’t forget to take this into account as you could find a novel or unusual use for a product that had not been thought of by anyone else. Analysing the product and shipping strategies of those businesses could put you in good stead to appeal to those customers and eventually win their business.
Marketing approach and free shipping
Your marketing approach and the competitiveness of your industry will also play a role in what shipping strategy or strategies you should use in your online store. To take away the potential for “bill shock” at checkout, you might want to offer free shipping across your entire store, or free shipping for orders over a particular amount. If you are offering free shipping for orders over a particular amount try to set this level at something that many customers will benefit from – so many customers in your store benefit from it and do not abandon their carts. Many businesses believe that the purpose of free shipping for orders over a particular amount is to merely drive more high value orders, and in many cases it will, but your primary goal should be to reduce abandon carts. So set this at a realistic level so many potential customers can reach it.
Are you offering International shipping?
Overseas buyers can widen the breadth of your sales, and if you have items that are highly sought-after can help drive considerable growth. The downside of international selling is usually issues such as language barriers, handling returns and getting the shipping right. This is where more than ever you need to understand what is driving your costs. If you are using Paypal as your payment provider you will need to ensure that you always use a tracked method of postage to prevent international buyers fraudulently claiming that your package did not turn up and obtaining a refund via PayPal – as you will not be able to prove to PayPal that you actually sent the item. The buyer will get the item and a refund leaving you doubly out of pocket.
Once you have a good understanding of your shipping costs, you can plan your shipping approach in Ozcart. Ozcart shopping carts give you a flexible shipping approach for your store, because you can set up separate shipping methods for inpidual postcodes, streets, regions, groups of customers and even groups of products. Real time and manually calculated shipping tables are also possible.
Ozcart shopping carts support the following real time shipping provider calculators:
|Trans Direct Couriers
|Australia Post Delivery Rate Calculator
|E-Go Couriers Post
|Smart Send Couriers
For even more flexibility, you can also set up a manual table of rates to set up a tier of rates based on order costs, the number of items in the order or the weight of the order. You can also allow for packaging cost by applying an extra weight allowance to the calculations by the shopping cart. For example, you can automatically add an extra 200g to the order for every kilo of actual weight.
Choosing a shipping provider
There is no one-size-fits-all solution for shipping your online products, so you should shop around to get the best deal for your business. Some shipping providers like Trans Direct, Smart Send and eGo aggregate shipping costs from a number of different providers and offer you the cheapest option for a particular package. For example, Trans Direct will quote you based on Toll, Allied Express and Couriers Please. Smart Send quotes consider Fastway, TNT, Fastway, and Couriers Please. You should shop around the different providers based on your needs.
Setting up your shopping cart for shipping
Once you have decided on your shipping strategy, setting it up in Ozcart is easy. You go into the shipping section of the cart’s admin, create a new shipping method, choose the real time option that you wish to use and the shipping method that you wish to offer (e.g., Express Post, Standard with tracking, etc.) and you can assign a handling fee to it if you wish. Repeat for as many shipping methods that you wish to offer.
Make your policy visible
Whatever policy you decide on, make it clear and easy for customers to understand. Customers will abandon your website before they even have items in the shopping cart if your shipping policy is too difficult for them to work out as this creates additional complexity and buying anxiety. Make your policy simple, clear and obvious.
Put a link to your shipping policy in a prominent place on your website, like in a like at the top of your site, in a main menu area or clear footer link.
Don’t make customers have to sign up or put items in the cart in order to understand how you charge for shipping or they may feel you have something to hide.
Linking Shipping and Payment Methods
You may wish to offer certain payment and shipping methods together. For example, for Australian customers you might want to offer bank transfer and direct credit card with Australia Post, and for international customers you might want to offer courier shipments with PayPal payments only. You can do this by linking your shipping and payment methods together in Ozcart so that if a customer chooses international shipping (because they are an international customer), then only PayPal is offered for that group.
Alternatively, you might want to offer store pickup for just VIP customers (or staff) but not to others through the website. This is also just a tick box in Ozcart – you have a lot of control over what shipping methods are offered to which customer groups and can make payment and shipping methods depend on each other.
Shipping is an important part of your online store marketing
It is worth taking the time to get the shipping strategy for your website with shopping cart right. Customers do shop around but if your shipping is too complex for your customers understand or prices your products out of the market then you will just be asking for abandoned shopping carts no matter how advanced the features of your ecommerce technology platform are.