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Have you ever shopped online?
Well, unless you’re practicing some kind of internet detox, your answer is probably yes.
If that’s the case you’re definitely familiar with shipping costs and how you can take your time shopping and enjoying the process, but at the end of that beautiful experience be faced with a hefty additional cost of shipping.
It’s no secret that shipping costs can be a dealbreaker for customers, influencing their purchasing decisions, satisfaction, and long-term loyalty to a brand. In fact, one research shows that 48% of online shoppers abandon their carts due to shipping costs.
But what exactly is driving these costs up, and how do they affect the way businesses attract and keep customers? Let's dive in.
In order to fully grasp the impact of shipping costs, it’s crucial to understand what causes them to rise.
These shipping costs that seem to get higher and higher are driven by factors such as fuel prices and labor shortages, which are putting pressure on businesses to find a balance between customer expectations and operational efficiency.
Unfortunately, most of these reasons are outside the retailer’s control. However, understanding these elements can help businesses plan their strategies even better and learn how to manage customer expectations.
And the first on our list is fuel prices. It’s not surprising that this is one of the biggest factors influencing shipping costs.
Fluctuations in the price of gasoline or diesel can have a huge impact on transportation costs, whether a business is shipping locally or internationally.
And with recent global events like supply chain disruptions and changes in things like oil production, fuel prices are extremely unpredictable. All of these factors make it almost impossible for companies to lock in fixed prices on shipping.
Major shipping carriers often add surcharges based on fuel, package dimensions, or even delivery zones. These costs are offered to businesses, who then have to decide whether to take care of these costs or charge their customers instead.
As a customer, you might face this when ordering something during peak seasons, because that’s when carriers may add extra fees to deal with higher volumes of shipments.
The logistics industry, just like lots of other industries nowadays, is facing labor shortages, especially among truck drivers and warehouse workers. These shortages drive up wages, which in turn raises the cost of shipping.
Often besides high salaries employees expect to be given benefits and receive a real paystub that clearly states their wages and bonuses. All this makes it harder for companies to find and hire suitable candidates.
These and many other factors like packaging prices or customs fees can easily influence shipping costs, and the sad thing is that most of the time it’s outside of the company’s control, and small businesses have no other choice but to charge the customer for the extra fees.
But enough about the causes of those rising prices, let’s go into more detail about how it actually affects customer acquisition and retention rates.
Now that we know what drives shipping costs, it's important to understand how these rising expenses affect the way businesses attract new customers and keep existing ones.
Here are four key ways that shipping costs influence customer acquisition and retention:
There’s no denying that shipping costs can have a direct influence on whether a customer decides to complete a purchase or abandon their cart.
Customers often expect affordable or, in a perfect scenario, free shipping, especially for purchases over a certain price point. If a customer gets to the checkout page only to be hit with unexpected shipping fees, they might reconsider their purchase altogether.
E-commerce stores deal with this in two different ways.
First is setting up a certain threshold, like “Free Shipping on Orders Over $50.” This is usually a good way to encourage customers to spend more, but it can also force the business to cover the shipping costs.
The second way is offering free shipping only to those customers who sign up and become members of their shop. This is a good way to gather email addresses, send promotional messages, and encourage repeat purchases. But again it has the same side effect as the first option.
For small businesses, this can be a pretty tough challenge. They might have a resource allocation problem and therefore will not have the budget to offer free or discounted shipping on every order, meaning they have to carefully weigh their pricing and shipping options to avoid losing customers at the last stage of the shopping journey.
Shipping costs and speed are directly related to customer satisfaction levels. Fast and reliable shipping is one of the top factors customers consider when evaluating their online shopping experience.
When shipping takes too long or costs too much, how likely are you to shop from the same store?
Probably not very likely, right?
But on the other hand, if the shipping is cheaper and doesn’t take a long time, the customer is more likely to be impressed and buy from you again.
So, shipping delays, hidden “surprise costs” or even worse items damaged during transportation can all negatively affect a customer's satisfaction.
The majority of companies that fail to meet such delivery expectations will often find themselves in situations where they’ll be facing lots of customer complaints or refund requests, both of which can damage their reputation, have a negative impact on the ecommerce funnels, and decrease the likelihood of repeat purchases.
But we’ll discuss that a bit later.
