How to Reduce 2-Day Shipping Costs
In the ecommerce industry it’s a feeding frenzy out there—DTC and B2B retailers doing everything they can to get shoppers’ attention. While advertising, website user interface, social media, and many other factors may tip the scales when it comes to winning customers, shipping is actually one of the most crucial components that influences customer acquisition.
Today’s shoppers not only want the best products; they want them as fast as possible. Colossal companies like Amazon created this “new normal” in the ecommerce industry, and all merchants have been forced to follow or get left out in the cold. As a result, nowadays if you don’t offer the 2-Day shipping that most consumers have become accustomed to, you could miss out on valuable sales.
Even a few years ago before the Covid pandemic kicked ecommerce into high-gear, 83% of US online shoppers asserted free delivery was the most important factor when ordering online. Meanwhile 26% of online shoppers said slow shipping was the main reason behind cart abandonment and 53% of consumers cited delivery time as a determining factor when evaluating online orders.
These numbers have continually grown over the years as ecommerce sales and competition have increased. However, just because fast shipping makes customers happy, doesn’t mean it makes your bottom line happy. Offering the preferred, faster 2-Day shipping option could eat away at your profit if you support the cost entirely. Meanwhile, if you pass the total buck (literally and figuratively) on to your customers and have them float the expense, you could also lose business because they aren’t happy paying more. Over 50% of online shoppers stated they’d abandoned baskets at some point due to delivery costs.
So the question becomes: is it possible to offer 2-Day shipping at an affordable price? The answer: it is, and ShipMonk is here to show you how. In this guide discover the most important things you need to reduce 2-day shipping costs and make offering 2-Day shipping a feasible option for your ecommerce brand.
What to Consider When Offering 2-Day Shipping
In 2022 the Baymard Institute conducted a study of top reasons for ecommerce cart abandonment. In looking at the numbers, 70% of customers attributed their reasons to shipping—specifically 48% cited extra costs (shipping services, added fees, etc.) as being too high and 22% cited slow delivery times. That’s a problem for ecommerce brands. Fast shipping at an affordable price is the solution.
As you endeavor to offer 2-Day shipping, the key areas to consider that will affect your cost are as follow:
- Day and time of day that shipments are scheduled
- Location (zip code) where package is coming from
- Destination (zip code) where the package is being delivered
- Peak season carrier capacity constraints and surcharges
- Shipping carrier selected
- Shipping service selected
- Type of items shipped
- Dimensional weight of package
- Other package characteristics (fragile, hazardous, perishable, etc.)
- Fluctuating fulfillment fees and channel costs
In regards to the last item on that list, this varies depending on who does your ecommerce fulfillment (i.e. do you do it in-house, work with a reliable 3PL like ShipMonk, or outsource entirely to a 4PL or 5PL). Depending on the logistics level you utilize, the fulfillment fees you incur are the costs for processing, picking, packing, stocking, and shipping your inventory. As an example, fulfillment fees explain why it is cheaper to order a product directly from a manufacturer than an online marketplace, and cheaper to order from an online marketplace than it is from an ecommerce brand’s direct website.
Keeping 2-Day Shipping Costs Low
With all that in mind, what are the best approaches to provide customers with the shipping speed they want and the shipping costs that are acceptable to both of you? Check out these six tips for reducing 2-Day shipping costs now!
1.) Minimum Order Value
You don’t want the cost of your customers’ happiness to be your profits. A great way to protect your ecommerce brand from this fallout is by only offering 2-Day delivery if customers reach a minimum spend with your online store. Requiring customers to spend a certain amount before qualifying for 2-Day shipping increases their basket sizes, which in turn allows you to make enough money from the purchases to absorb delivery costs and protect your profit margin.
2.) Membership Plan
Even with all the money Amazon makes, they’re not giving away speedy shipping for free to every person. Only Prime members enjoy that perk. In order to offset your 2-Day delivery costs, your ecommerce brand can create its own membership model that rewards customers who sign up for accounts with the preferred 2-Day shipping option. This benefit (along with others you may offer) can entice customers to create a membership or subscription plan.
