Why Shipping and Profitability Are Not Mutually Exclusive

In an Amazon dominated world, it is difficult for small businesses to find ways to compete when it comes to shipping costs. The corporations offer products at an incredibly low cost, which leaves independent retailers across the country wondering if they should match that price. However, the reality is that most retailers simply can’t be Amazon. Constantly using your own dollars to eat shipping costs without a free-shipping threshold will not be profitable. Therefore, it is important that you implement a minimum order threshold that your customers must meet before they get free shipping.

Here are a few things to think about:

1. Test It Out.

It is likely that you will need to test several threshold minimums before you can find the right fit. Each business has different requirements factoring into their decision. Luckily the Special Ordering Portal’s profit toggle allows you to play around with different basket compositions so that you can see how much margin you have to play with. You’ll soon see that orders reaching a certain retail subtotal can be profitable even if you offer free shipping. Of course, there is always a trade-off between maintaining margin by minimizing discounts and order volume (conversion rate).

2. Think About What Products Are Most Profitable

Larger, more expensive, items are easier to suggest to your customers who want to purchase items for home delivery. For example, steer your customers towards the biggest bags at a better price per pound and higher price point, compared to smaller bags or treats which won’t have as much margin to outweigh shipping costs.

3. Know Your Shipping Costs

If most of your customers are local, research your location’s shipping costs. This way, you’ll know exactly how much shipping is eating into your margin, and it will be easier to gauge your margins on the fly when speaking with customers. Simply enter your zip code on the checkout page of the Special Ordering Portal and test out a few different basket compositions. Alternatively, you can view our shipping fees here.

3. Offer Incentives

Once you know your margins and what baskets make sense to be shipped for free, you can offer additional incentives to motivate you customers to buy from you. For example, getting 15% off a toy with the purchase of a large pet food bag can still be profitable given the higher margins on toys and large bags of food. If it prevents them from shopping for that big bag on Amazon, then it’s always a win for your business.

Whatever free shipping minimum policy you decide on, be sure to communicate it clearly to your staff so that your message is consistent with your customers and they know what to expect when they get products delivered to their home from your store.

For more on how to manage your Endless Aisles catalog, check out our article on How to Handle Out Of Stock And Discontinued Products.

By Andrea Barsk