How to Make Free Shipping Profitable: The Ultimate Guide

Offering free and fast shipping is a must for any seller wanting to get ahead of the pack, but it's not really free for you and can creep into your margins. We have created THE ultimate guide to profitable free shipping. Keep reading to learn every known and proven way you can offer free shipping profitably.
1. Structured Negotiation with Multiple Carriers

Shipping costs are easily the biggest component of your fulfillment prices, worse if you happen to sell big bulky items. But the problem is, every year the carriers increase their rates while you have to keep prices low to stay competitive. Giants like Amazon can afford to subsidize their deliveries but what are you to do as a small businessman?

Well, a lot.

With Amazon itself getting into the freight and shipping business, other carriers like UPS and FedEx are doing all they can to retain their customers. For these carriers, every bit of business is important. This presents you with the perfect opportunity to pull up your socks and put on your negotiation cap.

The key is shopping around and negotiating with your carrier account manager (if you have one). Chances are you’ll get a better deal if you can convince carriers that you are a reliable source of repeat business. First, you’ll have to gather what your business’ shipping needs are and then you formulate a formal Request for Proposal (RFP). This RFP document will help carriers assess your needs and tailor a deal for you. It’s easier to distribute this document across multiple carriers rather than setting up one-on-one discussions with everyone too early in the negotiation. For more details, Logiwa does an excellent job of explaining how to go about it.

There’s a merit to being well prepared for your negotiation. Be sure to really understand what sort of shipping profile your business have, ranging from:

  • Breakdown of shipping speeds you need historically
  • Different sizes of packages needed and their dimensional weights
  • Percentage of residential vs. commercial deliveries
  • How often errors and corrections like address changes and incorrect weights occur

Having a clear sense of what your business really needs helps you avoid paying for features you don’t really need in your deal with the carrier and makes sure you negotiate for the items that you use the most. Pulse commerce also has a great in-depth article on how you can negotiate better rates using shipping data and analytics.

Pros

Taking the time to assess your needs and building an RFP will pay off because it comes with a few benefits:

  • It becomes easier to negotiate with multiple carriers at once
  • The RFP can be repurposed to negotiate with suppliers, warehouses and software solutions

Cons

Negotiating a contract seems like a solid way to lower your shipping costs but there are a few things that you should keep in mind:

  • You get locked-in with the carrier. This might mean you lose out on any short-term discounts other or new providers give out.
  • Your shipping needs may change. If you change your SKU assortment, you might no longer be able to ship at the negotiated rates for new sizes and weights.
  • If the carrier is sloppy with your deliveries, even if you get reimbursed, few unhappy customers can really drive your business into the ground.
2. Convince Suppliers to Use Your Shipping Account
You might be leaving money on the table if you use your shipping account for only outbound shipments. Most sellers get inbound inventory shipments from their suppliers. If you’re one of those merchants, it would be a good idea to convince your suppliers to send them using your shipping account, meaning the carrier will bill you directly for the inbound shipment. This translates to more shipping volume on your account, and if we learned anything from the first tip, the more volume you have the more bargaining power you’ll have as well. In addition, you might already hit a higher volume discount even before further negotiations.

There are third-party solutions such as Boxton which let you manage account access rights for shipping with various partners:

Pros

There are two major advantages to it:

  • It increases your sales volume so that you can negotiate better rates.
  • It also prevents suppliers from marking up transportation costs in the invoice.

Cons

However, you should exercise some caution. Your carrier account numbers are like a credit card number. Things can go wrong such as:

  • If you have multiple suppliers or change your suppliers over time, your account could end up paying for someone else.
  • It is often difficult and time-consuming to comprehensively audit your carrier invoices and claim reimbursements.
  • It is also difficult to track which service levels the suppliers are using. They may end up using a more expensive shipping method over the most practical.

A simple solution would be to set up a process through which suppliers can provide all the shipment details to you and you can provide them with the shipping label. You can email those labels directly to them so that they can print and handoff the packages to the carrier.

3. Intelligently Set Minimum Order Value

It would be best to avoid delivering low-cost items for free as their shipping costs are often higher than the cost of the item itself, leaving only so much margin. Setting a minimum order value in your shopping cart helps you generate enough margin to recover some of the shipping cost. One study has revealed that about half of the shoppers will add additional items to their shopping cart just to qualify for free shipping, making a great case for setting a minimum order value for free delivery.

However, be mindful that there’s a fine line between setting a minimum order value that will increase total sales and one that will drive away the customers. There are different ways to test what that right amount is. Don’t set a limit too far away from your average order value. It should be just enough for customers to add a couple more items at most.

The following is a simple model developed by a data analytics company, RJ metrics:

Source: RJ metrics

To learn more about calculating your minimum order value, check out this guide by Shipgooder.

Pros

The advantages of having a minimum order value are:

  • You don’t lose all your profit margin by spending it away on shipping cost.
  • Your average cart size goes up, meaning on average your customer spends more every time she buys from your store.

Cons

There are a few things you should keep in mind while using this approach:

  • There’s a chance of your core customer base abandoning you for a better alternative and not coming back.
  • If you are in growth mode, subsidizing shipping may be the only way to get your products out there and create a great track record of customer service. And hence, setting a minimum order value may not be in your best interest at this early stage.
4. Use Trade or Group Association Discounts

Trade organizations such as the American Bar Association or the Outdoor Industry Association are not just good for their annual conferences and shows, but they also offer a lot more advantages to their members. One of them is working together to help businesses reach scale when buying goods and services.

Shipping carriers often have relationships with many professional associations and offer member discounts. Depending on the size of the organization, you could be eligible for discounted rates of up to 50 percent with UPS and FedEx.

While UPS does not advertise the associations they offer discounts to, don’t hold back from asking your account manager or your association, whether you qualify.

Source: https://www.ups.com/us/en/services/consumer-services/organizations.page

Pros

The advantages building a relationship with carrier through a professional association are:

  • You don’t have to build a separate relationship with the carrier to get the discounts and other benefits
  • The carrier will be able to provide the same discounts to you at trade shows organized by your association

Cons

But there are a couple of things to keep in mind while doing this:

  • You may not stay on as a member of the organization forever. Building a direct relationship may be a possible alternative for a long-term solution.
  • Savings from the member shipping discount may be less than the cost of membership. However, you might receive other intangible benefits from associations such as the network and learning opportunities.
5. Maximize Ground Shipping Usage

Free shipping is a great motivator for shoppers even if it means getting the delivery a little later in some cases. According to a 2017 survey by Bizrate Insights, 9 out of 10 shoppers are willing to wait longer for a free shipment. Hence, using the cheaper option of ground shipping may be your best bet.

Similar to tip #3 which aims to add enough margins in a shopping cart to make free shipping viable, an alternative is to provide free shipping but at a slower speed. Consider offering a no rush delivery option for your customers who are willing to wait for free shipping. Ground shipping uses trucks to ship around the country rather than air cargo, therefore reducing the carrier’s costs and giving you better margins.

