Optimize your dropshipping shipping strategy

How to optimize shipping costs when managing your drop shipping business

Total
3
Shares

When launching an e-commerce site, one of the most crucial elements is finding the right shipping strategy for your store. As research suggests, shipping cost can greatly influence a customer’s decision to complete a purchase. As a drop shipper however, you can only control what the customer pays, not what it will actually cost to ship the product. Working with hundreds of suppliers means a huge variety of carriers and prices so all of a sudden shipping becomes a major headache.

Instead of stressing about every penny lost or gained when choosing a shipping price, step back and remember what your main goal is for your store – sales and happy customers. This should always be forefront in your mind. You want to create a seamless, inexpensive experience for your users. While that may cost you initially, it will be worth it in the end.

So, how do you price shipping as a drop shipper? First, research your competitors and see what they are doing – you will want to offer something similar or better. Next, choose a simple and standard policy to make it easy for you and your customer. Here are the most popular strategies.

 

Free Shipping

A lot of retailers are feeling pressure to offer free shipping because so many customers expect it these days. “Free” shipping is of course not free – it is simply a psychological strategy to make customers feel like they are getting a deal. Most drop shippers include the shipping cost into their MSPRs so the customer pays for it in the end.

If you are using Shopify to run your store and sourcing from Modalyst, including the shipping cost into the MSRP is one way to pass the cost directly to the customer. Shopify does not support associating shipping costs with specific products so this is one way around that if you just want to charge what you will pay.

 

Flat Rate

This is a great strategy for Shopify / Modalyst users since it can be easily implemented and offer a calculated way of managing your costs. The best way to decide on your flat rates is to take the average of the shipping costs of the products you are selling on your store. Luckily, you can see all the shipping costs directly on Modalyst. In an excel sheet, separate your products by weight or price range and add in all the associated shipping costs. Take the average price for each group and make it your flat rate.

This is easily translated to Shopify by creating weight-based or price-based rates under your Shipping section.

With flat rate shipping, you will inevitably pay more sometimes and less other times. But if you calculate your average properly, you are likely to break even in the end. Once you start getting a steady stream of sales, you can identify the popular items and adjust your shipping rates accordingly. For example, if you are seeing dresses priced between $50-$100 are selling well, maybe you can weight your average slightly and charge more. Likewise if you are seeing sales are slow for shoes priced between $100-$200, consider offering lower shipping for that range to boost sales.

 

Charge What You Pay

The simplest formula is to pass the shipping cost to your customer. This will guarantee you do not lose any money. As long as you are working with a platform that reveals shipping costs per product, you can easily add those to your store. The challenge is when you have a customer purchasing multiple products from multiple suppliers. If you are passing along the costs per product, this will add up quickly. Remember that customers may not be aware you are a drop shipper so listing separate shipping costs may deter them and end in many abandoned carts. I would therefore be careful with this approach and make sure you are monitoring your traffic to see how people are reacting.

 

Tiered or Promotional Shipping

The last approach would be a combination of all three. I recommend this approach only after you have had significant data and analytics to understand what works. This will open opportunities to hone in on your best customers and offer a promotion right when  you know it will resonate best and end in more sales. Some examples include : Free shipping on orders over $100 or free shipping on all shoes all month. This can be communicated via pop ups or newsletters.

Shipping is an inherent challenge with the drop shipping retail model. However, keep it in perspective and remember that customer happiness is more important then torturing yourself over each and every penny lost on shipping. As long as you are calculated with your approach, you can achieve happy customers and a happy bank account.

 

What are different shipping strategies you have tried as a drop shipper? Let us know by commenting below!

 

Sign Up for Our Dropshipping Newsletter

Just enter your e-mail and get notified whenever we post our latest articles!

You May Also Like