While eCommerce merchants may not have to worry about leasing retail space or unexpected maintenance issues like their brick-and-mortar counterparts, they do have plenty of their own unique hurdles.
Among the most challenging of these is deciding on which type of shipping to offer their customers. There’s more than a few options including no cost, table-rate, real-time rates, and flat-rate. And that’s not even the full list!
In this article we’ll discuss the advantages and disadvantages of the last item in that list: flat-rate shipping. Read on to learn if flat-rate shipping is the right option for your online store.
The Basics of Flat-Rate Shipping
Online retailers who use flat-rate shipping charge every customer the same amount for shipping, regardless of what the shopper orders. Flat-rate shipping is an attractive option for e-retailers who cannot afford to offer free shipping. It’s also less complicated than calculating the various shipping costs for orders of different sizes and weights.
Calculating flat-rate shipping requires a good bit of research. You’ll need to take a look at the average cost of shipping for previous orders to determine the best rate for your company. With this data, you can make sure you’re not undercharging (which can hurt your profit margins) or overcharging (which can discourage shoppers from completing an order).
To be confident about the rate you choose, track what happens when you charge different amounts. You should also see if it makes sense to calculate the rate based on order totals or weight ranges.
While offering flat-rate shipping will sometimes mean charging less than what you pay to ship larger orders, you’ll make up the difference on smaller shipments. As long as you’ve properly calculated the best rate for your business, shipping costs will begin to balance out.
The Pros of Flat-Rate Shipping
Shoppers know the total price of their order before checkout. Nearly 70% of shopping carts are abandoned. And a full quarter of the shoppers who abandoned their carts cited “unexpected shipping costs” as the reason. But with flat rate shipping, there’s no sticker shock when the shopper lands on the checkout page.
It’s an enticing benefit to use in your marketing. “Free Shipping” is a major motivator for shoppers, which is why it’s featured so heavily in online marketing. Unfortunately, offering free shipping is simply not an option for every brand. The good news is that ads promoting “$5 Shipping on All Orders” are still effective. Knowing there won’t be any unpleasant surprises can motivate undecided shoppers to visit your site and start looking around.
Flat-rate shipping encourages shoppers to spend more. If a consumer knows that, regardless of how many items they order, their shipping costs will stay the same, they’ll feel comfortable adding more items to their cart. After GNC switched to a $3.99 flat rate shipping fee, the retailer learned that its customers spent more when they knew the shipping costs upfront.
The Cons of Flat-Rate Shipping
Flat-rate shipping may not be profitable if you sell products that vary greatly in size and weight. If you offer items that are of a similar size and weight — for example, clothing or jewelry — flat-rate shipping is a good option. However, if your products run the gamut in size and weight — such as appliances — you may not benefit from flat-rate shipping. You’ll end up charging the same amount for shipping a toaster as you do for shipping a refrigerator.
Customers won’t want to place an order if the shipping costs are nearly equal to the cost of their purchase. If a shopper is interested in only making a small purchase, they may be discouraged if the cost to ship is almost the same price as their order. This is potentially a pro, however, if you’re looking to deter tiny orders.
Calculating the right rate requires more research and planning than other methods. Making sure you choose the rate that is best for both you and your customers means performing months of testing and a lot of trial and error. And if you don’t have the resources to do this kind of data analysis, offering tiered shipping rates that are based only on the individual order amount may be your better option.
Flat-rate shipping might be just what you need to make your online store even more profitable. Or it might be the exact opposite of what you need. If you consider each of the pros and cons above, you’ll be able to better determine if offering this shipping method will benefit your business.
This post was contributed by Callie Hinman, Content Marketer & Writer at ShipStation, a leading provider of shipping software for ecommerce fulfillment.