Here are some possible options for ground shipping from different carriers:

FedEx Ground: Offers delivery to commercial destinations with the certainty of delivery on a pre-informed day. They deliver within typical business hours and the delivery duration is between a day to five days.

FedEx Home: This is like FedEx ground, but with deliveries to residential addresses. It is slightly more expensive and has a wider window of delivery between 9 am and 8 pm. The delivery duration is between a day to five days.

UPS Ground: UPS ground shipping is a ground delivery service with a guarantee of delivery on a specific date similar to FedEx.

USPS Parcel Post: The delivery duration, in the case of USPS, is between two to eight days. It is even less expensive than UPS and FedEx ground but takes 2 to 3 days longer.

To help you decide which carrier to go with, check out this price comparison by Shipping Easy on the 2019 rates for ground shipping by different carriers:

Source: Shipping Easy

Pros

In the end, using ground shipping for your fulfillment has its benefits:

  • Compared to a 2-day guaranteed delivery service, ground shipping saves sellers more than 50% in shipping cost.
  • A slower shipment using ground shipping makes sense for products that do not fall under the ‘instant gratification’ category, in which delivery speed is very important.
  • Ground shipping is the greener choice for the environment because truck and lorry deliveries produce up to 85% less emissions compared to air cargo.

Cons

Ground shipping is not the ideal method for delivery though. If you stick to ground shipping, be ready to deal with the following issues:

  • Buyers increasingly opt for the faster shipping method due to the norms set by marketplaces such as Amazon Prime
  • If your items are perishable, they might not be able to survive the long journeys in a truck across the country.
  • There could be delays due to unexpected stoppages and detours caused by weather conditions or accidents, affecting your customer experience.
Episode 2

Part 2 – Pricing Strategies

Pricing is one of the most determining factors of a customer’s buying decision. While customers naturally gravitate towards the lowest price, this expectation is now the norm thanks to marketplaces placing a high importance on low final prices (which includes the list price and shipping cost). If you look at any product page in Amazon, very likely the seller who has the buybox also has the cheapest offer. This price expectation puts pressure on sellers to set a “just right” price that is both low but enough to provide free shipping. Shipping charge is an important component of online product pricing.
6. Include Shipping Costs in Product Prices

Remember the last time you were irritated about hidden resort fees during hotel checkout? Or that mysterious additional tax you didn’t know about when traveling to a new city? Similarly, customers perceive a surprise when you charge shipping separately to an item sold on your page which might lead to cart abandonment.

However, the shipping cost is an inseparable part of selling online. There should be no reason to treat this cost separately. What if you included the shipping cost in the price of the item?

Imagine having to pick between these two options for something you’re about to buy:

  • Option 1: $30 + $5 shipping charge
  • Option 2: $35 with free shipping

Bill D’Alessandro, of Rebel CEO, a consulting firm, ran this very test for a skincare product and option two converts twice as many sales. Several other studies  have shown that customers are more likely to abandon the shopping cart when they see the shipping charge right at the end during check out.

How do you distribute shipping costs to individual item prices? One approach is to change the pricing of items below your free shipping threshold to include a portion of expected shipping cost.

Say a merchant offers free shipping for orders of $50 or more and on average shipping cost is $5. For a $25 item, add 50 percent ($25/$50) of the shipping cost to the item price. For a $10 item, add 20 percent ($10/$50) of the shipping cost to the item price.

If shipping cost on average is $5, the $25 item would now be offered at $27.5. The $10 item now has a price of $11. You still offer free shipping, but you’ll recoup a portion of the costs. Customers may prefer to pay $11 with free shipping versus $10 with $1 shipping.

Pros

The advantages of including shipping costs in the product price are:

  • The rate of cart abandonment goes down as there is more transparency from search to checkout.
  • Your marketplace stands out with the tag of free shipping against other stores irrespective of the prices they are offering

Cons

There are other factors that you might want to keep in mind before using this method.

  • Landing customers on your page can become tougher with slightly higher prices; there is a potential to offset any advantage gained by removing shipping charges at the end of checkout.
  • If the customer initiates a return, you need to refund the listed price including a part of the shipping cost baked into it.
  • Customers buying multiple quantities would prefer a separate shipping charge on the whole purchase than higher prices.
7. Offer Free Shipping on Select Items Only

It is tough to offer free shipping for your entire SKU catalog when you sell everything under the sun big or small. But you can thoughtfully select which items to offer with free shipping.

It is often the items with low-margins, heavy-weight, and big-size that suffer losses from shipping costs. This should not stop you from providing your customer with free shipping on other items where the shipping cost is not a big chunk of the product price.

The key is communicating it effectively to the customer, being clear and upfront about such restrictions will help customers navigate your page easily and with trust. Here’s an example that Neil Patel demonstrates in this blog:

Source: https://neilpatel.com/blog/make-free-shipping-profitable/

He goes on to show how there is a marked improvement in net profits with this experiment despite a reduction in margin per SKU. You can gain more profits because of the increase in sales and a positive margin per order.

Pros

Offering free shipping to a limited selection of SKUs has its benefits, such as:

  • Offering free shipping increases your sales volume, effectively negating any decrease in margin per single item.
  • Free shipping as a way to recruit new customers, there will be upsell-opportunities when satisfied customers come back to your store.

Cons

However, keep in mind these few things while implementing this strategy:

  • Free shipping on select items works best when you have at least one high-selling item with a low shipping cost.
  • Promoting free shipping on one item may signal the customer that you specialize in that item only.
8. Enable Free Shipping on Large Orders

Setting minimum order value increases your margin so that you can recover your shipping costs. But the strategy does not work for everyone. If you have a limited variety of items, the customer may end up abandoning the purchase because they cannot find anything relevant to them.

Quoting a minimum order value forces customer to find the item priced at a certain amount. It is easier to nudge the customers with a prompt that says, “free shipping when you buy 3 or more”.

It works in case of items that are consumables that customers regularly buy, like personal care or household items. For these products, customers are used to expecting savings when buying in bulk or large packs. The end goal is similar to minimum order value in that the merchant can increase average order value and ship the items together to decrease the shipping costs.

Source: https://www.cpcstrategy.com/blog/2017/06/amazon-promotions-for-sellers/

Pros

The advantages of bulk/quantity based free shipping method are:

  • It’s easier for customers to add one more item of a product they already want to buy and will need to repurchase in the future.
  • Packing multiple items is also time and cost-effective.

Cons

A possible hindrance to something like this would be:

  • It is mostly applicable only to marketplaces which sell items customers regularly repurchase over time.
  • It will not be profitable for items that cannot be shipped together to reduce packaging and shipping cost.
9. Introduce Flat Rate Shipping Charge

If for some reasons, it is still not possible to bake shipping costs into your product prices, there is still a way to manage customer expectations. Customer will have less anxiety and surprises if they know the shipping charge they will need to pay irrespective of what they buy. They are more likely to find an item they want and complete the purchase.

