Shipping strategies optimization for shipping rate changes in 2020

The options available to adjust to the rate changes rely on what your current shipping strategy uses for pricing: free, flat-rate or calculated shipping rates. 

1. Free-shipping

  • Do nothing: if you continue offering free shipping, you’ll need to absorb the increased cost of shipping once the rate changes take effect. Before moving forward, ensure you are aware of your margins, and that you’ll remain profitable in the face of the increased costs. 
  • Increase product prices: if you raise your products’ prices to cover the increased cost of shipping, you’ll keep your margins the same. However, repeat customers may notice an increase in price, hence affecting their buying decisions.
  • Switch to free shipping minimums: a good compromise between doing and nothing and increasing product prices is to add a free shipping minimum. This is an effective way to raise your average order value, which can help offset the increased cost of shipping, and pass on the cost of shipping to your clients if their order falls below the threshold.

2. Flat-rate shipping

  • Do nothing: be prepared to absorb the increased cost of shipping when the rate changes take effect. Ensure to check the impact it has on your profit margins, and sustainability.
  • Introduce or adjust your order value ranges: your flat rates don’t have to be the same for every order. Instead, you can begin to offer a higher flat rate on small orders and lower flat rates as cart sizes go up to help offset your increased shipping costs. If you are already offering varying flat rates for shipping, you can adjust the ranges to account for the increased cost of shipping.
  • Increase product prices: if you retain your flat rate shipping price and raise your products’ prices, you can maintain your current margins. However, repeat customers will notice the price and enhance more time between repeat purchases and lower conversion rates.
  • Increase your flat rate shipping price: increasing the cost of shipping may lead to similar results as increasing your product prices, although you will likely see the impact in your abandoned cart rates. Shipping costs are one of the most common reasons for customers to abandon their carts, so to mitigate the impact you could implement or adjust your cart recovery emails.

3. Calculated shipping

  • Do nothing.: if you do nothing and utilize a calculated rates provider or app, the shipping rates displayed at checkout will automatically update to the 2020 rates. It’s important to keep in mind that shipping costs are one of the biggest factors leading to abandoned carts, so you may see a higher cart abandonment rate as shipping costs increase. If you’re using Shopify Shipping, you’ll see that your discounted shipping rates will still get passed on to the customer.
  • Decrease your product price: since your shipping rates will update automatically, you could decrease your product price to keep costs the same for your customers. If you’re considering this, it’s important to ensure that your margins are still sustainable given your new pricing strategy and that your pricing remains strategic for the rest of your business. For example, if you offer a premium product, you’ll want to ensure your prices still communicate the right message about your product’s quality.

It’s always best to prepare for any rate changes and consider applying any of the strategies above to optimize the best for your shipping.  

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