Shipping strategies: How to choose the right one for small business

Having fantastic products and marketing isn’t enough to guarantee your business’s success — you must also adopt the right shipping strategies to deliver those products to your customers’ doorsteps affordably, safely, and quickly.

Small business shipping

Shipping for small businesses comes with unique challenges. As a small business owner, you’re in charge of not only creating and marketing your products but also figuring out how to ship orders on time, every time — or risk losing revenue and frustrating valuable customers.

When it comes to small business shipping options, your goal should be to meet shoppers with:

• Streamlined e-commerce experiences: You want to make it as easy as possible for customers to understand and choose their shipping options for a quick checkout.
• Affordable prices: Don’t lose shoppers at the last second because of high shipping costs. Offer them cost-effective shipping rates to ensure they complete their purchases.
• User-friendly shipping software: Make it simple for your business and your shoppers to manage, track, and complete shipping transactions with transparency and minimal fuss.

To help you address and overcome these challenges, read on for e-commerce shipping tips for small businesses.

Understanding your shipping costs

Let’s calculate e-commerce shipping costs for small businesses so you can prepare your budget. Some standard components of shipping expenses include:

• Postage: The fee carriers charge to deliver your package.
• Packaging: This includes boxes, filler materials, tape, and labels.
• Handling: Labor and administrative expenses for order processing and packaging.

Assessing these expenses will allow you to develop a cost-effective shipping strategy that neither undercuts your profits nor overcharges your customers. Regularly tracking and analyzing these numbers can also help you find opportunities to reduce shipping costs and streamline processes.

Keep in mind that the expenses outlined here can vary depending on your shipping method and priorities. For example, if you opt for eco-friendly shipping, you might incur higher packaging costs. But affordable packaging for small businesses may use thinner packing materials, raising the risk of damage.

Learn more about best practices for shipping.

Competitive shipping analysis

Curious how to determine your pricing strategy and discover shipping options for small businesses? One way is to conduct a competitive analysis. By benchmarking your shipping strategies against your competitors’, you can pinpoint areas to streamline or enhance your offerings.

Not sure how to start? Take these steps to conduct a competitive shipping analysis:

• Identify your biggest competitors — those in your industry offering similar products.
• Download industry reports for the latest shipping strategies, trends, and benchmarks.
• Analyze common pricing strategies, carriers, and shipping methods among your competitors. What are the most popular options in your industry? Are there any notable trends, such as free shipping or eco-friendly shipping?
• Conduct a SWOT analysis of competitors’ small business shipping strategies to identify their strengths, weaknesses, opportunities for improvement, and growth impediments.
• Identify gaps in the market that your business can fill. For example, are customers seeking lower shipping rates that your competitors can’t provide? Can you adjust your shipping strategies to address this pain point?
• Explore shipping rate comparison tools to see real-time rates among common shipping carriers like UPS, the United States Postal Service, and FedEx.
• Monitor competitor websites and customer feedback on a regular basis to gather insights into their shipping policies and performance, and then optimize your strategies accordingly.

Customer expectations and preferences

Do your customers prefer cheap yet slow shipping or pricey and fast shipping? Along with conducting competitor analysis, knowing customer expectations can shape your shipping strategies.

For instance, many customers consider the following factors when weighing their shipping options:

• Cost: Shoppers now prioritize cost over speed, with 90% willing to wait longer for deliveries if they can avoid high costs — and the same percentage of shoppers will abandon their carts when faced with high shipping costs.¹ More than 80% of shoppers will also add more items to their orders to quality for free shipping.²
• Speed: Another survey found that many customers look for fast shipping options and are willing to pay the price — 55% will pay for same-day delivery and 45% for next-day delivery.²
• Tracking: Almost half of shoppers say the ability to track deliveries impacts how they choose an e-commerce store.³
• Sustainability: More than a third of shoppers are willing to incur additional costs for sustainable shipping.¹

Tiered pricing strategies

So, how should you set your pricing? Consider tiered pricing strategies, which adjust shipping charges based on:

• Order value: Higher spending can qualify for reduced or free shipping, which encourages larger purchases (for example, “Spend $50 and get free shipping”).
• Weight: Costs scale with the package weight. While this can be a fair approach, it requires clear communication to avoid customer confusion (for instance, “Shipping rates start at $5 for packages under 5 pounds”).
• Location: Variable rates apply for different delivery zones. This ensures that costs are covered for longer or more complex delivery routes (for example, “Free domestic shipping; international shipping starts at $15”).