Online customers are faced with a lot of options and must take into account many factors while deciding on a purchase. Therefore, making one factor very clear and straightforward will make the customer’s shopping experience that much easier. Customers respect the transparency from a merchant in a crowded marketplace.

You should consider your average margin per unit and average shipping cost to calculate the flat rate to achieve positive profits. Here’s one online seller advertising flat rate shipping very effectively, “We don’t want our customers to experience sticker shock when they see the shipping rates at our store. Also, we want to make our online shopping experience straightforward and having a $10 Flat Rate Shipping charge lets customers quickly calculate their costs. That can’t be a bad thing, right?”

Source: https://www.giftbasketsfrommichigan.com/blog/gift-baskets/everyday-10-flat-rate-shipping

Pros

Some of the advantages of flat rate shipping are:

  • Sales increase as the customers will increase their average order value to make the most of the flat rate
  • The shipping options on the product page are much easier to configure

Cons

However, you should be careful about a couple of things:

  • Flat rate shipping is not suitable for low margin items, depending on the flat rate you charge, such margin might not be enough when customers only order a single item during check out.
  • It is also not profitable for items that have high shipping costs such as ones with bigger size, are heavy or need special packaging.
10. Adopt a Dynamic Shipping Charge

While the last tip focuses on providing a clear expectation of shipping costs via a flat fee, it is possible that customers may find other sellers offering the same items cheaper. In some cases, if your fulfillment center is close to where the customers reside, you might be able to charge a lower shipping cost than average.

Sellers typically apply a standard shipping fee during check out. There could be some customizations there. It could be related to the speed of delivery. Additionally, the zip codes are often used as a decider whether to offer free shipping or not. Nevertheless, there is a dollar amount imposed on the customer for shipping.

Typically sellers calculate shipping charge using the average shipping rate for all their sales, a combination of different zones, sizes, and weights. So, some customers end up paying more than they should for their shopping while some others pay less.

If your shipping charge imposed on the customer are higher than other sellers, because of the kind of item you ship (heavier, larger), your cart abandonment rate will be higher. On the other hand, offering free shipping for the customers in proximity will result in losing your margin.

With the same input of zip code, there is an opportunity to charge the customer the shipping fee tailored right at them. You can get real-time estimates of shipping rates right from your shipping solution. Connect your shipping solution right to the checkout page. This way, each of your customers will be shown a shipping charge that covers your shipping as well.

This blog by Squarespace explains one way to do it in great detail.

Source:https://support.squarespace.com/hc/en-us/articles/213022907-Carrier-calculated-shipping

Pros:

The big benefits of having this system are:

  • You can rest assured that you won’t lose money from shipping costs, no matter the location of customer or change in carrier rates.
  • A portion of your customers will be rewarded for their proximity to your fulfillment location, assuring you of their business.

Cons:

However, there are repercussions to imposing a dynamic shipping charge

  • If your fulfillment location is away from the concentration of your target customers, you will end up charging your core market more-than-average shipping cost
  • Temporary spikes in shipping rates may result in a customer lost for good, establishing your reputation for high costs.

Episode 3

Part 3 – Exploring Your Carrier Options

Carriers are one of the most important stakeholders in running an eCommerce business successfully. Although every order involves some action through your carrier, you might not be using all the services that your carrier has to offer in fulfilling those orders. Selling on online marketplaces can be exhausting, and you don’t always have the time to figure out what’s best for you.

11. Take Advantage of ‘Hybrid’ Shipping Services

Hybrid services like Surepost by UPS and Smartpost by FedEx can help you cut your costs by half if you qualify for their weight and size restrictions. Hybrid shipping services are ideal for packages weighing between 2 to 10 pounds that don’t meet the criteria for a postal flat rate shipment. Packages lighter than 2 pounds should use USPS first class shipping or Priority Flat rate box and packages heavier than 10 pounds should use Standard shipping methods. Outside of this sweet spot, the prices for hybrid services may be comparable to other service types but hybrid services will take longer to deliver.

Hybrid services are a great example of how competitors work together to increase value by working in their area of expertise. The most expensive component of shipping is the last-mile delivery. The ground distribution network, especially in residential areas, has never been a strong suit of large national carriers such as UPS and FedEx. Instead, UPS and FedEx inject these packages into the USPS distribution for last-mile delivery, effectively outsourcing the final delivery stretch. This collaboration saves a lot of fulfillment costs for them, making it possible to charge less.

An example would be FedEx SmartPost, which provides the last mile delivery to every US address using USPS services. Although, recently FedEx has started to use its own trucks to do even the last mile as it tries to fill it’s unused capacity as a result of its recent infrastructure expansion.

Source: https://www.fedex.com/en-us/shipping/fedex-smartpost.html

UPS also offers the same service for domestic and international orders through Mail Innovations and UPS Surepost. Here is a visual explanation of their Mail Innovations process.

Source: https://www.upsmailinnovations.com/services/index.html

Pros

The advantages of using a hybrid shipping service are:

  • Enjoy the long-distance speed of private carriers and last-mile efficiency of USPS, saving you up to 50% in cost.
  • No surcharges for residential deliveries or special territories

Cons

However, there are some things you might want to keep in mind while going for hybrid deliveries:

  • Slower than standard shipping and it lacks a guaranteed delivery date.
  • Availability is limited. Due to hybrid’s lower margins compared to standard shipping, carriers only offer this service to select merchants
12. Consider a Regional Carrier or Regional Rates

Some carrier services operate in specific regions only, they are often less expensive compared to FedEx or UPS because they operate in a smaller area and use mainly ground transportation for delivery. Their delivery networks are typically limited, but many of them cover wide ranges of states and fast deliveries as well, some of the prime examples of such carriers are:

Source: https://www.shipware.com/regional-carrier-options-mcm-sept-2012/

Regionals carriers typically provide better services than national carriers because they specialize and operate in a smaller area. They can provide same day or next day delivery options for deliveries that usually take a couple of days through FedEx and UPS.

They are more flexible in accommodating the requests of sellers too. Since they have a smaller base of customers and fewer packages to handle, it is not uncommon for them to provide later pickup time and earlier deliveries.

Pros

The advantages of going with a regional shipper are:

  • You can save about 10% to 40% on your shipping costs compared to UPS and FedEx.
  • Options for same-day or next-day delivery are greater when compared to the national carriers.
  • The service windows are more flexible with earlier pick-ups and later deliveries when compared to the national carriers.

Cons

There is always a risk of partnering with regional carriers due to their relative inexperience and size

  • The consistency of service over a longer period of time may vary depending on the maturity and financial state of the often-smaller regional carrier
  • The services are only available in a geographically bound area. You will have to use national carriers or other regional carriers for different areas, adding complexity to your fulfillment.
  • You might lose out on volume-based discounts with FedEx or UPS. Carefully analyze the impact on discounts before diverting some of your deliveries to a regional carrier from national carriers.
13. Support Local Courier Services Like Postmates, Uber, Instacart, Etc.

