eCommerce 101: Costs of Shipping


FORRESTER CONSULTING
Clarity delivers world-class eCommerce solutions to enterprise corporations

Thinking about starting an eCommerce company? Clarity helps organizations ranging from start-ups to multi-million dollar corporations execute and operate their eCommerce strategies. Whether you need an attractive user interface on your site or logistical expertise on the ground, Clarity is here to help.

 

Now, it is increasingly common for eCommerce stores to offer free shipping promotions or other discounted shipping offers. Retailers experience shipping expenses ranging from 5% to 20% (and sometimes even more) of their net revenues. In some cases, it’s just not possible for businesses to stay afloat. There are multiple factors correlated with a company’s propensity to offer free shipping. We have listed a few hurdles that our clients face when it comes to executing their successful eCommerce strategies.

 

Product Margin

 

Clarity | offering free shipping cuts into profit marginsRetailers in highly competitive industries typically have low product margins. If you utilize a low price business model or focus on selling expensive products, your margins will be thin. In most cases, it is incredibly difficult to offer free shipping.

 

Product Weight

 

Clarity | it's costly to offer free shipping on large productsSimilar to margin, retailers with products that have larger volume, or weight, have difficulty offering free shipping. Shipping costs are driven by weight, product cube, and distance shipped. Retailers with heftier items tend to stray away from free shipping. Organizations make explicit exceptions around the heaviest or largest products wherever possible (or assessed additional shipping surcharges).

 

Fulfillment Center Locations

 

Clarity provides integration with global shipping providersDistance shipped is a pivotal factor in determining shipping costs. Factors like: location of the fulfillment/distribution center, whether a company employs drop-ship vendors, and ultimately, where packages are going all have significant impacts on the customer experience. Hub and spoke models tend to be the most effective way to operate distribution centers. However, if you are regionally based, East Coast centers tend to have high expenses when you ship nationwide.

 

Clarity specializes in shipping integration solutionsClarity helps organizations coordinate product margins, product weights, and fulfillment centers. We have a list of suggestions here on how to drive sales while maintaining margins. Feel free to take a glance, then connect with a Clarity consultant to learn how your business can benefit!