How to Start an Ecommerce Business in Australia in 2024

How to Choose the Right Shipping Strategy for Your Online Store

The next step after sales is shipping. It plays a fundamental part in any ecommerce business. What you charge your customers for shipping may affect your conversion rates and the profitability of your business. So it’s crucial to ensure that you have an appropriate shipping strategy for your business.

Before going over shipping strategies, let’s begin with understanding the factors that influence shipping costs.

Factors influencing shipping costs

The following are some of the factors that influence shipping costs.

Weight and size of products

The weight and size of the products could influence the shipping costs. A heavier package but smaller in size may or may not cost you more than a lighter but larger package. However, it all depends on the carrier you choose. Weighing each product you sell will help you get a good sense of total shipping costs and enable you to pass accurate prices to your customers. This will reduce bounce rates significantly and help you build valuable relationships with your customers.

The weight and size of a package will influence the cost of shipping.

Packaging materials

Different products need different kinds of packaging. Some fragile products may need extra padding to prevent damage during shipping. Such custom packaging materials can also influence the shipping costs. Some common types of packaging materials include plastic, wood crates, paperboard boxes, plastic boxes, and durable glass packaging. Packaging materials vary in size and weight, which helps explain the differences in shipping costs.

Time and resources required

Shipping products to your customers requires time and resources, which could increase your costs. Either you will have to deliver products to your preferred carrier or have them picked up. Additionally, you will need to create labels, place products in the boxes, and seal them. You will also need someone to manage this work.

Total distance from the destination

Distance is also a vital factor that affects shipping costs. The further away from the destination, the higher the shipping price. Establishing your warehouses close to your target audience’s location might significantly reduce the shipping price.

Delivery speed

How fast you want your products to reach your customers could also influence the shipping price. Same-day delivery or overnight delivery methods are expensive. Established ecommerce companies, such as Amazon, are set up to handle the costs associated with fast dispatch and delivery. It can be more difficult and costly for emerging or smaller businesses to operate at the same speed.

Shipping surcharges

A shipping surcharge is an additional fee added to your shipping cost by the carrier. It involves miscellaneous expenses, such as weekend shipping charges, handling fees, area-specific charges for hard-to-access areas, and fuel surcharges. All of these factors could also result in increased shipping fees.

Customers expect their orders to arrive quickly but they still do not expect to pay more than $7 extra for expedited shipping.

Set the right goals

Now that you know the factors influencing shipping costs, it’s time for you to determine what you want to achieve with your shipping strategy. Here are some of the goals you might want to consider:

  • Increase conversions by offering shipping prices that work for you and your business.
  • Increase sales by offering free shipping on certain high-profit products.
  • Decrease costs by identifying alternate shipping services.
  • Improve your operational efficiency by reevaluating and making improvements along the way.
  • Expand your target audience by shipping to new demographics.

In order to choose the right shipping strategy, you have assess your goals for your business. Is decreasing costs more important to you than increasing conversion?

Choose the best shipping strategy for your business

To help you choose the ideal shipping strategy for your ecommerce business, we’ve explained the three most common shipping strategies.

Let’s dive in!

Free shipping

Free shipping is popular among shoppers because it offers the convenience of purchasing an item online and paying the same amount they would pay in store. It acts as an incentive for customers to buy goods and services, which leads to an increase in sales conversions and revenue. According to a survey of 3,000 customers conducted by Forbes, nearly 84% of respondents made a purchase because of free shipping, and 30% of respondents said they increased the size of their orders to qualify for free shipping.

This shipping strategy could work for you if you’re selling lightweight products with low shipping costs or high-end products with a high profit margin. For generic or heavy products, this strategy can be more difficult to execute.

A pro tip would be to test this shipping model with limited product categories initially to understand if it might be a suitable strategy for your business.

All customers want free shipping. In order to determine your free shipping minimum, consider your AOV, MOV, average shipping costs and gross profit margin.

Flat rate shipping

Another popular option for ecommerce businesses is to offer flat-rate shipping. In this method, you provide a flat rate for every package or multiple flat rates depending on weight and order total. Flat-rate shipping allows you to state the full price upfront. This helps reduce the cart abandonment rates when faced with higher shipping fees.

This particular shipping strategy could be an attractive option if you have a limited product range and you’re selling items of standard size and weight. However, you'll have to do some initial work to determine your average shipping cost to ensure you don’t overcharge or undercharge your customers.

A pro tip would be to offer flat-rate shipping for purchases over a set amount. This will leave room to cover any variability in shipping fees.

Variable-rate shipping

With this type of shipping strategy, you pass your shipping costs on to your customers. That means, when shipping heavy and bulky items with higher shipping costs, your customers pay what it’ll cost you to deliver their order. This saves your business from fluctuating delivery costs that eat into your profit margin.

Shipping prices are influenced by what customers purchase, how quickly they need the product, and how far they are from the destination. A customer who needs their parcel before a specific date may choose to pay extra for expedited shipping, while another customer may be happy to wait longer for their item to save money.

A pro tip is to use a shipping aggregator to collect quotes from different carriers for each purchase and integrate this into your checkout process. This way, you can communicate the delivery price to your customers upfront during checkout, which may help reduce cart abandonment rates.

How to ship with Dropshipzone

According to Forbes, 77% of customers have abandoned a purchase altogether due to unsatisfactory shipping options. It’s one of the biggest reasons that customers abandon their shopping carts.

77% of survey respondents reported that they have abandoned a purchase due to unsatisfactory shipping options.

For this reason, Dropshipzone offers three different shipping strategies for your online store.

  • Free shipping for smaller and lightweight items sold through Dropshipzone (dimensions or weight)
  • Metro free shipping for bulky items sold through Dropshipzone (dimensions or weight)
  • As a retailer using Dropshipzone, you can also opt to turn on the shipping calculator through Sofortig to calculate shipping costs for individual customers based on their location and the dimensions or weight of the product. With variable-rate shipping, you pass the shipping costs on to your customers, so you don’t wear the cost, and clearly communicate prices upfront during checkout.

Establishing the right shipping strategy for your ecommerce store is crucial. An effective shipping strategy is about balancing the needs of your customers and your business. Before setting up a shipping strategy for your online store, you should determine the best possible way to ship the products and identify the shipping costs for each product.

This will take time, so be patient. Also, be ready to shift the tactics and reevaluate your strategy as you learn more about your customers.

Australian consumers prioritise quality shipping so establishing the right shipping strategy for your ecommerce store is crucial.

Check out our FAQs to find answers to your most frequently asked questions related to shipping with Dropshipzone.


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