Local courier services such as Postmates and Instacart offer instant delivery from select stores to customers in exchange for a delivery fee. Though the end customer does not always get free shipping, customers are used to paying extra for instant delivery through these couriers. Some also provide a subscription service offering free deliveries, which can help relieve the customer’s anxiety of paying for shipping.

Courier services generally have three stakeholders: the businesses who are listed to sell their product in an area, the drivers who deliver the product, and the consumers who order the product. Businesses pay a portion of their total order value to the courier service as a fee for listing and delivering their product instantly (usually less than an hour). Fortunately, this fee is typically much less than the conventional shipping cost for same-day delivery.

Courier services enable an “on-demand economy” where customers seek instant gratification from the convenience of their home. It has grown beyond food ordering & ride-hailing and now anything available locally can be ordered on demand.

One study shows 41% of the adult population had used one of these apps in 2017, and it is a great way for a seller to increase their online footprint. It makes a great case for adopting instant courier delivery for your store, especially for eCommerce sellers catering to urban customers with a fulfillment center in the area.

Pros

The major advantages of using an on-demand courier service are:

  • It is the fastest way to deliver products to your customers.
  • The delivery costs are split between the customer and the local business, reducing the burden of shipping costs.

Cons

  • A seller must be available to pack and ship the order throughout the day for the hours listed on the app.
  • The delivery experience for the customer may be erratic due to the on-demand workforce compared to standard delivery service by carriers
14. Use Online Shipping by Carriers

Online shipping is an easy alternative for sellers who are new to eCommerce and haven’t reached the volume to qualify for negotiated rates or discounted 3PL services yet. You can print your shipping labels online instead of at the post office counter and enjoy reduced rates. It can be done via USPS’ website or through authorized USPS postage services like Endicia claims savings of up to 40% on USPS orders, whereas Stamps.com can save you up to 30% on priority mails. Online shipping with USPS also saves you from carrying all your packages to the post office with its free parcel pickup service.

Source: https://www.usps.com/ship/online-shipping.htm

Using USPS is ideal only if you are shipping packages weighing less than two pounds. For heavier packages, it’s less expensive to go with the private carriers (FedEx and UPS). For private carriers, it’s best to open an account online rather than shipping them through the physical counters. These carriers reward the Do-it-yourself mentality! If you pay & print labels online and drop them off at the carrier store, you can save up to 50% compared to doing all of this directly at the carrier’s store.

Pros

There are a host of advantages when you buy shipping online:

  • Online shipping makes it easier for merchants to compare and select the right service for the desired delivery window and affordability.
  • If you go with USPS, you can have your package picked-up directly from your location for free — no more trips to the post office.
  • Easily add extra instructions such as ‘signature required’ or other services such as redirecting the package while on its route right from your own computer.
  • Email notifications, so you have updates sent to you instead of checking tracking numbers one by one on their website. This way, you can update customers on delivery status quickly.

Cons

Online shipping is a great starting tool. But there are a few things to worry about as you scale:

  • It can be time-consuming to do it yourself manually as you grow and send more packages. You may need to explore more sophisticated solutions like multi-carrier shipping software and 3PLs.
  • Express and guaranteed deliveries over long distances will still be expensive, so you will need to explore other ways to reduce those costs.
15. Avoiding Residential Addresses Surcharge

UPS and FedEx, the biggest national carriers, add a surcharge for all shipments to residential addresses. Carriers’ definition residential addresses aren’t always clear, but you can reduce some of your costs by planning around residential surcharges.

UPS defines a residential delivery as delivery to a location that is a home, including a business operating out of a home.

FedEx also adopts a similar definition of the residential addresses, to be completely sure you can enter addresses in your account to check their status. FedEx provides a helpful example list of addresses here.

Source: https://www.fedex.com/en-us/shipping/home-delivery.html#ResidentialInformation

You can find the complete list of surcharges for FedEx and UPS on their site here.

Carriers impose a residential fee surcharge because, to them, it is more expensive to deliver. A courier can deliver many packages to different businesses in a single trip to a commercial building, whereas typically a courier makes one delivery to a single residential address. It is this discrepancy that made carriers charge a residential surcharge.

It’s important to choose the right shipping method to avoid surcharges. For example, FedEx Ground is cheaper than FedEx Home Delivery, but when shipped to residential addresses will incur a surcharge of $4. However, FedEx Home Delivery is 35 cents cheaper compared to FedEx Ground+Surcharge. Imagine, with 2000 incorrect labels per month, you’d be missing out on ~$700 worth of savings!

So how do you go around it? One way is to utilize the services such as UPS Surepost and FedEx SmartPost as outlined above to eliminate your residential surcharge. However, keep in mind hybrid services do not give you a guaranteed delivery day and take longer.

Also, analyzing your past shipments will help you understand how much residential surcharges have you been paying so you can take action accordingly. The surcharges may not seem like much, but when shipping high-volume packages and utilizing the wrong network, they can add up quickly and can accumulate many lost dollars.

The solution is to separate your deliveries for home and commercial addresses and select delivery methods accordingly. While we can’t force the customers to only ship to a commercial address, you can make it easier by asking the customer to identify in the address type if it is a commercial or residential address. Lastly, there are intelligent shipping software solutions like Cahoot that provide address identification and verification besides buying and printing your labels to help you ship as inexpensively as possible.

Pros

The advantage of doing this is:

  • You save some per order but can amount to sizable savings on your total volume.
  • You can use address type of customer to personalize messaging for your targeted advertisements.

Cons

However, doing this does bring in a hassle.

  • In the absence of a good shipping software doing it for you, you will end up spending a lot of time correcting and sorting addresses for a large volume.
  • Each carrier has their own identification for an address being either commercial or residential, and when comparing service types across carriers, this can be inconsistent.

Choosing the right carrier strategy is important in keeping costs low but still provide good service. Cahoot’s shipping software and network automates this process and provides you the most affordable options for the desired level of service every time.

episode 4

Part 4 – Marketing Strategies

Innovative marketing is essential for any online seller to stand out in today’s world of fierce competition. In the headphones category on Amazon, for example, there were seven new products from two new brands added to the top 100 list every day last year.

Free shipping can be leveraged as an excellent tool in clever marketing campaigns by treating shipping cost as a customer acquisition expense. This part of the ultimate guide will focus on using promotions ed around free shipping to acquire new customers while preserving your long-term profits.

16. Offer Free Shipping with Loyalty Programs

Loyalty programs are customer memberships offered by retailers in exchange for various perks, including free shipping. The customer is charged a fee or must collect points against regular orders to enjoy the perks of the membership. It is designed to encourage repeat purchase, enabling retailers to absorb the shipping costs.