How to offer free shipping

Small businesses might also consider offering free shipping, especially since this is a priority for many shoppers. The challenge lies in how to offer free shipping without losing money.

These strategies can help protect your bottom line:

• Calculate your free shipping threshold: This is the lowest order value at which you can offer free shipping. Your free shipping threshold = (average shipping cost/gross profit margin) + average order value.
• Increase product prices: You may need to hike up your prices to absorb the cost of offering free shipping.
• Make it exclusive: Try offering free shipping just for first-time customers, loyal customers, or customers within a certain radius of your location.
• Negotiate with shipping carriers: Work with your partners to see if they offer deals or incentives for free shipping, such as with bulk orders.

What is flat rate shipping?

Flat rate shipping is another popular option for small businesses. This pricing strategy involves charging a fixed cost for shipping regardless of a product’s weight, dimensions, or destination. Instead, the rate is based on the size of a standard package, such as a box or an envelope.

You might consider flat rate shipping costs if you want to simplify your shipping payments or ship products of different weights and sizes — as long as they fit in a standard package. Flat rate shipping can also be helpful if you’re looking to set predictable rates for budget forecasting.

Should you offer international shipping?

You might offer international shipping strategies if you want to reach global e-commerce audiences and expand your customer base. But there are pros and cons to international shipping for small businesses.

Pros:

• Expanded reach: Go beyond your local or domestic demographics and market to customers across the world, building brand awareness.
• Increased revenue: Accept orders worldwide by tapping into a much larger pool of customers.
• Stay competitive: Edge out competitors who may not have reached global audiences yet.

Cons:

• Higher costs: Offering international shipping can increase your expenses and impact your bottom line. International shipping costs can also come with added fees, such as for taxes, customs, and security clearances.
• Longer delivery times: Set customer expectations up front about international delivery speeds, including exchanges and returns.
• Complex processes: You may have to meet certain customs regulations and compliance standards to securely and efficiently deliver packages across the globe. You may also have to navigate currency exchange rates, language barriers, and various shipping carriers local to different countries.

Ultimately, you might consider offering international shipping if the resulting revenue will outweigh the costs of adopting this strategy, and you can find a trustworthy shipping carrier to deliver packages reliably and on time.

Shipping discounts and negotiations

Shipping costs are never set in stone. Remember, you can negotiate with carriers to reduce prices and optimize your rates. You can then pass on these savings to customers or boost your profits.

Use these tips to negotiate rates effectively:

• Leverage competitors: Research the average shipping strategies and rate of your competitors, and then ask your carrier to match or beat these costs.
• Explore bulk shipping discounts: See if your carrier offers deals or discounts for businesses with high shipping quantities and frequent orders.
• Strike long-term deals: Offer commitment and loyalty in exchange for lower rates.
• Consider the season: Ask if your carrier runs promotions for high-volume seasons like the holidays or summer months.

Shipping software and tools

There are plenty of shipping tools and platforms that business owners can use to streamline their operations. Small business shipping software, for example, can automate processes like label creation and rate comparison, saving valuable time, reducing human error, and uncovering better deals.

Some popular options of shipping software for small businesses include:

• Shippo: Offers discounted rates and easy-to-use interfaces.
• EasyShip: Provides customizable shipping solutions.
• PayPal Shipping software: Manage your shipments easily with tracking emails, branded packing slips, and discounted rates.

Make sure you choose the right shipping strategy for your business

Shipping isn’t just an added perk for shoppers anymore. In a world driven by e-commerce, shipping strategies and prices can make or break your bottom line and have a major impact on customer satisfaction. That’s why it’s crucial to know your options and leverage these best practices to research, plan, and fine-tune your shipping costs.

If your customers prioritize cost over speed, for instance, find a way to offer free shipping. If you’re looking to simplify costs and you offer products of uniform sizes, try setting a flat rate. Or if sustainability is a major value-add in your industry, consider upping your rates to include eco-friendly packaging options.

Even as your business continues to grow, remember to regularly monitor customer preferences, competitor rates, and potential carriers to ensure you stay on track with the right shipping strategies and solutions for your needs.

Want more shipping best practices that’ll help you reduce abandoned carts and delight your customers? Check out these PayPal shipping articles.