It is essential to find the right shipping rates when you start a dropshipping business and open a dropshipping store on eCommerce platforms.
Shipping strategy involves shipping time, shipping methods, and shipping cost. Keeping shipping costs down is quite important for both your business and customers. Research your competitors and see what they are offering about shipping price strategy. Even the most loyal of customers can be tempted by potential savings on shipping, so offer something comparable or better.
The article will introduce the most commonly used and popular shipping price strategies for dropshippers. Then you can choose a shipping price that increases sales and happy customers so that you can set shipping rates for your dropshipping store.
Shipping Price Strategies
There are four strategies that you can use to handle shipping rates for your dropshipping store.
1. Free Shipping
You may feel pressure to offer free shipping for your dropshipping store. Amazon Prime has trained consumers to not see shipping as a necessary expense when shopping online.
In fact, free shipping is not free. It is simply a psychological strategy to make customers feel like they are getting a good deal and encourage customers to buy more. Many dropshippers include shipping costs in their products’ prices so there isn’t a loss in profits and still maintain positive profit margins.
So how to make free shipping a reality? For a small business, it may be difficult to offer unconditional free shipping and returns. But there are three ways that you can refer to create some opportunities for free shipping.
- Offer free shipping only during the holidays
In general, there may be a surge in sales during the months of October through December. During this season, you perhaps have high enough profit margins to accommodate the shipping costs. Offering free shipping during the holidays is also a great way to drive sales to your store, even over your competitors.
- Set a minimum shopping cart value
You can set a minimum shopping cart value so that a customer must reach the lowest amount to be eligible for free shipping. Determine the minimum order value that still allows you to make a profit. Many of the biggest online shopping marketplaces, such as Amazon, and Walmart, enforce minimum order values for customers to qualify for free shipping.
- Make shipping free for customers who subscribe to your email lists
It is also a good way to make shipping free for customers who subscribe to your email lists. Subscribers will receive emails and know about your newest products, sales, and marketing efforts. And your customers will become long-term shoppers and contribute to more sales.
2. Flat Rate Shipping
Flat Rate Shipping can be easily implemented and offer a calculated way of managing your costs. You can take the average of the shipping costs of the products you are selling on your dropshipping store to decide on your flat rates.
If you sell a wide variety of products with different sizes and weights, offer different flat rates by dividing your products into groups. Separate your products by weight or price range and add in all the associated shipping costs and calculate each group’s average.
With flat rate shipping, you will definitely pay more or less. And when you start getting steady sales, you can find popular products and adjust your shipping rates accordingly. And there are three ways to deal with your internal shipping costs, for you may pay more with flat rate shipping.
- Take the shipping cost out of your profit margin.
To know your profit margins, you need to know the following elements:
- Total Orders Received
- Average Price per Order
- Average Profit Margin
- Shipping Fees per Order
- Shipping Costs per Order
Increase the price of the product to include some of the shipping cost. Pass some of the shipping cost on to your customer as a shipping line item in the order.
For the average store that ships average-sized, normal products, the best choice is to set a flat rate shipping cost for your entire store. The “sweet spot” appears to be $5.00.
Once you know the shipping cost of your product, take $5.00 off that price and increase the price of your product by the difference.
3. Actual Shipping Cost
Passing the actual shipping cost to your customer is the simplest strategy to avoid you losing any money. If you are working with a supplier that calculates and reveals shipping costs per product, you can easily add the actual shipping cost to your dropshipping store.
However, the separate shipping cost that they must pay for each product may lead to many abandoned carts. The other big problem with the actual shipping cost is sticker shock.
In fact, the actual shipping cost to you is much more than the average person expects. Something small and lightweight like headphones with an average of about $9 to ship by FedEx.
If you pass through the entire shipping price for the order to your customers, they will think you charge too much for shipping. So be careful if you use actual shipping costs and be sure that you are monitoring your traffic to see how people are reacting to the shipping costs.
And when is the actual shipping cost OK?
There are certain scenarios that may be appropriate to use it.
①If you sell the exact same product as your competitors and you want to compete on product price, take the entire shipping price out of your advertised product price. You may have an edge in this way.
②If you sell very expensive yet lightweight, small, and easy-to-ship products, passing through the entire shipping cost to the customer may be alright. It is because the shipping price is just a small percentage of the total order.
③If you offer multiple shipping methods such as ground, 2 days, and overnight shipping and you introduce faster but more expensive shipping methods like overnight shipping, customers can generally accept the actual shipping cost.
4. Promotional or Tiered Shipping
Tiered or Promotional Shipping is a combination of all three that are introduced above. Only after you have had significant data and analytics to understand what works for each scenario you can use it.
It allows you to offer a promotion right when you know it will make the most sense for your business, such as resonate best and end in more sales. And promotional strategies like free shipping on orders over $50, or free shipping on all T-shirts for the month of January.
And if you want to set tiered shipping rates on Shopify, here is an instruction.