Some big retailers offer the membership to customers solely in exchange for their basic personal details such as email account, name, address, gender, and birthday. Retailers use this information to encourage more purchases through targeted marketing efforts. They leverage  customers’ purchase history and demographics to send special offers and personalized catalogs.

The increase of purchase frequency from a loyalty program is reflected in the customer lifetime value (CLV), which is the basis for most loyalty programs. CLV refers to the dollar amount that a customer is worth to you between their first and last purchase with your business. It is easy to calculate with a formula:

CLV = (Average order value) x (Average gross margin) x (Average Number of transaction per customer over a year) x (Average lifespan of a customer in years)     +     (Loyalty program fee per year) x (Average lifespan of a customer in years)

For a loyalty program to be successful, CLV should increase when compared to CLV without the loyalty program. Let’s walk through an example. Before loyalty programs, your average order value was $50, Average gross margin was 20%, the average number of transactions per customer over a year 8, and customers only stay for 1 year. We assume customer lifespan on your store to be a year. Then,

CLV=$50 x 20% x 8 x 1 + 0 = $80

Now suppose you offer free shipping for a yearly fee of $50, you see a few changes in your metrics. Your gross margin goes down to 10% because of $5 assumed shipping expense per order, but the customers are likely to stay with you for twice as long (that is two years). In this case,

CLV = $50 x 10% x 8 x 2 + $50 x 2 = $80 + $100 = $180

Since there is an increase in CLV despite a decrease in gross margin, the loyalty program worked in this case. And this estimate has not accounted for increased purchase frequency from customers wanting to take more advantage fo the free shipping.

Even if you don’t charge a monthly fee, the point system is a good alternative. The points-based system encourages customers to keep shopping and take advantage of free shipping. Also, it can be designed to ensure there is enough additional margin to make up for shipping costs. Another driver of sales is the tailored offers and product catalogs, as mentioned previously.

Loyalty programs, in some cases such as supermarket cards, end up being a discount program without getting any more loyalty from the customer. Customers get membership cards from all supermarkets they visit and continue with similar order value with an added discount. Therefore, it is necessary to design loyalty programs to increase your profitability and reward increased spending.

A few good examples of membership programs designed around free shipping would be Instacart, Shipt, and Newegg Premier. Instacart and Shipt’s annual memberships provides free grocery deliveries for orders $35 and above at $99 per year, which basically encourages a monthly shopping behavior from its members (per delivery fee is ~$8). Newegg’s $49.99 annual membership provides free shipping and returns, which also incentivizes customers to purchase from Newegg frequently to make it worth their while.

Source: https://signup.shipt.com/choose-plan

Someone who does it well is Sephora. If you look at the Sephora Beauty Insider program, it rewards dedicated beauty shoppers with more than discounts and free shipping; it has early access to products, exclusive events, access to like-minded beauty enthusiasts, and other extra frills. Customers are encouraged to buy more and stay on to reap the benefits tailored right for them.

Source: https://www.sephora.com/about-beauty-insider

Another unique membership program is Shoprunner, which partners with high-end luxury retailers to provide free 2 day shipping for its members. The membership is currently free for customers, potentially charging the retailers for the express delivery service.

Source: https://www.shoprunner.com/enroll/mastercard

Pros:

The advantages of this strategy are:

  • Sellers can offer ‘free shipping’ while recovering the shipping costs from customers at the same time.
  • Customer data acquired through loyalty programs can be used to drive other marketing campaigns and to design future products.
  • Customer behavior data can help you improve your user experience by conducting different experiments on the same customers.

Cons:

A few things to keep in mind while offering loyalty programs:

  • Sellers should be wary of customers using loopholes to extract the maximum value against their membership, such as multiple people using one account.
  • The success of loyalty programs is difficult to assess over a short period, given the need for customer longevity.
17. Offer Free Shipping for a Limited Time Window

If you’re not yet set to offer free shipping all the time, free shipping for a limited time serves as a great marketing tool in many cases. The purpose of providing free shipping here is to encourage additional purchase and build a relationship with the customer for future business.

Source: https://www.graciousstyle.com/blogs/chance-free-shipping-ends-february-28th/

Very simply, you need to set a target of future incremental sales from customers who have used the free shipping promotion. The margins from incremental sales should cover the costs of shipping during the offer and help you assess the success of your campaign. Additionally, just acquiring more customers could increase brand awareness, which will attract new prospects organically in the future.

If you have a high engagement rate on your web store but low conversion rate, that means customers need a nudge to complete the checkout. Offering a limited-time free shipping offer will excite the prospective buyers and turn window shoppers into paying customers. Temporary free shipping can be an excellent investment to boost sales during slow periods. It is essential to be careful about frequency to not habituate the customers to free shipping.

You can be creative by offering a limited time offer through different strategies:

  • Offer free shipping on next purchase to customers only after checking out. This acts as a reward for shopping with you and encourages the customer to explore your catalog for future purchases.
  • Offer customers free shipping when they share their purchases on social media or after writing a product review. Here, you are using free shipping to increase your exposure and potential sales via consumer generated content.

The broad idea is to invest in the shipping cost for a few orders to acquire more customers and get more future orders.

Source: https://www.partydelights.co.uk

Pros:

  • Limited time offers of free shipping require relatively fewer changes in fulfillment operations.
  • Free shipping promotions can be added on top of your existing discount promotions to make them more effective.

Cons:

  • Running limited time offers frequently may accustom the customers to expect free shipping all the time.
  • Free shipping promotions being so commonly available these days can get lost amongst the host of other promotions.
18. Offer Free Shipping at Peak Seasons of the Year

Free shipping is not a value creation strategy if you do not have enough sales to increase your bottom line with reduced unit margins. Therefore, offering free shipping during peak season could be a better idea. One, there is potential for more sales and two, you need to be competitive when everyone is offering some kind of promotion. Free shipping is cherry on the top of any other promotion.

Every business has a seasonality to it. Depending on your products, test out free shipping offers during different times of the year such as Christmas, Mother’s Day, Valentine’s Day, Amazon Prime Day and Back-to-School.

Source: GameStop

Third-party sellers on various marketplaces such as Amazon could also benefit from offering free shipping during their flagship sale day. Increased customer traffic on Amazon during Prime Day can work in your favor only if you can stand out. Even if you don’t offer free shipping all year round, temporarily offering free shipping could help you convert a larger share of the increased traffic to the site.

Best Buy has been offering free shipping to all customers during its peak holiday sales season. Target, on the other hand, offered expedited free shipping before Christmas on most of its items. The key was to increase sales during the peak season and get even bigger share of the pie than usual.

The objective of this strategy is to increase profits by increasing gross sales at a lower margin, but be mindful of not losing money on every sale. Customer acquisition can be a secondary goal, but the primary purpose of this shopping lift should be to increase your overall profit. It’s possible that customer spending on your site during the off-peak season might not cover the promotional free shipping losses made during the peak season, so you may have to wait until the next year for a possible pay-off. Therefore, be selective about what products you offer with free shipping.