As a business, the only thing you can do is make sure that this last bit of the shopping experience does not drive the customers away from you, but the opposite, makes them come back for more.
Failing to do so, will cause high customer churn rates and will lead your customers straight to your competitors. If this happens it might be a good idea to conduct proper competitor and market research and identify the strategies that your competitors use.
This process can be simplified by using automation tools and leveraging datacenter proxies to gather data from multiple sources and regions without being detected.
We’ve already touched upon the idea of customers buying again from the same business and increasing the number of repeat purchases. Now at the base of it all, lies the idea of customer loyalty.
Customer loyalty is not easy to achieve, and it’s the same for any type of business. With so many different options available in the market, you must give your customers at least a couple of reasons to come back.
And the truth is, it’s not just about the quality of the service or products that you provide, it’s often about everything else that comes along with it. It can be the customer service, the brand messaging, the user experience on your website, and the quality of your professional video production showcasing your products.
These are the reasons why businesses invest in proper branding and marketing, and even hire nearshore developers who have the necessary experience and skills to help them provide the perfect e-commerce website.
Now for e-commerce stores, besides all of these factors, what matters is, of course, the shipping and delivery of your products.
Brands that offer fast, reliable, and reasonably priced shipping tend to see higher rates of repeat customers. If the customer buys from you once and is satisfied with the quality of your products along with the shipping experience, it’s obvious that they are way more likely to buy from you again.
It is not surprising that many businesses took this logic and made an even better business decision - they started using subscription models.
To make it a bit clearer let’s take a look at Amazon’s approach. Amazon created a subscription plan called Amazon Prime the main advantage of which is free and fast shipping.
Now thanks to this strategy, people are more likely to keep buying things from Amazon, because not only do they get free shipping but they also have access to things like same-day delivery.
Yes, technically it’s not free, because they still have to pay a monthly fee, but capitalism, right?
Shipping costs can also play a role regarding return policies and refunds.
A customer’s willingness and readiness to return items are easily influenced by the cost and ease of the return process.
You might be thinking why would anyone want to encourage customers to return products?
Well, the simplest explanation is that when shopping online there are no guarantees that what you order will end up being what you expected. The chances of an item being the wrong size or color, or not corresponding to what it seemed like online are pretty high.
So, in short, due to all these small issues, there will be a handful of people who will want to return an item or exchange it. And by not making this process easy you’re risking having frustrated customers who might potentially discourage future purchases from your store.
It’s crucial to set some guidelines and policies concerning the refund processes and add them to your website. It might even be a good idea to use a software localization tool that will translate the contents of your website to make sure people from around the world understand how those policies work.
An even worse scenario is when the company makes a mistake and ships the wrong item or a defective one. In this case also, the return process should be extremely simple and free, because the business is to blame, not the customer. Not to mention that the customer must be compensated and receive a full refund.
When it comes to refunds and returns it’s also crucial to communicate with the customer in a proper way and make them feel heard and understood. This is why it’s crucial to hire the perfect customer support specialist, so make sure to recruit candidates who not only have good communication skills and experience but also use the predictive index cognitive assessment to guarantee they’re a good fit.
So, free and easy returns, while expensive for businesses, can encourage customer trust and increase the likelihood of a repeat purchase. However, keep in mind that offering free returns can be risky for the business, particularly if they experience high return rates in industries like fashion, where sizing issues are common.
Each e-commerce business must consider all available options thoroughly and choose return and refund policies that don’t harm the business too much but also don’t result in an army of angry customers.
The challenges of the shipping industry are quite omnipresent and very valid. However, one thing you can do to streamline your shopping capabilities and improve the customers' experience with your delivery is to use reliable shipping software like ShipSaving. By using this all-in-one shipping software you can get discounts of up to 89% off shipping rates, and easily integrate it with your store’s platform.
Shipping costs are a crucial factor when it comes to customer acquisition and retention, there is no denying that. From influencing purchase decisions to shaping customer satisfaction and loyalty, shipping plays an important role in the overall customer experience.
The complexities of the shipping industry make it quite challenging for businesses to offer competitive shipping options without letting it eat into their profits. However, companies that manage to strike the right balance and offer affordable and efficient shipping will be in a better position to attract new customers and keep existing ones coming back.
At the end of the day, consumers value convenience, and shipping is a big part of that, so make sure to do your best to offer this convenience and maintain your competitive edge.
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