With the rise of major online retailers such as Amazon Prime, consumers worldwide have heightened expectations of all online retailers. Free 2-day shipping has not only become a trend, but also a standard expectation of savvy shoppers.
Today we’ll discuss why your ecommerce store should offer affordable 2-day shipping to customers, as well as options for providing free 2-day shipping. We’ll also share ways you can do this in an affordable way that increases your sales conversion rate.
Before we begin, let’s make sure we’re on the same page with our definitions and expectations of online retail fulfillment…
What is 2-Day Shipping?
Our definition of 2-day shipping refers to the customer receiving the delivered package within 2 days from the time the package is shipped out. This is the central offer of Amazon Prime.
Unless otherwise specified by a retailer, customers generally expect retailers to ship an order out within one business day. (Note: If this is not the case for your business, make sure your order processing time is stated obviously on your website to manage your customers’ expectations.)
Let’s look at some examples…
Let’s say your ecommerce website offers free 2-day shipping, and your shipping policy states that your daily shipping cutoff time is 2:30 pm EST from Monday to Friday.
In this case:
- If a customer orders at 2 pm on Monday, they would expect the package to be shipped the same day and delivered by Wednesday evening.
- If a customer orders at 3 pm on Monday, they would expect the package to be shipped the next day (Tuesday) and delivered by Thursday evening.
- If a customer orders at 3 pm on Friday, they would expect the package to be shipped the next business day (Monday) and delivered by Wednesday evening.
What are the benefits of offering 2-Day Shipping?
Amazon has reshaped consumer expectations about how easy it should be to purchase and receive items from online retailers. Consumers have come to expect free shipping – specifically free 2-day shipping – as a standard. Today’s consumer considers paid shipping to be an extra fee, beyond the order total. And, just like The Notorious B.I.G. put it, “more money, more problems” — the more a consumer has to pay, the more likely they will look elsewhere for a better price.
Regardless of what types of products you sell, Amazon is likely your biggest competitor. Since they offer free 2-day shipping for Prime members, you could easily be missing out on a large number of sales unless you’re offering the same deal.
According to a 2018 report by Statista regarding the primary reason online shoppers in the United States abandon their carts:
- 63% reported it was because shipping costs were too high, and
- 36% claimed it was because the package would take too long to be delivered.
Another 2018 report shared that 83% of U.S. shoppers said free delivery was the most important factor in their online purchases.
Bottom line: Your ecommerce store should offer free 2-Day Shipping or, at least make it affordable.
Why? Offering free 2-day shipping removes two of the top reasons that customers abandon their shopping cart — extra costs being too high and shipping speed being too slow.
Shipping is also shown to be the biggest factor in the customer loyalty loop. By offering free 2-day shipping to customers, you can increase your conversion rate and scale your brand with one simple strategy.
What factors determine my shipping costs?
There are a number of factors that determine shipping costs including:
- Distance the package is being shipped (Click here to read more about shipping zones.)
- Dimensional weight (also known as volumetric weight) of the package
- Shipping method (air vs. ground) and carrier rates (Check out our Shipping Methods Overview infographic for a full breakdown for each shipping carrier.)
- Upgrades such as shipping insurance or tracking numbers
- Shipping surcharges
- International customs duties and tariffs
How can I affordably offer 2-Day Shipping in my store?
Going from charging customers for shipping to offering free 2-day shipping would certainly increase your operational costs. So, how can you strategically offset the increased cost so it doesn’t erode your bottom line? You’ve landed in the right place.
First, you need to think beyond the initial sticker price. It’s important to consider how much your conversion rate would increase by simply offering free 2-day shipping. To find your answer without changing your operations, run an A/B test to see the numbers for yourself. You may be surprised how much your sales increase with this single change.
Once you’ve gotten a taste for this increased conversion rate, you can decide between (or experiment with) a variety of options for making free 2-day shipping work for your bottom line.
Here are a few ways to keep free 2-day shipping affordable for your business:
Offer free 2-day shipping with a minimum order value.