Pros:

  • It is relatively safe to offer temporary free shipping as the increase in sales volume will guard against the downside in margins.
  • This strategy does not set unrealistic customer expectations of free shipping all year round.

Cons:

  • Running peak season promotions to acquire customers at loss may create uncertainty of pay-off if the off-peak sales are lower than anticipated.
  • It is a busy time for both carriers and sellers. The sheer volume spike can cause delays when on-time delivery is crucial (e.g. gifts shouldn’t arrive a day or two after Christmas). Make sure you’re prepared to handle fulfilling this sales jump and not disappoint your customers.
19. Offer Free Shipping on Returns Only

Online shopping prominence has made returning products much more critical in the last few years. Customers care about the ability to return the item if they are not satisfied with it almost as much as free shipping. Hence, there is an opportunity to attract customers by offering free shipping on returns as a feature of shopping with you.

There are few categories, where the customer thinks about returns even before they have made the purchase. These are the products that conventionally require a trial. Anything in the fashion category, house décor, and jewelry fit into this.

When customers shop for clothes, they cannot be 100% certain of the fit or how they would look wearing the product. The risk is higher if returns are complicated (e.g., how to print the label, how to mail them, how much will it cost to ship, etc.). This creates a lot of hesitation for the customer to buy these things online. Free returns take the fear out of monetary loss from unsatisfactory purchases. For example, kurufootwear.com, an exclusively-online footwear-store, advertises free returns explicitly.

Source: https://www.kurufootwear.com/customer-service/returns-and-exchanges.html

Free returns can become very costly for items that have high shipping costs such as a couch or television. Therefore think about what products are worth offering with free return shipping. Products that are light and small with good gross margins are good candidates as the reverse shipping costs won’t eat up all your profits. Expensive or high-end luxury products are prime examples of products that enjoy a good margin and hence excellent candidates for free return shipping.

Nevertheless, try to keep returns to a minimum by helping customers choose the right item in the first place. This can be done by having detailed product information section, multiple size charts, FAQs, and useful visualizations.

Besides making it free, make sure that the customer receives hassle-free service during the return process. This can be achieved by giving them clear instructions on the site or including a pre-paid return shipping label inside the original package itself.

Pros:

  • By offering free shipping on Returns only, not all orders will incur the cost of additional shipping expense
  • It attracts customers who are wary of shopping online altogether because of the fear of getting duped by product presentation.

Cons:

  • A free returns policy can encourage unwanted consumer behavior such as wardrobing or ordering an item without serious intent to keep it.
  • A free returns policy must be accompanied by investment in product visualization and additional product description to ensure minimum surprises to the customer.
20. Offer Free Shipping to First-Time Customers Only

Getting customers to try your products can be the biggest hurdle in growing your business. Offering free shipping could be the nudge that customers need to buy from a new seller. Such an offer makes sense for a seller who is looking to broaden its base or acquire new customers.

Source: https://www.elfcosmetics.com/promotion-details/

It is a simple but effective strategy. Many successful businesses, such as Postmates or Grubhub, have used it in the past to get the customer on board. Once the customers realizes the value of the service, they stay on to become regular paying users.

Petco.com offers a similar offer to first-time customers. They even doubled down on this strategy by providing an additional discount on first purchase and free delivery on the first repeat order. This lays out the foundation for a long-term relationship and more orders from that customer in the future.

Source: https://www.petco.com/shop/en/petcostore/s/petco-coupons-promos

An existing seller with a new product offering or a brand new online store, free shipping on the first order can get the product out into the hands of the customers. This is especially useful in consumable categories like pet food, coffee and vitamins where customers tend to order the products at routine frequency but are not sure if they are ready to commit to the product or the seller just yet. It can be considered as an online version of free sampling.

Pros:

  • A way to get new products in the hands of the customers or for a new store to gain visibility in front of customers
  • Paves the way to a long-term relationship when coupled with consumables/regularly purchased items

Cons:

  • May be vulnerable to exploitation if not executed properly (e.g. multiple fake accounts)
  • May not be enough to entice new customers depending on what competitors are offering and which season is the promotion
episode 5

Part 5 – Third-Party Logistics

Fast shipping is just as important as free shipping. Amazon has conditioned customers to expect 2-day shipping and is continuing to push one-day delivery as the norm. As a third-party seller, it can be costly and sometimes impossible to deliver on such expectation. Thankfully, several third-party logistics services help you relocate inventory to different parts of the country to fulfill customers in under two days. They provide services from inbound freight to final shipping.
21. Fulfilled by Amazon (FBA)

Fulfilled by Amazon (FBA) is a logistics service focused on products sold on Amazon marketplace by third-party sellers. FBA enables sellers to reach their customers as fast as possible through warehouses across the nation, along with Amazon’s renowned customer-obsessed service. Also, items fulfilled by FBA are eligible for Amazon Prime two-day shipping, free shipping, besides other benefits.

FBA assumes all responsibility of fulfilling an order right from storage to handling returns. Along with basic order fulfillment services, it offers 24/7 customer service, and shipping costs are included in the FBA fees.

Amazon has more than 400 fulfillment centers currently in the U.S. and uses pioneering technology in warehouse, order, and inventory management to reduce cost and increase speed and efficiency. It has continuously pushed the boundaries of fast shipping by utilizing its own last-mile delivery fleet and services.

Source: Jungle Scout

Amazon charges two types of fees, – fulfillment fees and monthly storage fees. You can find the latest pricing on this page. For products sold on Amazon, pricing is one of the cheapest for third-party fulfillment service. However, if you operate a multichannel business, the fees are nearly double to fulfill an order originating outside of Amazon.com.

Pros:

  • Most of the product fulfilled by FBA automatically qualify for Prime badge and more likely to get the buy box.
  • Service fee includes deeply discounted shipping rates and world-class customer service available 24/7/365 to your buyers.
  • Sellers gets protection in terms of their ratings and reviews on Amazon in case of unsatisfactory deliveries due to issues in fulfillment or shipping.

Cons:

  • It is expensive for fulfilling orders from other sales channels due to higher fees and lack of custom branding on the package. Walmart has even prohibited its sellers from using FBA to fulfill orders received on Walmart.com.
  • It is not suitable for heavy items as handling costs can be very high.
  • Storage costs can add up quickly; therefore, seasonal or slow-moving items can incur high charges.
  • Sellers have no control over fulfillment operations and must keep up with strict ever-changing guidelines from Amazon.
22. Traditional 3PLs

FedEx fulfillment, UPS Supply chain solution, and C.H. Robinson are some examples of 3PL providers that also provide end-to-end solutions for eCommerce businesses from inbound freight to white-glove last-mile delivery and returns management. They have an extensive network of distribution centers around the world with infrastructure to support large-scale logistics.

For example, FedEx Fulfillment uses conventional logistics infrastructure to offer 3PL solutions to brands and retailers. It combines FedEx Freight, FedEx Fulfillment, and FedEx Shipping all rolled into one to provide 2-day delivery across the nation. They offer a complete solution, including inbound freight, storage, pick-and-pack, shipping, and returns.