Customers who create accounts with you are more likely to purchase again (earning you back those shipping costs long-term), especially considering your ecommerce brand now has access to email information for retargeting and promotions outreach. Just make sure you’re not being too pushy or requiring customers to create an account to make a purchase in general, as 24% of customers in 2022 said a website wanting them to create an account was a top reason for cart abandonment.
3.) Zip Code Selective
One of the greatest contributors to shipping costs is the distance (number of shipping zones) ecommerce orders need to travel. By limiting your 2-Day shipping eligibility to zip codes that are close to your fulfillment centers or warehouses, you reduce the distance orders travel and thus reduce the cost shipping carriers will charge. If you work with a 3PL like ShipMonk that has many strategically-located fulfillment centers across the globe, 2-Day shipping may not be an inconvenience, but rather a natural result of being close to your customers.
4.) Leverage Multiple Locations
You may have heard the expression “Too many cooks in the kitchen.” While that saying typically has a negative connotation, the fact is a single chef on his/her own will drown in orders. The same can be said for a busy warehouse or fulfillment center. If you just have one hub that handles your ecommerce brand’s orders it could become overwhelmed, and those orders will pile up. If orders pile up, they are slower to get picked, packed, and shipped. So in order to offer 2-Day delivery in a cost-effective way, it is important that you’re not paying more to make up the time you lost in getting the products out the door.
Having multiple warehouse or fulfillment center locations allows you to split inventory—optimizing in terms of geography, order method (FIFO vs. LIFO), and general organization. ShipMonk is known to shine in this area (hence our effective 2-Day shipping options). Our various strategically-positioned, technology-driven fulfillment centers are designed to get orders out accurately and quickly, preventing pile-up and delays.
5.) Ground Shipping
This method is traditionally the least expensive way to accomplish 2-Day shipping. However, it only pays off if you have warehouses or fulfillment centers close to your customers (preferably in big cities or port cities that feed into greater numbers of orders). By distributing your SKUs across a network of fulfillment centers, AND utilizing advanced fulfillment software to keep track of it, you’ll reduce the distance items have to travel to reach customers. This allows ecommerce brands to harness ground shipping to achieve 2-Day delivery vs. paying for more expensive 2-Day shipping services offered by major shipping carriers.
6.) 3PL Partnership
Limited locations, limited technology, and lack of leverage can all restrict an ecommerce brand’s 2-Day shipping capabilities. Sometimes you need a little help. To paraphrase the Beatles, “You need somebody; not just anybody,” you need a 3PL partner that will make 2-Day shipping attainable, affordable, and easy. How does a 3PL do that exactly?
To start with, there’s the aforementioned diversified portfolio of fulfillment center locations across the globe. ShipMonk is a prime example of a 3PL that brings this to the table. Having a fulfillment center footprint in major cities allows ecommerce brands to divvy up inventory strategically. This also minimizes the number of shipping zones products need to cross (reducing shipping costs). And bringing goods closer to customers who’ve ordered them keeps transit times down, automatically ensuring faster delivery.
With new locations opening each year in the U.S. and around the world, ShipMonk is always expanding our reach and thus reducing customer wait times. Just this year we’ve opened a state-of-the-art location in Dallas-Fort Worth, Texas and the United Kingdom. The Texas fulfillment center is located within 1-day ground shipping from 5 of the 15 most highly-populated cities in the U.S. and is near the Port of Houston. Meanwhile the new UK fulfillment center is strategically located within the major logistics hub of Birmingham, providing direct access to the British Isles and all of Europe.