Run the numbers to determine how much it’ll cost you to offer free 2-day shipping, then calculate the minimum order value necessary to offset your average shipping cost while making a profit. Alternatively, the minimum order value can be based on market research or what your competitors offer.
Offer free 2-day shipping to certain destinations.
Based on the location(s) of your warehouse(s), you may want to consider offering free 2-day shipping to addresses close to your fulfillment center. Or you could offer free 2-day shipping to popular shipping destinations to encourage more sales in those areas.
Offer free 2-day shipping on select items.
This can be done according to minimum order value, or you can base it around special promotions and marketing campaigns to increase sales on specific products.
Offer free 2-day shipping during major holiday seasons.
Using free 2-day shipping as a strategic incentive at certain times of year can help increase seasonal sales.
Work with a 3PL to get discounted shipping rates.
Based on your monthly shipping volume, you may or may not be able to negotiate discounted rates with your preferred carriers. However, the top third-party logistics companies (3PLs) are able to use their massive shipping volume to negotiate highly discounted rates with top carriers. By partnering with a reliable 3PL, your ecommerce brand can offer free 2-day shipping and still save money.
The best 3PLs also have multiple warehouse locations, which allows you to strategically ship orders from the warehouse closest to your customer. This can be a great way to reduce shipping costs and increase delivery speed simultaneously.
Absorb the shipping cost into the sticker price of your products.
Depending on your brand positioning and the competition in your niche, this may be a feasible option. This allows customers to see the full price up-front without the shipping cost cutting into your bottom line.
Offer free 2-day shipping as an incentive to gain first-time buyers or email subscribers.
This can be a good option for new ecommerce companies and brands who want to build their email list or loyalty program with interested subscribers. Once the shoppers are on your list, you can promote free 2-day shipping options during special promotions and marketing campaigns.
Partner with a third-party company that offers free 2-day shipping to their members.
Some top retailers have partnered with third-party membership sites that include free 2-day shipping as a perk for their members. For example, Kate Spade, American Eagle, and Newegg allow ShopRunner members to receive this perk.
What are the best options for offering 2-Day Shipping?
You can offer free 2-day shipping using in-house fulfillment if you have the bandwidth. However, there are things that can go wrong with in-house fulfillment. For example, if your website receives a sharp increase in order volume, would your in-house staff still be able to ship out all orders on time?
You can also outsource to an ecommerce fulfillment company that has the ability to strategically ship orders with 2-day shipping on both coasts at an affordable cost. And, if you decide not to offer 2-day shipping for free, you can pass on the savings to your customers to encourage them to upgrade their shipping method.
Here’s what you should look for when choosing a great fulfillment center:
- They should have strategic geographic locations that match up with your delivery destinations. This will reduce your shipping costs and the transit time of your packages.
- They should be able to grow with your ecommerce business – and keep up with a sharp increase in demand – while also being flexible to your needs.
- They should have state-of-the-art technology to ensure your brand is benefitting from cutting edge fulfillment opportunities.
Wondering if it’s the right time for your business to use a fulfillment center? Check out this article for factors to think about.
And then there’s Amazon
If you want to sell on Amazon Prime, you have two options:
1. Fulfillment By Amazon (FBA)
Fulfillment by Amazon (commonly known as FBA) enables you to sell your products through Amazon’s marketplace and let Amazon handle the order fulfillment tasks. However, they have strict processes and requirements for how they must receive your inventory.
If you don’t follow their rules, Amazon can levy high fees on your invoice – or even reject your delivery to them. In order to ensure you’re following their guidelines, you may want to use a 3PL that offers FBA Prep Services.
2. Amazon Seller-Fulfilled Prime (SFP)
Amazon Seller Fulfilled Prime (SFP) aims to alleviate the logistical concerns that FBA can cause for some business owners. By allowing sellers to use their own facilities to fulfill product orders, it eliminates many of the hassles while still encouraging competition and bringing the best possible buying options to consumers. However, there are minimum requirements a seller must meet to qualify for SFP. This can also be done through a great 3PL.
BONUS! We created a complete guide on how you can offer free shipping to your customers at no cost to you! Click here to get your free copy.