Traditional 3PLs offer custom pricing to customers based on volume. One can get better pricing with higher volume. All your operations are coordinated by a dedicated account manager who works directly with you. The fulfillment fees are standard depending on the size of your units and the packaging required, but you may qualify for discounted shipping rates.

Pros:

  • Discounted pricing on shipping and freight for large volumes.
  • An end-to-end solution with everything from in-bound freight to last-mile delivery.
  • Sellers can service orders originating at different marketplaces and support multi-channel sales through easy integration with popular online platforms like Magento, Shopify, and BigCommerce.
  • Some 3PL providers have extensive networks that cover even international markets
  • Support for reverse logistics from processing customer refunds to the liquidation of returned inventory

    Cons:

    • It is expensive for fulfilling orders from other sales channels due to higher fees and lack of custom branding on the package. Walmart has even prohibited its sellers from using FBA to fulfill orders received on Walmart.com.
    • It is not suitable for heavy items as handling costs can be very high.
    • Storage costs can add up quickly; therefore, seasonal or slow-moving items can incur high charges.
    • Sellers have no control over fulfillment operations and must keep up with strict ever-changing guidelines from Amazon.
    23. One-Stop Outsourced Service Partner

    Whitebox and Cpg.io are examples of outsourced third-party solutions that go beyond the scope of logistics and provide an all-inclusive solution for sellers looking to outsource their entire eCommerce operation.

    Whitebox works on top of Amazon FBA to further enhance the seller’s brand by offering product listing creation and market research. Cpg.io provides support for multiple marketplaces, including Amazon, Walmart, and eBay.

    They set up the seller account and support all the day-to-day tasks from product listing to inventory replenishment. It includes quality control, kitting, warehousing, order fulfillment, optimizing product listings, and managing reverse logistics.

    Optimization of listing includes managing stock quantities, keyword research, and product visualizations. They also help you select and run appropriate marketing campaigns for your products.

    You can optionally choose to list your products on marketplaces under their Seller account, so in essence, they become the seller of record. They act as a partner who takes care of all the operations and takes a cut in profits while you are responsible for just the availability of the product itself. You typically get paid at the end of each month after deducting their fees. They typically charge an onboarding fee and offer a la carte pricing depending on the services you require.

    Pros:

    • Their scope of services goes beyond just fulfillment; this may be an attractive choice for sellers with little or no experience or ones not looking to actively manage their eCommerce operations.
    • Products can get the ‘Prime’ badge without the hassles of managing FBA requirements directly yourself.
    • Sellers benefit from the partner’s experience and know-how in implementing best practices in listing optimization and fulfillment from the get-go.

      Cons:

      • They do not cover the freight logistics for inbound shipping, requiring you to hire another service provider for that.
      • Sellers have less freedom to implement their own ideas on marketing their products on the marketplaces.
      • Outsourcing nearly all your operations will cost you more vs. other operating models.
      24. On-Demand Warehousing

      On-demand warehousing is a relatively new concept that connects sellers with multiple warehouses and 3PLs across the country. Solutions such as Flexe, Flowspace, and Ware2Go utilize a two-sided platform model akin to Uber or Airbnb. On the supply side, warehouse operators and 3PLs list their unused space, and on the demand side, sellers can rent warehouse space and purchase fulfillment services.

      The platform takes care of all the support and additional services needed to effectively run a fulfillment operation. This includes all the typical functions such as receiving inbound shipments, storage, pick-and-pack, and outbound shipping using the right carrier; but through multiple facilities in distributed geography instead of just one.

      For Sellers, these platforms provide an order and inventory management system that allows them to manage their product catalog and aids them to distribute their inventory while keeping track of fulfillment. This includes visibility into distribution, tracking inventory levels, tracking fulfillment, and replenishments.

      For Warehouses, these platforms inspect and certify the available space and the fulfillment support provided by these firms. Through a software interface, warehouses monitor and manage the inventory sent to them via the platform.

      The advantage of using on-demand warehousing is the ability to get distributed warehousing without committing to a capacity long-term. You can change your mind about how much space you need on short notice and scale up or down as needed. It is both useful for sellers in the growth stage and sellers who have uncertain demands.

      Pros:

      • Sellers only pay for warehouse space they need without the long term commitment.
      • The storage fees may be cheaper than conventional 3PL models because warehouses on the platform mostly list their unused space.
      • Sellers get access to many more facilities than those available via a typical 3PL.

        Cons:

        • The space availability in a region is subject to the availability of warehouse providers on the platform.
        • The service level beyond a minimum standard (guaranteed by the platform) may vary depending on the warehouse provider.
        • Not always a solution for smaller sellers. Some platforms require a minimum number of orders per month.
        • Is more expensive than a traditional 3PL because both the warehouse and the platform needs to charge and make money in order to make this service available to sellers.
        25. Emerging 3PL Solutions for Sellers

        There are a few models on the market that specialize in catering to new sellers and emerging brands. They do not provide a one-stop solution but help out in costly fulfillment through services and pricing for new sellers. Let’s talk about two interesting players in the limelight: ShipBob and Deliverr.

        ShipBob offers a package of 3PL services designed for newer small businesses. Sellers can do batch-fulfillment with ShipBob in case of a seasonal offering, a crowdfunding campaign or subscriptions, and continuity programs. It is a start-up friendly fulfillment service with a minimum requirement of only 100 orders per month. It also offers standard fulfillment services including support for inbound freight, distributed warehousing and specialty kitting for private brands.

        Deliverr focuses solely on fast deliveries through a lean fulfillment network. Deliverr leases unutilized spaces from different warehouses throughout the country. Once you sign up with Deliverr, they estimate future sales geographically with their proprietary algorithm and then distribute inventory only to regions with meaningful future sales. They don’t offer other services such as freight or returns. This enables them to offer cost-effective fast shipping for orders originating at multiple marketplaces.

        Pros:

        • They enable distributed fulfillment for new sellers without large minimum volumes.
        • They are a cost-effective solution for sellers who require assistance in fast fulfillment but are adept at handling sourcing and marketing.

          Cons:

          • The quality of service provided by the underlying facility could be inconsistent since they rely on third-party infrastructure and their operational maturity.
          • They do not provide fulfillment solutions for international markets or personalized branding and unboxing experience.
          • Sellers may need to manage several other operations such as freight and returns.

          episode 6

          Part 6 – Special Carrier Services

          We have covered a variety of methods to ship, and increase profitability while doing so. However, there are some more methods to ship profitably if your online business has certain features such as concentrated sales in a region or an international customer base.

          26. Use Zone Skipping for High Volume Zones

          Zone skipping is a practice of consolidating orders and shipping them together to a destination region. From there on, the parcels can be shipped individually within the destination region. The shipping cost is often calculated by the number of regions or ‘zones’ a package travels through to reach the destination. Through zone skipping, the parcel is injected into the carrier’s network directly into the destination zone. Hence, the term Zone-Skipping.

