Nobody LIKES paying shipping fees…
But for some food business owners, high shipping costs stop online shoppers in their tracks, and keep them from reaching the checkout page.
Their answer: FREE SHIPPING
Or perhaps I should say, “FREE” Shipping.
Because, you guys… the shipping should not ACTUALLY be free!
Not unless you’ve got amazing profit margins that won’t be reduced to zero (or lower) by covering your customers’ shipping costs.
And you don’t mind giving those profits away!
With the holidays just around the corner and more shoppers buying online than EVER before..
Ensuring you’ve got a profitable shipping offer could be the key to your holiday financial success.
You MUST incorporate the cost of shipping, or at least a portion of it, into the price of your products to maintain your profit margins.
If your holiday promotion plan includes free or discounted shipping, listen up!
here are my top 3 tips for a financially successful holiday shipping offer:
#1. Determine Your Net Shipping Income / Loss
If you currently offer a shipping discount, record and track these 3 key pieces of financial data:
Your online product sales number
Your online shipping income number
Your costs to pack + ship your products to customers
Once you have recorded and tracked this data, you can calculate your Net Shipping Income or Expense.
And you can determine if your shipping offer is having a negative, positive, or net zero financial impact on your business.
#2. Determine the Cost to Ship Each of Your Packaged Products
Many business owners make the mistake of estimating their shipping costs based on the weight of their products, rather than the total weight of the package that will be shipped.
Additionally, many businesses allow their customers to shop “a la carte” making it hard to determine the weight of every package that they ship, and thus to difficult to determine the appropriate shipping offer or price to build into their products. Grouping your products into “packages” limits the number of shipping configurations that are possible, and can also streamline your fulfillment processes.
#3. Implement and Analyze Your Results
Much like when implementing a new marketing strategy, businesses should monitor the results of a newly implemented shipping strategy
in at least these 2 ways:
Monitor customer activity on your website to identify if the new shipping offer is preventing potential buyers for completing checkout, or if the offer is improving your abandoned cart rates.
Some of my clients report overwhelming positive response to their new “free shipping” offer despite the cost of their product going up.
Others say that sales dipped with the increased product price despite the “free shipping offer.
It’s important to know your customer and to be ok with Implementing, Analyzing + Modifying as needed.Check in on your Net Shipping Income / Loss Weekly to see how your offer is performing financially and if it is having the financial impact that you need it to. If not identify if packaging costs or shipping costs are the culprit and adjust as needed.
About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.