That is just an example of two of our fulfillment center locations, but the benefits they offer all add up to an easy 2-Day shipping equation:
ShipMonk + ecommerce Brand = Realistic 2-Day Shipping Options
Leverage. It’s not just something you need to make a seesaw work. Working with a 3PL can get you leverage with the major shipping carriers that can lend to lower 2-Day delivery costs. Naturally every 3PL is different, and every major shipping carrier has its own guidelines, pricing structures, and shipping services. But in general, 3PLs have economies of scale that allow them to get discounted shipping rates. In layman’s terms, they can leverage the large amount of business (high volume shipments) they give major shipping carriers to negotiate discounts and the best prices, in turn getting you lower 2-Day shipping costs than if you were doing everything on your own.
ShipMonk takes things a step (or ten) further by utilizing our Virtual Carrier Network. This advanced approach that blends the concepts of rate shopping with transportation management with straight-up innovative thinking allows our 3PL the flexibility to change shipping carrier and shipping service options for your orders instantly. That adaptability means we’re always making sure to keep your orders flowing and delivery costs low. As a result, the 2-Day shipping option you offer your customers will always be executed at the best speed and rates possible.
As long as you don’t go all Ex Machina, technology is a beautiful thing. Technology is what takes a fulfillment center from plain warehouse space for storing inventory to a multi-layered, sophisticated operation that gets your inventory to customers accurately and efficiently. At ShipMonk, on the ground we utilize an array of fine-tuned fulfillment technology to get items picked, packed, and shipped. Our AMRs (Automated Mobile Robots), for example, work alongside our experienced 3PL team members to speed up order packaging times, which leads to speeding up delivery times.
Furthermore, our first-in-class, fully-integrated fulfillment software keeps your sales channels connected, real-time data transparent, and inventory tracking dialed into all our 3PL facilities. Definitely watch our quick 3PL platform tour video to get a more thorough understanding of the benefits our platform brings to the table. In sum, our fulfillment software, like the rest of our technology, ensures orders are immediately processed at the proper facilities and shipped out as soon as possible, making 2-Day Shipping as easy as doing the robot without adding in any unexpected fees or administrative costs you’d incur if you outsource to a 3PL that doesn’t have these capabilities.
Stress Less; Grow More Advantage
If you’d rather focus on growing and scaling your business than figuring out the secret formula to making 2-Day shipping an affordable and attainable endeavor every moment of every day, outsourcing fulfillment to a 3PL is a great decision. It just has to be the right 3PL. Speaking completely objectively . . . that very well could be ShipMonk.
In addition to the shipping advantages we already mentioned, our whole philosophy is “Stress Less; Grow More” because we handle the complexities of fulfillment while you focus on the big picture of running your business. The 2-Day shipping option we offer and execute is a perfect example of this. Between our strategic locations, technology, shipping carrier relationships, and team member expertise, we make 2-Day delivery an easy option for you and your customers. We’ll save you the headaches while finding the best way to meet buyer expectations for speed at every turn.
Your 2-Day Shipping TO-DO List
In today’s competitive economy, all sizes of ecommerce brands at some point ask the question that is this blog’s namesake, i.e. “How to Reduce 2-Day Shipping Costs.”
There are, of course, many hindrances to this aspiration. Namely: though customers want faster speeds, they do not want higher costs. And unless you sell expensive products, sitewide free 2-Day delivery can really hurt your business. That being said, 2-Day shipping is an ecommerce industry expectation you can’t afford to ignore because it can get you more customers, reduce cart abandonment, and increase lifelong brand loyalty. You can reduce the cost of 2-Day shipping by:
- Setting a minimum order value
- Tying 2-Day shipping in with a membership plan
- Making 2-Day shipping zip code selective
- Leveraging multiple fulfillment center or warehouse locations
- Utilizing the power of ground shipping
- Working with a 3PL partner
Though all six items on this list can help ecommerce brands reduce 2-Day shipping costs, item six follows the “save the best for last” motto. With all the advantages a 3PL like ShipMonk brings to the table in terms location, leverage, technology, and lower stress, it is a key solution ecommerce brands can leverage in order to reduce 2-Day shipping costs.
If you’re ready to implement sustainable 2-Day delivery options and/or reduce 2-Day shipping costs, contact one of our 3PL team members today to discuss all your shipping service needs!