          This is ideal for sellers with a large volume of sales within a region. If you have close to a truckload of orders from a zone every day, zone skipping is for you. Your objective should be to get your orders as close to the destination as possible, from where the shipping carrier can pick-up and deliver each package to the final destination.

          For example, if you are based out of Detroit (Zone 1) and have a considerable volume of orders coming in from southern California (Zone 8). If you ship all your orders directly, you will have to pay for high shipping rates for Zone 8. Instead, with zone skipping, you can bundle all your orders from California every couple of days and send them to Southern California by a truck. Once in California, it can be picked up by the shipping carrier and shipped within the Zone at lower rates. You end up saving big because paying for bulk transportation is far cheaper than the difference between zone 8 and zone 1 shipping rates.

          Here is a snapshot of how zone skipping saved money for two online merchants:

          Source: https://multichannelmerchant.com/operations/zone-skipping-yea-or-nay-part-ii/

          USPS Parcel Select is a great complementary service to zone skipping. Under Parcel Select, sellers are expected to drop their packages in bulk at a postal facility as close to the destination as possible. Not only, do they save on zone-skipping, but Parcel Select also offers an additional discount for dropping off large orders at once. In fact, Parcel Select is used by UPS and FedEx too as part of their hybrid shipping services, mentioned in the third-party logistics section of our guide.

          Pros:

          • Sellers can save more than 10% on their shipping costs which can be substantial for many orders
          • Zone skipping enables sellers to access additional discounts through Parcel Select.

            Cons:

            • Sellers must arrange for transportation of parcels in bulk to the destination zone.
            • It is slower than Ground Shipping if the volumes are not large enough to fill a truck in a day.
            27. Ship Directly from Overseas Using the Global Mail Program

            Sourcing from overseas can seem like a costly affair because of the obvious reasons. But there is an international mail program that makes it incredibly inexpensive to ship from some countries, including China.

            Under a program called ePacket, sellers can ship products that weigh less than 4.4 pounds for a low rate. It is governed by a century-old treaty called Universal Postal Union (UPU) between major nations wherein postal services have agreed to deliver mail coming from other countries for a fee called terminal fee. Now, this fee is based on how ‘developed’ a country is. Say Chinese postal services can charge higher for deliveries from Western countries as western countries are more developed. Vice versa, USPS can only charge very little for the post coming from China. This has made it cheaper to deliver from China to Texas, compared to New York to Texas.

            Source: https://www.productpro.io/blog/epacket-china-wins-america-loses

            Wish.com bases its whole business model on Chinese sellers using ePacket to deliver their products at extremely low prices. As a seller, you can also take advantage of this. Start with establishing a trusted supplier of quality items in China. However, it is challenging to locate a reliable supplier due to physical and cultural distance. After overcoming this hurdle, you need to think about managing returns within the country as shipping back the product will be a lot more expensive.

            It must be noted that this program has come under a lot of scrutiny under the Trump administration. The White House wants to put an end to low-cost shipping from overseas, a move widely supported among U.S. e-commerce sellers. USPS has also warned shippers that they may no longer be eligible for discounted rates if the US leaves the postal union, pending negotiations with the other members to form new bilateral and multilateral agreements. Previously negotiated rates for international shipping may be null on Oct. 1, 2019 — creating even more uncertainty for cross border e-commerce going into the peak season.

            Pros:

            • Sellers don’t have to set up a warehouse in the US if your supplier can drop ship directly at such low costs.
            • Sellers can compete with the Chinese sellers on prices in certain categories (weighing less than 4.4 pounds).

              Cons:

              • The deliveries can take up to 20 days, making it suitable for certain categories only.
              • ePacket is valid for items weighing less than 4.4 pounds.
              • Managing and reselling returns can become a complex operation.
              • This program may be short-lived and replaced with higher rates as the U.S. government renegotiates its contracts under the United Postal Union (UPU)
              28. Use International Freight Forwarders to Fulfill International Orders

              Shipping international from the US can be a costly affair. Besides, international shipping can be an operational headache too. There are several things to consider. You need enough manpower and time to manage different aspects of international shipping.

              International Freight Forwarding services carry out the logistics operations on behalf of a firm. These generally involve, as the name suggests, large orders. But with the increase in eCommerce, a lot of freight forwarding agencies offer services tailored to eCommerce sellers.

              Freight forwarders provide less-than-container load (LCL) services for eCommerce sellers. They bundle your parcels with other parcels to fill pallets and containers, which are then delivered to your destination country via the conventional freight network. At the destination, the last mile delivery is done by the local postal service in the destination country.

              This end to end process is taken care of by the freight forwarder. Sellers enjoy savings since they get freight discount for parcel shipping and have to deal with their freight forwarder only. Freight Forwarders also provide support for calculating real-time duties, taxes, and other governmental fees to present itemized final prices to customers as well as costs to sellers before the sale is made.

              In some cases, if you have a fulfillment provider like Amazon FBA in the destination country, freight forwarder ensures that your items reach the fulfillment provider’s warehouses.

              A good example of such a service is DHL eCommerce (formerly Global Mail) which provides a solution tailored for online sellers.

              Pros:

              • ·         Sellers get discounted freight rates along with simplified cross-border charges.
              • ·         Sellers maintains control over the checkout process for international customers including pricing and marketing.

                Cons:

                • It is hard to monitor and audit cross-border fees if there is no transparency from Freight Forwarder.
                • The delivery time can be incredibly long, making it unsuitable for some product categories.
                29. Selling Internationally through Full-Service Cross-Border Solutions

                While delivering domestically can be taken care of using other strategies we’ve discussed in our guide, selling and delivering to customers in other countries is a whole other ball game.

                Aside from accurately calculating shipping charges and various import fees, there are a few other things that a seller needs to do. To avoid surprises, your customer must understand your product’s pricing and the different tariffs included in the final landed cost. Additionally, having familiar payment options at checkout would reduce hesitancy, for example, allowing payment via China Union Pay, WeChat, or Alipay.

                Thankfully there are cross-border solutions such as Pitney Bowes’ BorderFree and International Checkout that provide a comprehensive solution for selling to an international customer. An end-to-end solution offering typically includes:

                1. Localization of your product content and checkout pages in locale-specific language, UI, and currency.
                2. Calculation of duties, taxes, and import fees for transparent final pricing to customers before the order is placed.
                3. Presenting and processing country-specific payment options.
                4. Efficient international order fulfillment using freight forwarders and other service providers.

                The following checkout page example of an online store that uses Borderfree shows personalization to a Chinese customer buying from a seller located in Australia.

                Pros:

                • Sellers can increase their market reach to include international customers without having to deal with all the operational complexities.
                • Sellers save on additional costs for website development that includes local payments and locale-specific content and customer service for international customers.